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Low-cost iPhone seen generating $6.5B in 2013 revenue for Apple

post #1 of 87
Thread Starter 
A rumored contract-free, low-cost iPhone geared toward emerging markets could net Apple $6.5 billion in revenue this year, one analyst believes.

Gene Munster of Piper Jaffray believes there's a good chance Apple will in fact release a new low-cost iPhone model this year. Unlike new reports that have claimed the device could be priced between $99 and $149, he expects Apple will charge around $199 for a new unsubsidized iPhone.

At that price, the new, less expensive iPhone model would be a significant discount over what Apple currently offers: A contract-free iPhone 4 costs $450 in the U.S., while taxes bring the cost up to $490 in China and $750 in Brazil.

Current iPhone models have gross margin between 55 and 60 percent, aided by carrier subsidies. Munster believes that Apple's contract-free iPhone with a price around $200 would instead have gross margins around 30 percent.

iPhone 5


He also believes that a cheaper iPhone would be a popular option in Apple's lineup: Munster's sales forecast for the end of 2013 calls for 30 percent of all iPhone sales to be the rumored lower-price model.

Accordingly, he sees the average selling price of the iPhone falling from its current level of around $640 to about $520.

In Munster's models, the $6.5 billion in revenue a hypothetical inexpensive iPhone would add to Apple's bottom line would be about 3 percent of the company's total revenue.

He believes that Apple's previous entries into lower priced market segments have demonstrated a "measurable positive impact on overall revenue" for the company. In the past, Apple has expanded its product lineup with the iPad mini and iPod mini, while the iPad itself has cannibalized sales of Apple's higher-priced Macs.
post #2 of 87

gm;dr
 

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post #3 of 87
So it's PROFIT we're concerned with more than REVENUE. What are the PROFIT projections?

The state is nothing more than a criminal gang writ large.

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The state is nothing more than a criminal gang writ large.

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post #4 of 87
Gene Munster needs to STFU. Where's this TV he's been predicting since forever?
post #5 of 87
Quote:
Originally Posted by MJ1970 View Post

So it's PROFIT we're concerned with more than REVENUE. What are the PROFIT projections?

 

Exactly.  And the Mac mini has never really been a player in the "lower-priced segment" of the PC market, but it was never priced that way.  And therefore it didn't completely undermine the higher margin models.  I don't see how the same could be done with phones.  Giving away iPhones at (just above) cost in the developing markets will just alienate consumers outside those markets.

post #6 of 87

Seriously - how can you predict revenue on something that doesn't (and may never) exist??  

 

Guess what?  I'm predicting that Tesla's hover car will generate 6 billion.  Now pay me.

post #7 of 87
Gene speaks, stock market listens, and AAPL drops today because "investors" are afraid the lower margin will kill the stock. I know analysts think they have the right to propagate rumors but until they have factual information (usually only available when the product is released by Apple), they should not say anything because anything they say manipulates the stock market. Where's his disclaimer about his position relative to AAPL?
post #8 of 87
Quote:
Originally Posted by Rogifan View Post

Gene Munster needs to STFU. Where's this TV he's been predicting since forever?

Since at least 2009, to be exact.
http://news.cnet.com/8301-17938_105-10314746-1.html

It really amazes me that this guy who is so consistently wrong gets any press at all.
Quote:
Originally Posted by rob53 View Post

Gene speaks, stock market listens, and AAPL drops today because "investors" are afraid the lower margin will kill the stock

You only have half the story.

The analysts can say that Apple will introduce a low cost phone that will hinder margins and AT THE SAME TIME say that Apple is in trouble because they don't have any new products coming. Whichever one of their stories you choose, Apple stock falls.
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post #9 of 87
Quote:
Originally Posted by AppleInsider View Post

Unlike new reports that have claimed the device could be priced between $99 and $149, he expects Apple will charge around $199 for a new unsubsidized iPhone..

Anyone who projected that Apple would sell a $99 or $149 unsubsidized phone needs to have their head examined.

Even $199 unsubsidized is out of the question. Apple would have to cut so many corners that it might as well be an Android crap-phone. That's not going to happen.
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post #10 of 87
Quote:
Originally Posted by malax View Post

 

Giving away iPhones at (just above) cost in the developing markets will just alienate consumers outside those markets.

