A $99 Apple-branded cell phone is inevitable, analyst says

Posted:
in iPhone edited January 2014
There's no doubt that Apple will release a mobile handset priced at $99, according to Kaufman Bros. It's just a matter of when and in what form.



The firm's comments came as part of a research note responding to investor questions about a rumored deal that would see discount chain Wal-Mart offer a $99 4GB iPhone 3G a few days before New Years.



"While we are not sure of exact timing, we think a $99 Apple-branded cell phone is inevitable," analyst Shaw Wu wrote. "As we mentioned in our initiation report, we believe one of the key things Apple needs to do to drive broader iPhone adoption is to build a more complete product line like it has done with the iPod."



He noted that today's iPhone offerings essentially consist of one product with two storage capacity points (8 GB and 16 GB), while what's really needed is a complete family of iPhones that includes "true low-end, mid-range, and high-end" models.



Echoing a recent report from Needham & Co. analyst Charles Wolf, Wu argues that there's little stopping the company from taking such an approach with its existing iPhone design, which he believes is capable of supporting a $99 price point despite being perceived as a high-end device.



"The reason being the price of the hardware that customers pay is not the big driver of economics," he wrote. "It's really about the subsidies, revenue share and royalties."



More specifically, the analyst believes the average selling price of today's iPhones is close to $700, an estimate which likely factors in an approximate $550 wholesale price to AT&T and another $100 bounty for each of the devices Apple sells to new AT&T subscribers at its retail stores (details).



Therefore, he notes that Apple could easily absorb a modest $100 margin hit to drop a model based on today's design down to $99, but adds that it's also likely that the company's carrier partners would be willing to eat that cost on their own through additional subsidies due to the handset's ability to drive higher ARPU (average revenue per user) with $30-$45 data plans in addition to pricey voice plans.



"The payback period [for the carriers] is two to three months making this an easy economic decision," Wu told his clients. "We would like to note that already in some international markets, customers can get an iPhone for free or less than $199 USD when they sign up for a longer-term contract (three years) and a premium feature package."



The Kaufman Bros. analyst maintained his Buy rating on shares of Apple on belief that the company remains "one of the better names to own in this tough economy given its strong fundamentals."
«13

Comments

  • Reply 1 of 47
    zunxzunx Posts: 620member
    THE ONLY IPHONE THAT WE WILL BUY IS:



    - Unlocked to be used with any provider.

    - NO contract with any provider. Prepaid.



    That simple. Until then, NO iPhone!
  • Reply 2 of 47
    paxmanpaxman Posts: 4,546member
    Makes sense to me. In the same way the the Nano offers much more limited video / photo viewing abilities (pleasure), a scaled down iPhone could do the same. Useful for music, phone calls, limited browsing, video etc, good for texting but not for email, calendar etc. A separate dep of the app store for NanoPhone games and apps. Hm... it sounds pretty good, actually.
  • Reply 3 of 47
    Quote:
    Originally Posted by zunx View Post


    THE ONLY IPHONE THAT WE WILL BUY IS:



    - Unlocked to be used with any provider.

    - NO contract with any provider. Prepaid.



    That simple. Until then, NO iPhone!



    then you will need to pay ~$500 for an iPhone....if you don't want a contract.
  • Reply 4 of 47
    Bonjour,



    There's a limited promotion for Xmas in France by Orange

    iPhone 8 GB at EUR 99 or iPhone 16 GB at EUR 129

    with a 24-month plan at EUR 45 or a 12-month plan at EUR 50
  • Reply 5 of 47
    pxtpxt Posts: 683member
    I'd like to see a law passed so that the line rental and the finance for the phone are separated out. Phone deals are like unregulated finance. If you buy a car with finance, they have to tell you the total cost, the interest, how long it takes to pay etc. This could also help with carrier switching, since you could change your carrier, but of course you'd still owe them for the phone loan. Transparency is the consumers' friend.
  • Reply 6 of 47
    satchmosatchmo Posts: 2,699member
    Quote:
    Originally Posted by zunx View Post


    THE ONLY IPHONE THAT WE WILL BUY IS:



    - Unlocked to be used with any provider.

