Apple execs disclose options for boosting iPhone market share

Posted:
in iPhone edited January 2014
Apple executives said this week they believe the iPhone remains in its infancy and went on to -- somewhat uncharacteristically -- reveal a series of strategic measures they may employ in the near term to help grow the handset's share of the booming smartphone market.



The comments came during a meeting between senior company officials and analysts for Oppenheimer, who stopped at the iPhone maker's Cupertino-based campus Thursday as part of a bus tour that also swung by the headquarters of Synaptics, Trimble Navigation, Zoran, and Cypress Semiconductor.



In a report on the meetings issued to clients Friday, analyst Yair Reiner said Apple sidestepped his questions on new products but remained upbeat about the potential for "considerable" growth through share gains in two of its three core business segments: the Mac and iPhone.



On the Mac side, Apple indicated that some of its strongest prospects for share gains exist internationally, where growth has recently outpaced that of the U.S. For example, the company said last month that unit sales and revenue grew 5 percent and 18 percent, respectively, on a year-over-year basis in Europe compared to an 8 percent unit decline and 8 percent revenue increase in the Americas.



Meanwhile, Reiner wrote that the "iPhone is still in its early days and could gain share by: providing more functionality; lowering prices; growing geographically; or segmenting the market with different models."



Uncertain whether these assertions where those of the analyst or derived from specific comments by Apple, AppleInsider contacted Reiner for clarification. Surprisingly, the remarks came from management. "[T]hey are not saying they will necessarily do all of these," the analyst said. "This is basically the menu of options."



Still, the revelation is noteworthy given that it's the first time members of the company's leadership have expressed openly that they may be interested in catering to a broader demographic by fragmenting the iPhone line into a family of phones with materially distinct features and price points.



These comments may support the discovery of references to multiple new iPhone models in the company's pre-release builds of iPhone Software 3.0. The remarks on lower pricing are similarly interesting, though they've been made previously during earlier sit-downs with other analysts.



For his part, Reiner says he expects "some combination of all these" options to materialize over the next six months. In speaking to AppleInsider, he added that when it comes to segmentation of models, "Apple said that one thing would be a constant: iPhone will remain a software centric device."



Oppenheimer's visit to Apple's campus was the second in as many weeks by an equity research firm that provides ongoing coverage of the company. Last week, Kaufman Bros. analyst Shaw Wu made the trip in conjunction with a pack of investors that tagged along for the ride down from San Francisco..



In his write-up of the face-to-face encounter with Apple chief financial officer Peter Oppenheimer and Tom Boger, a senior manager in the company's Mac division, Wu similarly noted that no new product information was shed. However, he said he walked away from the sit-down with higher conviction in his "Buy" thesis on the company and a belief that Apple shares can support a higher trading multiple going forward.



"Apple seemed particularly excited about the China market but wouldn't comment on timing," he said, referring to the iPhone maker's prospects for capitalizing on the world's largest cell phone market, and suggesting a move into the region could come as early as this summer alongside new iPhones.



Government statistics indicate that there are more than 600 million wireless subscribers spread across the country, with market research firm iSuppli estimating that another 90 million are likely to sign up with a wireless provider this year. So the stakes are high and share ripe for the picking.



Both China Mobile, the world's largest wireless provider, and China Unicom, its smaller rival ranking second in the country, have both confirmed ongoing negotiations with Apple. However, recent reports indicate that momentum may have recently shifted in China Unicom's direction after talks between Apple and China Mobile, believed to be its first choice of partner with 415 million subscribers, reportedly broke down.



At the root of the issue were reported demands on the part of China Mobile that it be able to control the local version of the App Store. The carrier was also at one point said to be asking that Apple ship it iPhones with both Wi-Fi and 3G technology disabled for competitive reasons. And while there's no concrete information to suggest Apple would agree to make such concessions, references to "ChinaBrick" discovered in betas of iPhone Software 3.0 leave room for debate.



Apple could also approach China with a multi-carrier strategy, which turned out to be a healthy move in the land of Oz given that it led to increased competition, and ultimately more options for consumers, company officials told Wu during their meeting.



"In regards to new carriers beyond AT&T in the U.S., management commented that it remains happy with AT&T but that competition has been good and cited Australia as an example where there are three carriers carrying iPhone," Wu wrote.
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Comments

  • Reply 1 of 94
    sflocalsflocal Posts: 3,954member
    It's not just the iPhone in particular that is in its infancy but the entire iPhone/Apps ecosystem. Apple really changed the ballgame and has all the other smartphone makers playing catch-up.



    Apple started a new way of doing mobile computing. Thinking about it more now as I write this, perhaps it's the iPhone halo-effect that is in its infancy and the entire industry as a whole will have to re-think its strategies to compete on a new level.