 

Nobody said that this is what they are planning. The rumor (and I am not saying I necessarily believe it) is about creating a lower-cost model. If they build an iPhone out of cheaper materials (say plastic), drop Gorilla glass for plastic or cheaper glass, use a standard iso retina resolution, use previous, or even older, generation chipsets, reduce storage capacity and drop 4G (which is not available in many of these markets anyhow) and end up with a device costing clearly less than $100 to make, they could well retain their margins without alienating anyone. This device would not be a match for the real iPhone, but it could still compete well with the tons of Huawai and Nokia Asha phones out there. Especially as it would give people in those countries access to the App Store and iTunes (both have been expanding into many more countries lately).

 

The bigger question is, if this would still be a device that Apple would ship. But looking at the pricing of e.g. the iPod Nano, I guess a decent and differentiated device could be made at this price point.

post #11 of 87
Quote:
Originally Posted by allenbf View Post

Seriously - how can you predict revenue on something that doesn't (and may never) exist??  

It's easy. Imaginary price times imaginary sales.

post #12 of 87

Apple has extremely high margins on most of it's products, compared to the rest of the industry. Even if Apple's insanely high margins were to shrink slightly, then so what, there would still be a very nice margin left, with plenty of profit and mind boggling revenue to report.

 

Apple's stock goes down, because they are still making a ton of money, enjoying very healthy margins.

 

Meanwhile, other stocks, like Amazon, which sells products at cost or even at a loss (Kindle Fire), continues to rise.

 

Maybe Apple should just sell phones for $49. Don't worry about any potential loss of revenue or the fact that Apple would be losing money on each phone sold. I'm sure that Apple will make it all up in quantity, just like the other people, and maybe Apple's stock will shoot up again. If only Apple could lose $50 on each phone sold, then that would be awesome! When earnings time comes, Apple could report that they only lost $40 per phone, exceeding all expectations, and the stock would jump up at least 10%.

post #13 of 87

What about the analysts estimates for MicroSoft Surface ?

post #14 of 87
Fore these ideas about a "low cost iPhone" to be true, they need to include a redefinition of what a low cost "smart"-phone is.

It's not a F#%%ing large screen-latest-CPU-new-design-thing. Rather a iPod Nano - stripped iPhone but with some sort of essentials for tying the user to the Apple universe. What can that be?

A iPod using 3G to stream from iTunes-match? And for making calls?

Apps? Hardly the same as for the iPhone.

Webb? Don't think so but maybe. Thus maybe WebbApps (HTML5-stuff) but not iOS native stuff.

E-mail? Could be.

Maybe modeled towards a use case where mobile broadband is scarse?

Don't know. Can't really find the right mix here. Anyone else?

I think they will aim to be the Mercedes/BMW/Audi of the smartphone/iPad/computer world. Where's the innovation in car's today? Design. Oh, they use LED instead of light bulbs. Same engine year after year. Just a new design.

Profit.

End of discussion.
post #15 of 87

it's a stock manipulation play. If Apple produces a low cost iphone (not likely), analysts will cry the ASP is decreasing...sell sell sell!. if apple doesn't produce one, analysts will cry market share, market share, market share ... sell, sell, sell. It's a no win situation for Apple.

 

There's a reason why he's an analyst. He failed at running a business. Apple is doing fine, thank you.

post #16 of 87

I suppose a simpler iPhone, with the precedent of the simpler iPods, the shuffle, nano etc. does have a great deal of precedent. 

post #17 of 87
Quote:
Originally Posted by jfc1138 View Post

I suppose a simpler iPhone, with the precedent of the simpler iPods, the shuffle, nano etc. does have a great deal of precedent. 

here's a problem with that. the ipod's main purpose is to play music.

 

the iphone's purpose is the apps (Apple will never make a dumb phone) and ecosystem. How can you make that experience for cheap?

post #18 of 87
Originally Posted by jungmark View Post
it's a stock manipulation play. If Apple produces a low cost iphone (not likely), analysts will cry the ASP is decreasing...sell sell sell!. if apple doesn't produce one, analysts will cry market share, market share, market share ... sell, sell, sell. It's a no win situation for Apple.