    - NO contract with any provider. Prepaid.



    That simple. Until then, NO iPhone!



    10 million+ users beg to differ.
  • Reply 7 of 47
    Quote:
    Originally Posted by zunx View Post


    THE ONLY IPHONE THAT WE WILL BUY IS:



    - Unlocked to be used with any provider.

    - NO contract with any provider. Prepaid.



    That simple. Until then, NO iPhone!



    Is that a Royal "We"?
  • Reply 8 of 47
    daseindasein Posts: 139member
    Quote:
    Originally Posted by zunx View Post


    THE ONLY IPHONE THAT WE WILL BUY IS:



    - Unlocked to be used with any provider.

    - NO contract with any provider. Prepaid.



    That simple. Until then, NO iPhone!



    But who are you going to go with? In the U.S., it's only AT&T or T-Mobile. Sprint and Verizon use Qualcomm's chip, not GSM. Supposedly there's only about a year left on the exclusive marriage with AT&T, after which time you may get your wish, but you'll still have to subsidize your own phone with a contract (although it may have dropped in price by then).
  • Reply 9 of 47
    neilmneilm Posts: 526member
    Quote:
    Originally Posted by zunx View Post


    THE ONLY IPHONE THAT WE WILL BUY IS:

    - Unlocked to be used with any provider.

    - NO contract with any provider. Prepaid.

    That simple. Until then, NO iPhone!



    @ Zunx: (a) Don't hold your breath, and (b) Who cares?



    To the actual subject at hand, I don't see justification for the assertion that "what's really needed is a complete family of iPhones that includes true low-end, mid-range, and high-end models." That's not Apple's strategy with their other products. Even the iPod Shuffle isn't a low-end product. Apple has never offered low end products, and I doubt that they'll find any need to mess with success at this point.



    These "analysts" seem to have an unending stream of advice for people who know infinitely more than they do about how to be successful.
  • Reply 10 of 47
    Analysts.....are....DUMB. They don't know anything about Apple and they continually prove that.



    Apple will NOT find some reason to cut out $100 of their margin (seriously? $100 of margin?!?!?!?) and I know I've read that while AT&T has gotten many new subscribers, the iPhone revenue sharing/subsidizing has cut their profit. There's no way they will eat up more of the cost, that's foolish. Apple provides a premium product ($200 is a good price for this device, look at pdas and prices of cell phones in Japan where I'm currently living) and I feel that everyday when I have that gawking moment and realize what's in my hand. As previously stated, analysts are dumb. Like Apple was going to really offer a laptop for $799 as the analysts thought. WRONG. Like Apple was gonna make an iPhone Nano like the analysts thought. WRONG. Steve himself pointed out that multiple devices with different specs and sizes makes it hard for developers.



    @zunx: Oh darn, no iPhone for you. And as said, then pay the real cost of the phone. Get real, all high-tech phones are provided at a lower price because the providers are eating up some cost on the device.
  • Reply 11 of 47
    boogabooga Posts: 1,072member
    Quote:
    Originally Posted by zunx View Post


    THE ONLY IPHONE THAT WE WILL BUY IS:



    - Unlocked to be used with any provider.

    - NO contract with any provider. Prepaid.



    That simple. Until then, NO iPhone!



    I prefer the practical approach. Is it worth it? Does the provider offer sufficient service in my area? Will I get the most utility for my money? For me the iPhone 3G is a yes and a no-brainer decision to buy.



    The more intangible aspects of cell phone contract law don't really interest me.
  • Reply 12 of 47
    ivladivlad Posts: 735member
    LOL all these analysts are always wrong, they know nothing about Apple. I think Apple fans know more than them.
  • Reply 13 of 47
    Quote:
    Originally Posted by bslaght View Post


    then you will need to pay ~$500 for an iPhone....if you don't want a contract.



    Well, two days abroad quickly pays that $500 for a heavy user, two weeks for a more moderate user.