    I think the next 12-18 months will provide exciting opportunities in the industry as a whole.
  • Reply 2 of 94
    virgil-tb2virgil-tb2 Posts: 1,416member
    Quote:
    Originally Posted by AppleInsider View Post


    ... "Apple said that one thing would be a constant: iPhone will remain a software centric device." ...



    And yet no matter how many times this is said, there will probably still be someone (maybe on this very thread!), who will say that the announcement about segmenting the market with multiple models means that Apple is going to make one with a physical keyboard.
  • Reply 3 of 94
    rot'napplerot'napple Posts: 1,839member
    What do you think...



    If Apple stresses that the iPhone will be software centric as reported in AI's article, do you think that the iPhone can have one hardware but several iPhone OS's, like iPhone OS lite, iPhone OS, iPhone OS Pro? Of course that sounds too Microsoftish and their versions of their OS Vista... Basic, Home, Business, Premium, Extreme you get the point.



    OR



    Will Apple just have the one iPhone OS and have two or three physical handsets with different sizes, shapes, form factors, different chipsets, RAM, Memory, Price Points, etc.



    EDIT: add a physical keyboard : )



    It seems the option of multiple US carriers is out for the next year or so. What does anyone else think?



    And



    Does anyone think some of the above, either option, will be implemented this year?



    I'd be interested to hear what others forecast what they think will happen in the next few months to the iPhone.



    Take care ya'll.
  • Reply 4 of 94
    vinney57vinney57 Posts: 1,162member
    Not only will their NOT be multiple iPhone OS's Apple are trying hard to unify the Mac and iPhone OS's as much as possible.



    Apple likes its business goals to be nice and simple. Will they segment mobile products? Of course. Will they widen price points? Of course (they go together). Will they increase territories? Of course. Will they spread to multiple carriers? Of course. It ain't rocket science. The timing of all those things is much harder to predict however and will depend on developments that may be outside of Apple's control.



    Its not the what its the when... that's the hard part.
  • Reply 5 of 94
    virgil-tb2virgil-tb2 Posts: 1,416member
    Quote:
    Originally Posted by Rot'nApple View Post


    What do you think...



    If Apple stresses that the iPhone will be software centric as reported in AI's article, do you think that the iPhone can have one hardware but several iPhone OS's, like iPhone OS lite, iPhone OS, iPhone OS Pro? Of course that sounds too Microsoftish and their versions of their OS Vista... Basic, Home, Business, Premium, Extreme you get the point.



    OR



    Will Apple just have the one iPhone OS and have two or three physical handsets with different sizes, shapes, form factors, different chipsets, RAM, Memory, Price Points, etc.



    EDIT: add a physical keyboard : )



    It seems the option of multiple US carriers is out for the next year or so. What does anyone else think?



    And



    Does anyone think some of the above, either option, will be implemented this year?



    I'd be interested to hear what others forecast what they think will happen in the next few months to the iPhone. ...



    I think that it's obvious that there will be multiple devices in that there are already two right now (iPod touch and iPhone).



    By saying it's "software centric" they imply that most or all of it's main features would be implemented in software, so that means variations between hardware models are likely to be size only or at least limited to the occasional extra sensor/button etc.



    So there might be smaller ones (nano) and there might be larger ones (tablet), they will generally all be the same device. One would also expect that, they will all, (like the iPods) get smaller and thinner over time.



    This means quite a huge range of possibilities and devices, but still rules out things like physical keyboards, sliders, spinners, flippers, etc.



    All my opinion, YMMV.
  • Reply 6 of 94
    addaboxaddabox Posts: 12,667member
    Quote:
    Originally Posted by Virgil-TB2 View Post


    I think that it's obvious that there will be multiple devices in that there are already two right now (iPod touch and iPhone).



    By saying it's "software centric" they imply that most or all of it's main features would be implemented in software, so that means variations between hardware models are likely to be size only or at least limited to the occasional extra sensor/button etc.



    So there might be smaller ones (nano) and there might be larger ones (tablet), they will generally all be the same device. One would also expect that, they will all, (like the iPods) get smaller and thinner over time.



    This means quite a huge range of possibilities and devices, but still rules out things like physical keyboards, sliders, spinners, flippers, etc.



    All my opinion, YMMV.



    ++



    I think that's it exactly. I also think that Apple intends to use software to differentiate its mobile products in the larger market, which is why the endless hardware fetishism that surrounds each new "iPhone killer" so misses the point.