"But… but no one manipulates the stock. It's just bubbles bursting and speculation leveling out to Apple's "real worth"! All trades are legitimate ones, made in the face of Apple's actual failure!"

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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post #19 of 87
Gene Munster is just making noise. Nothing to see here.

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #20 of 87
Quote:
Originally Posted by jfc1138 View Post

I suppose a simpler iPhone, with the precedent of the simpler iPods, the shuffle, nano etc. does have a great deal of precedent. 

On the surface, that looks valid - but a little more consideration says it's not practical.

The iPod Touch starts at $299 - and that's wtihout cell phone hardware or the extra battery size needed to power it. How are they supposed to start with a $299 product, add cell phone hardware, add a larger battery, and sell it for $199 (much less $99 to $149)?
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post #21 of 87

I think there should be an option for ALL Apple mobile devices to be used as a cell phone.  All it takes is a chip and an antenna, right?  Then people can just pair a bluetooth headset and be done with it.  Then we can eventually get tablets of all sizes people want with a voice/data chip inside to be used for data and voice over cellular lines with a bluetooth headset or a build it microphone/speaker system in a car.   That way people can buy whatever sized product they want.

 

Sometimes, I would like to just take my iPad out and not have to carry both iPhone and iPad with me, and if I need to answer or make a call, I just put on a BlueTooth earpiece.  And just have whatever carrier I want with so many devices linked to the same number as an additional device.

post #22 of 87
Quote:
Originally Posted by jragosta View Post

Since at least 2009, to be exact.
http://news.cnet.com/8301-17938_105-10314746-1.html
It really amazes me that this guy who is so consistently wrong gets any press at all.
You only have half the story.
The analysts can say that Apple will introduce a low cost phone that will hinder margins and AT THE SAME TIME say that Apple is in trouble because they don't have any new products coming. Whichever one of their stories you choose, Apple stock falls.
The same analysts who fretted that the iPad mini was too expensive while at the same time fretting about the mini cannabalizing the full size iPad and therefore bringing down margins.
post #23 of 87
Quote:
Originally Posted by jragosta View Post

Even $199 unsubsidized is out of the question. Apple would have to cut so many corners that it might as well be an Android crap-phone. That's not going to happen.

 

Some people keep using derisive phrases like "craptastic phone", which is strange considering that they're almost always better equipped than the original iPhone or even the 3G or 3GS.

 

Consider the Samsung Galaxy Mini 2, which is a popular first smartphone in many countries:

 

  • Contract free for ~ $150
  • 3G, HSDPA
  • WiFi, DLNA, hotspot
  • 320x480 screen, 3.27 inches
  • 800 MHz Snapdragon
  • .5GB RAM, 4GB Flash, accepts another 32GB microSD
  • A-GPS
  • VGA videocam (no second cam)
  • Gorilla Glass screen

 

Here's a video of it:

 

 

Or the bigger screened Huawei Ascend G300, around $200:

 

  • 3G HSPDA/HSUPA
  • 480 x 800 LCD, 4"
  • 1 GHz Cortex-A5
  • .5GB RAM, 4GB Flash, add 32GB microSD
  • 5 MP camera, flash
  • A-GPS

 

 

These are just a couple of examples of what Apple has to compete with for sales (assuming they want to).   Plus the ease of cheaply adding more storage.


Edited by KDarling - 1/9/13 at 11:47am
post #24 of 87
Quote:
Originally Posted by KDarling View Post

You keep using phrases like "craptastic phone", which is strange considering that they're almost always better equipped than the original iPhone or even the 3G or 3GS.

I don't agree with calling it craptastic as I think that detracts for a valid argument but I don't think you can move the measure up 6 years and say something cheap qualifies as high-end or good when it's well below the state of the art. We can look at pretty much any technology driven industry to see features in the high-end trickle down to the low end. Automobiles are great examples of this.

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"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #25 of 87

I found Munster's low cost iPhone

 

 

post #26 of 87
Quote:
Originally Posted by SolipsismX View Post


I don't agree with calling it craptastic as I think that detracts for a valid argument but I don't think you can move the measure up 6 years and say something cheap qualifies as high-end or good when it's well below the state of the art. We can look at pretty much any technology driven industry to see features in the high-end trickle down to the low end. Automobiles are great examples of this.