    The problem is that the rate plan is the same for your primary line if you use the subsidy or not. (Isn't that anti-competitive bundling?)



    For anybody that travels outside their home country a few weeks a year, the iPhone is a useless brick. It makes those people angry at Apple and their iPhone: it is seen as a defect in the phone not the network provider. The fact that unlocked phones aren't available in all markets is just stupid. Sure, you can lock the subsidized version, but offer one unlocked!



    I can't afford to buy another iPhone given this situation. It is worthless at the times where I need it the most.
  • Reply 14 of 47
    boogabooga Posts: 1,072member
    Quote:
    Originally Posted by aaarrrgggh View Post


    Well, two days abroad quickly pays that $500 for a heavy user, two weeks for a more moderate user.



    The problem is that the rate plan is the same for your primary line if you use the subsidy or not. (Isn't that anti-competitive bundling?)



    For anybody that travels outside their home country a few weeks a year, the iPhone is a useless brick. It makes those people angry at Apple and their iPhone: it is seen as a defect in the phone not the network provider. The fact that unlocked phones aren't available in all markets is just stupid. Sure, you can lock the subsidized version, but offer one unlocked!



    I can't afford to buy another iPhone given this situation. It is worthless at the times where I need it the most.



    My iPhone was very useful on my trip from the US to UK recently. I added the international package, which admittedly still costs $1/min for voice... but who uses voice? Text messages still use your US quota, and data was enough MB/mo that it didn't make a difference as long as I turned imagery off in Google Maps.
  • Reply 15 of 47
    Quote:
    Originally Posted by zunx View Post


    THE ONLY IPHONE THAT WE WILL BUY IS:



    - Unlocked to be used with any provider.

    - NO contract with any provider. Prepaid.



    That simple. Until then, NO iPhone!



    I can appreciate that sentiment. I'm tempted to dump my dumb phone and Sprint plan. The no-contract carriers offer savings for my usage, and they also offer free dumb phones. ...with Bluetooth!



    Computers are sold without subsidizing internet plans. Fortunately, those have failed. Even Comcast internet is no-contract. I almost bought a Palm Centro for free. It wasn't, but with an iPhone for $99, with the same plan price as the Centro, I might endure AT&T.



    To bad no one lowers the plan price after you've paid the phone subsidy, or without the two year agreement.
  • Reply 16 of 47
    robb01robb01 Posts: 148member
    I bet they sell incredibly well



    ______________

  • Reply 17 of 47
    shogunshogun Posts: 360member
    There will be no stripped down iPhone and no multiple models. There will always be one current iPhone that is extraordinary and secondary and (before long) tertiary models that sell for less with less on eBay.



    Apple may bring the price down, though I kind of doubt they will. But they will not come out with multiple models.



    The iPhone is what it is. Anything less would not be iPhone. I am surprised Wu doesn't get this.
  • Reply 18 of 47
    I have an iPod touch because I don't want to shell out $$ for a data plan I'd barely use. If Apple came out with a $99 iPhone nano that lacked that, I would totally spring for one to replace my Razr.
  • Reply 19 of 47
    nagrommenagromme Posts: 2,834member
    A $99 iPhone is inevitable--someday--because things get cheaper over time. No need to analyze much deeper than that
  • Reply 20 of 47
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by NeilM View Post


    Even the iPod Shuffle isn't a low-end product.



    I don't understand that. Even if your contention is true, it shows that the iPod line is a tiered or segmented product line, where you buy either based on your desires or budget.



    Quote:
    Originally Posted by Shogun View Post


    There will be no stripped down iPhone and no multiple models. There will always be one current iPhone that is extraordinary and secondary and (before long) tertiary models that sell for less with less on eBay.



    Didn't a lot of Apple fans say the same about the iPod before the mini was released?



    I think it's very silly to make such bold predictions on what Apple is going to do. A lot of times, Apple's fans are nearly as bad as analysts, though generally Apple fans forget what the fan consensus was once it's been proven to be false, though they remember those of analysts.
Sign In or Register to comment.