    As far as is possible with current technology, the iPhone is nothing but software, that is, just enough hardware to support a screen where the UI and apps happen. Notice that Apples ads only ever show apps happening, whereas everyone else's ads almost never do, but choose to concentrate instead on glamor shots of the device itself, or sexy people brandishing same.



    While I'm sure the iPhone will get things like higher res screens or higher res cameras or faster processors or more ram over time, Apple clearly intends their mobile platform to be a very simple thing: a screen with enough hardware to support the UI and apps. Everything else is secondary. Anything that compromises that is out, which is why I suspect that Apple will never make a smaller iPhone, having already determined that the current size is the smallest possible form factor that allows the UI to work the way they want.
  • Reply 7 of 94
    virgil-tb2virgil-tb2 Posts: 1,416member
    Quote:
    Originally Posted by addabox View Post


    ... Anything that compromises that is out, which is why I suspect that Apple will never make a smaller iPhone, having already determined that the current size is the smallest possible form factor that allows the UI to work the way they want.



    I think that you're probably right about that but I hold out a tiny possibility that they might make a nano-ish version. When I was talking about smaller I was mostly referring to the fact that over time they will all of course shrink down to be as close to a simple screen as possible. You only have to handle the 2.0 iPod touch to all of a sudden realise how bulky the current iPhone 3G is and imagine it as an even smaller more svelte device.



    I continue to hope that they come out with a 6x9 tablet soon. The keyboard on the iPhone is fantastic, but if it were just a little bit bigger it would really fly.
  • Reply 8 of 94
    addaboxaddabox Posts: 12,667member
    Quote:
    Originally Posted by Virgil-TB2 View Post


    I think that you're probably right about that but I hold out a tiny possibility that they might make a nano-ish version. When I was talking about smaller I was mostly referring to the fact that over time they will all of course shrink down to be as close to a simple screen as possible. You only have to handle the 2.0 iPod touch to all of a sudden realise how bulky the current iPhone 3G is and imagine it as an even smaller more svelte device.



    I continue to hope that they come out with a 6x9 tablet soon. The keyboard on the iPhone is fantastic, but if it were just a little bit bigger it would really fly.



    True. I could see the top and bottom margins shrinking, as well.



    However, I think there's some idea that an iPhone "nano" would be a cheaper alternative, and I don't think that's how it will go. If anything, the current version will become the "cheap" one, and newer, premium models will be slenderized/shortened.



    Just my random theory, of course.
  • Reply 9 of 94
    teckstudteckstud Posts: 6,476member
    How does the iPhone grow from infancy if it eventually stalls at some point unless it is made available to mutiple carriers in the USA?
  • Reply 10 of 94
    trajectorytrajectory Posts: 647member
    Quote:
    Originally Posted by teckstud View Post


    How does the iPhone grow from infancy if it eventually stalls at some point unless it is made available to mutiple carriers in the USA?



    That's purely hypothetical.
  • Reply 11 of 94
    trajectorytrajectory Posts: 647member
    Quote:

    "Apple said that one thing would be a constant: iPhone will remain a software centric device."



    That makes perfect sense, because it's especially the software/OS where Apple excels. Anyone can make an iPhone-like device, but, few can come close to matching Apple's software and interface.
  • Reply 12 of 94
    anantksundaramanantksundaram Posts: 18,345member
    Quote:
    Originally Posted by teckstud View Post


    How does the iPhone grow from infancy if it eventually stalls at some point unless it is made available to mutiple carriers in the USA?



    What part of the following: "....iPhone is still in its early days and could gain share by: providing more functionality; lowering prices; growing geographically; or segmenting the market with different models......" is difficult to follow?
  • Reply 13 of 94
    addaboxaddabox Posts: 12,667member
    Quote:
    Originally Posted by Trajectory View Post


    That makes perfect sense, because it's especially the software/OS where Apple excels. Anyone can make an iPhone-like device, but, few can come close to matching Apple's software and interface.



    Right, and it's exactly there that so many would be "iPhone killers" have fallen down. Phone manufacturers seemed to be convinced that if they just pile on enough hardware "features", then slap on any kind of a touch interface, they've got the iPhone beat.



    Nobody, and I mean nobody, sweats the little details of user friendly interaction like Apple does. Of course, that in and of itself is not enough to insure the ongoing success of the iPhone platform, but I think they've already gone a fair ways towards establishing the idea that, if you want a smart phone that's easy and fun to use, the iPhone is it.
  • Reply 14 of 94
    anantksundaramanantksundaram Posts: 18,345member
    Quote:
    Originally Posted by AppleInsider View Post


    Oppenheimer's visit to Apple's campus was the second in as many weeks by an equity research firm that provides ongoing coverage of the company. Last week, Kaufman Bros. analyst Shaw Wu made the trip in conjunction with a pack of investors that tagged alone for the ride down from San Francisco..