 

Ahem.  Strawman.   No one claimed that under $200 phones were high end or state of the art.

 

I'm only pointing out that they're not "crappy", unless we want to call the first few iPhone plastic models the same thing.

 

I'm also trying to give everyone a feeling for what Apple has to compete with.   Some presented a thought that the capability to download apps would have to be left out, for example.   Or even a Gorilla Glass screen.  Nope.


Edited by KDarling - 1/9/13 at 11:48am
post #27 of 87
Quote:
Originally Posted by KDarling View Post

Ahem.  Strawman.   No one claimed that under $200 phones were high end or state of the art.

I'm only pointing out that they're not "crappy", unless we want to call the first few iPhone plastic models the same thing.

I didn't say that they had to be state of the art. I said you comparing technology from 6 years ago that was state of the art to technology today in order to draw some valid comparison on what is or isn't crappy. Would you take a $13 DVD player you can get from Amazon today and compare it favourably with the first DVD players with an argument of "Look, this $13 model has more options and features than the original state of the art DVD player." Of course not. You simply can't do a one-to-one breakdown of components, performance and capacities with technology over a wide divide of time.

As for what is or isn't crappy that will always be subjective. There are some things that we can look like build quality that often does stand the test of time. The original iPhone is probably better than any $200 contract-free smartphone. There has also been little movement in Lithium Polymer batteries so you can probably their overall reliability. Things like the processor used and the amount of RAM and NAND simply aren't a good measure.
Edited by SolipsismX - 1/9/13 at 11:54am

"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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"The real haunted empire?  It's the New York Times." ~SockRolid

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #28 of 87
Quote:
Originally Posted by SolipsismX View Post


I didn't say that they had to be state of the art. I said you comparing technology from 6 years ago that was state of the art to technology today in order to draw some valid comparison on what is or isn't crappy

 

I'm still confused.  You're saying that today, a phone like the 3GS should be considered crappy technology, because it was from a few years ago?

 

If so, I think I'd just call it "older" technology instead.

post #29 of 87
Quote:
Originally Posted by KDarling View Post

I'm still confused.  You're saying that today, a phone like the 3GS should be considered crappy technology, because it was from a few years ago?

If so, I think I'd just call it "older" technology instead.

What's to be confused about. The Samsung Galaxy Mini 2 and Huawei Ascend G300 are, comparatively, to the iPhone 5 and Galaxy S III crappy phones. If these were released 6 years years ago.

Note that the Huawei Ascend G300 uses an Cortex-A5. That is cheapest and weakest ARMv7 chip available. When Apple moved to ARMv7 back in 2009 with the 3GS they started with the Cotex-A8. That is a huge technology improvement over the A5 and that was 3 years ago. That alone would make me say the Ascend G300 is a crap. Now is it crap in other words a poor value for the $200 price? That depends on completely different factors.
Edited by SolipsismX - 1/9/13 at 12:15pm

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"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #30 of 87
Quote:
Originally Posted by KDarling View Post

I'm also trying to give everyone a feeling for what Apple has to compete with.   Some presented a thought that the capability to download apps would have to be left out, for example.   Or even a Gorilla Glass screen.  Nope.

I'm sure Apple has discussed the idea excessively because at some point the iPhone market will get saturated and they will have to let it sit because there is something new to tackle (like the PMP shift to smartphones) or they will have to move further down in their tiering. Now I don't see anything else replacing the smartphone at this time and we've already seen Apple move to the cheaper, more excessive sales tiers with the older model iPhones.

I don't think leaving out apps is on the table. If there is anything I would consider to be non-option it's getting rid of the App Store support. I can't imagine they will make any phone that doesn't fit into that hole fairly well, like they did with the iPad mini.

Gorilla Glass is a prime example of how technology moves. It was state of the art in 2007 but now it's a staple for any touchscreen device. I would not suggest any "cheap" touch-based smartphone that didn't have that.

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"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #31 of 87
Big mistake for Apple. People will pay a higher price for the name, build quality, and infrastructure. If this option comes to light, might as well throw the Apple name in the bargain discount bin with Android.
post #32 of 87
Quote:
Originally Posted by cmvsm View Post

Big mistake for Apple. People will pay a higher price for the name, build quality, and infrastructure. If this option comes to light, might as well throw the Apple name in the bargain discount bin with Android.