    Minor point: It should be "along."



    Major point: Shaw Wu hosted by Apple management!? Nice.
  • Reply 15 of 94
    solipsismsolipsism Posts: 25,726member
    The article is all pretty obvious stuff that most companies would follow. What isn't obvious is the best way to acheive this controlled and continued growth.



    Multple carriers are out of the question at this point, where it can be, due to the ecosystem controll that Apple needs. I'd think that a second phone type would come about bi-annually to the main iPhone, to help spark new sales after the initial sale frenzy dies. Perhaps in January. Though I would think thus device would either have to be just a basic phone with iPod or have the same size display as the current iPhone with just all specs being low enough to be useful yet cheap enough to be a viable alternative. However, both of these have their own issues that Apple typically doesn't like.



    Regardless, I think we have to get to a saturation point first. This next iPhone should give us some clues towards that.





    Quote:
    Originally Posted by anantksundaram View Post


    What part of the following: "....iPhone is still in its early days and could gain share by: providing more functionality; lowering prices; growing geographically; or segmenting the market with different models......" is difficult to follow?



    I'd wager it's the parts with words.
  • Reply 16 of 94
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by anantksundaram View Post


    What part of the following: "....iPhone is still in its early days and could gain share by: providing more functionality; lowering prices; growing geographically; or segmenting the market with different models......" is difficult to follow?



    None- but where is MULTIPLE CARRIER IN THE US mentioned in all your ""s?
  • Reply 17 of 94
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by Trajectory View Post


    That's purely hypothetical.



    True- we will just wait and see. Hopefully it expands into the US market further via other carriers. It's not impossible and highly desired by anyone who's satisfied with their current carrier and refuses to go to AT&T, whatever their present carrier is.
  • Reply 18 of 94
    bregaladbregalad Posts: 816member
    Quote:
    Originally Posted by anantksundaram View Post


    Minor point: It should be "along."



    Major point: Shaw Wu hosted by Apple management!? Nice.



    It's not good enough just to post good financial results. You must also ensure that those results get noticed and people write about your company.



    Letting Shaw Wu, who is world renowned for making wildly inaccurate predictions about Apple and then quietly revising them at the last minute so he can claim to have made accurate ones, on campus is just good PR.



    As Oscar Wilde said, the only thing worse than being talked about is not being talked about.
  • Reply 19 of 94
    addaboxaddabox Posts: 12,667member
    Quote:
    Originally Posted by solipsism View Post


    The article is all pretty obvious stuff that most companies would follow. What isn't obvious is the best way to acheive this controlled and continued growth.



    Multple carriers are out of the question at this point, where it can be, due to the ecosystem controll that Apple needs. I'd think that a second phone type would come about bi-annually to the main iPhone, to help spark new sales after the initial sale frenzy dies. Perhaps in January. Though I would think thus device would either have to be just a basic phone with iPod or have the same size display as the current iPhone with just all specs being low enough to be useful yet cheap enough to be a viable alternative. However, both of these have their own issues that Apple typically doesn't like.




    Apple's tendency with this is to introduce new models that do more at the old price points, so that last year's midrange becomes this year's base model.



    However, they do occasionally create a new price floor, and that's what I would guess will happen with the iPhone, with a $99 model that looks a lot like the current 8GB.



    Of course, that doesn't address the real cost of ownership, which is the cell plan, so to really make "cheap enough to drive big increases in uptake" to work, they'll have to negotiate a reduced cost/bandwidth plan with AT&T.



    With AT&T hot to extend their exclusive relationship, I would guess that Apple has some real leverage here.
  • Reply 20 of 94
    trajectorytrajectory Posts: 647member
    Quote:
    Originally Posted by addabox View Post


    Right, and it's exactly there that so many would be "iPhone killers" have fallen down. Phone manufacturers seemed to be convinced that if they just pile on enough hardware "features", then slap on any kind of a touch interface, they've got the iPhone beat.



    Nobody, and I mean nobody, sweats the little details of user friendly interaction like Apple does. Of course, that in and of itself is not enough to insure the ongoing success of the iPhone platform, but I think they've already gone a fair ways towards establishing the idea that, if you want a smart phone that's easy and fun to use, the iPhone is it.



    Completely agree. I'm old enough to remember the very first mobile phones, and I've owned many cellphones over the years. The Razr was one of my favorites, but, the interface and software was just horrible. When I got an iPhone and started using it, I knew I had a revolutionary device in the palm of my hands. Two years later and it's become "ho-hum" for some, but, I still marvel at the iPhone. It's the first cellphone that didn't require studying a manual for two days before I could use it.
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