I think like the iPad mini Apple will make this low cost phone high end with a high build quality.

They'll probably price it higher than the competition and still succeed. The iPad Mini is selling amazingly in China and it cost quite a but more than its competition.

I expect the same to be true if the iPhone Mini
post #33 of 87
Quote:
Originally Posted by cmvsm View Post

Big mistake for Apple. People will pay a higher price for the name, build quality, and infrastructure. If this option comes to light, might as well throw the Apple name in the bargain discount bin with Android.

I think like the iPad mini Apple will make this low cost phone high end with a high build quality.

They'll probably price it higher than the competition and still succeed. The iPad Mini is selling amazingly in China and it cost quite a but more than its competition.

I expect the same to be true if the iPhone Mini
post #34 of 87
Quote:
Originally Posted by cmvsm View Post

Big mistake for Apple. People will pay a higher price for the name, build quality, and infrastructure. If this option comes to light, might as well throw the Apple name in the bargain discount bin with Android.

I think like the iPad mini Apple will make this low cost phone high end with a high build quality.

They'll probably price it higher than the competition and still succeed. The iPad Mini is selling amazingly in China and it cost quite a but more than its competition.

I expect the same to be true if the iPhone Mini
post #35 of 87
Quote:
Originally Posted by cmvsm View Post

Big mistake for Apple. People will pay a higher price for the name, build quality, and infrastructure. If this option comes to light, might as well throw the Apple name in the bargain discount bin with Android.

I think like the iPad mini Apple will make this low cost phone high end with a high build quality.

They'll probably price it higher than the competition and still succeed. The iPad Mini is selling amazingly in China and it cost quite a but more than its competition.

I expect the same to be true if the iPhone Mini
post #36 of 87
Quote:
Originally Posted by cmvsm View Post

Big mistake for Apple. People will pay a higher price for the name, build quality, and infrastructure. If this option comes to light, might as well throw the Apple name in the bargain discount bin with Android.

I think like the iPad mini Apple will make this low cost phone high end with a high build quality.

They'll probably price it higher than the competition and still succeed. The iPad Mini is selling amazingly in China and it cost quite a but more than its competition.

I expect the same to be true if the iPhone Mini
post #37 of 87
Quote:
Originally Posted by cmvsm View Post

Big mistake for Apple. People will pay a higher price for the name, build quality, and infrastructure. If this option comes to light, might as well throw the Apple name in the bargain discount bin with Android.

I think like the iPad mini Apple will make this low cost phone high end with a high build quality.

They'll probably price it higher than the competition and still succeed. The iPad Mini is selling amazingly in China and it cost quite a but more than its competition.

I expect the same to be true if the iPhone Mini
post #38 of 87

Quote:

In Munster's models, the $6.5 billion in revenue a hypothetical inexpensive iPhone would add to Apple's bottom line would be about 3 percent of the company's total revenue.

...

He believes that Apple's previous entries into lower priced market segments have demonstrated a "measurable positive impact on overall revenue" for the company.

 

3% of total company revenue does not sound that measurable to me. $6.5b is less than 5 million regular iPhone. Apple is expected to sell over 100 million iPhones in 2013, right? 5 million is definitely within the noise of Apple's production planning for 2013.

 

Put the resources into making a better "normal" iPhone and surrounding platform services!

post #39 of 87
Not sure how cheap one needs to get. FREE with contract is quit cheap. Now if Apple wants to go with contract free phones, then what will the trade off be? iPhone 6 will see the iPhone 4 price at FREE with no contract and no camera/GPS?

I can see a no camera/GPS/contract "FREE" phone for $99ish when Tim smacks himself on the forehead and says "We forgot about the lowest end market! We need to provide a cheaper user experience that will reduce profit and increase support costs."

Until that day how about acknowledge that Apple is a high end product sold at a premium price.
post #40 of 87
Apple being advised to play the market share game once again. These analysts and business experts have never understood what Apple's DNA is and they never will. Yet they keep trying to pigeonhole Apple into traditional business models.
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