Building a cheap iPhone would be an 'insane idea' for Apple, Needham says

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Comments

  • Reply 21 of 67
    jungmarkjungmark Posts: 6,924member
    Apple should make a version of the 5C in black with 8GB of storage, a slightly lower res camera front and back, in a less elaborate packaging box, with no headphones or case included, and sell it exclusively in China, India and Africa for $299. Worth a shot.

    No it's not. Apple isn't going to downgrade an existing product.

    Also please ignore Odo. He's been off his meds.
  • Reply 22 of 67
    Quote:
    Originally Posted by tundraboy View Post

     

     

    Honestly Odo, you're just getting tiresome.  You're just a worn out old bag of one-sided half-truths, cherry picked facts, and illogical conclusions.  So you got excited out of your wits, poured all your savings into AAPL at 695 and got burned when it came down to more realistic levels.  Tim Cook is one of the few CEOs who don't let the share price unduly influence their decision making.  And if that drives off short horizon investors, so much the better.  If you think Google is really such a great company, then put your savings there and earn back what you lost in AAPL when you got swept up in the tide of euphoria.  No shame in that, even professional hedge fund investors succumbed to the irrational exuberance over AAPL.


    Tundra, you should "cut & paste" this and put it up as the first post of all future Ai articles about AAPL!  : )

     

    (Maybe, sans the first sentence.)    : )

     

    Best.

  • Reply 23 of 67
    The question that continually pops up for me, is "what is the value of customers whose primary deciding factor is price?". On average, customer that can't currently afford an iPhone, or who are driven by price won't spend money on Apps, music, video, etc.

    Apple would see higher costs to support these customers who would use a higher percentage of the "free" portion of the echo system - just like what is seen in the Android world.
  • Reply 24 of 67
    izzysizzys Posts: 4member
    Destroying a premium brand's reputation is easy. I'm an old timer. I remember when, in the 60's and 70's, SONY was considered the top of the line. It could charge a premium, since its products were that good. While Japanese brands in general were considered better, SONY was the top.

    Wanted a Walkman? Sony,s the best. Then, Sony got greedy and wanted to capture the middle and bottom in the 80s and 90d. It started selling crappy electronics for cheap. I could nt believe, for example, that I could get a Sony cassette player for only $40. But I could, and it was crap like everything else priced that low.

    Anyone here under the age of 40 that thinks SONY is the premium Japanese brand? I didn't think so. You just think I'm nuts. But it was true, past tense.

    Sony is like every other brand, though it doesn't realize it. It flatters itself with Sonystyle stores and the like. It doesn't realize that the customers who still think of it that way are either dead, or in their 70s.

    So go ahead Apple.
  • Reply 25 of 67
    tbelltbell Posts: 3,146member
    Quote:
    Originally Posted by Constable Odo View Post



    All Apple would need to do is take some of that unused reserve cash pile and expand the business into other areas such as mobile payments, cloud services or creating its own search engine and ad business. That way Apple could lower the price of some of its iPhones and still be able to boost revenue and offset some of those margin losses. Tim Cook needs to think outside of his little hardware only box. Android already owns the smartphone industry due to completely saturating the entire planet with Android devices. Apple has absolutely no room to grow iPhone sales and can never gain any market share against Android when every Android smartphone is half the price of an iPhone.



    Tim Cook is just killing shareholders because he doesn't want to part with his personal cash hoard. Doing nothing with that money is not going to help either Apple or shareholders. The share price will continue to be driven down towards zero if he doesn't take that money and create additional revenue streams. No company needs to save $100 billion for a rainy day. Apple is so incompetent to simply let Google dominate the search engine business and the smartphone industry and not do anything to fight back. Meanwhile Google's value soars and Apple's value plummets. Tim Cook clearly does not know how to do anything to stop Apple from sinking.

     

    I hate to tell you, but Apple has already committed to buying back 50 billion worth of its shares on borrowed money, and is paying the largest dividend. It also is involved in lots of lawsuits where it might actually have to spend some of the money if it loses, and is in a highly competitive industry where have cash is important. There is nothing wrong with Apple being conservative about giving money to shareholders. Apple is on record saying it evaluates on a yearly basis its cash dispersal policy to shareholders. That is fiscally prudent, and as a long term shareholder I support that policy.

     

    Moreover, Apple should not try to appease Wallstreet as its valuation of Apple simply is not reasonable. Further, Wallstreet's short term interests are not necessary in line with Apple's long term interests. Apple beat Google and Amazon in just about every metric, but in comparison the Street does not award it appropriately. Google does not pay any type of dividend, is not repurchasing any shares, and is sitting on over 50 billion in cash. Yet nobody is giving it a hard time about not paying a dividend and repurchasing shares. 

     

    As far as long term plans go, who knows what Apple is working on. It is a highly secretive company that takes its time before rushing a product to market. Based on its history, I think it fair to say it is working on great stuff. 

     

    Your view regarding Android is inconsistent. On one hand you erroneously state Android has all the market share, and on the other that Apple has not room to grow. 

     

    With all that said, I see some areas Apple needs to improve. For instance, operating system interoperability. Apple should own vehicle with mobile device integration. To the extent it does not it is because it is not offering a solution that allows other operating systems to interact with its solution. Another example is messaging. iMessage and Facetime need better integration with competing operating systems. 

  • Reply 26 of 67
    ted13ted13 Posts: 65member
    Quote:

    Originally Posted by DarkLite View Post

    edit: The recent article on App Store revenues breaking $10 billion is relevant here - with a low-cost device, the profit wouldn't be made on the hardware. It would be made on app / software / music sales, and also through longer-term sales due to ecosystem lock-in (get them into the Apple ecosystem with a cheap iPhone, and because moving to Android would cost them all their apps etc. you're very likely to have them hooked). 

     

    The problem is that people who buy cheap phones don't buy apps, music or movies.  This is what Android developers have found out: the customers buying apps are the ones who bought high end phones that cost as much as an iPhone.  People who buy $50 Android phones don't purchase anything else besides pre-paid SIM cards.  Anyone thinking they will make up the low price of a cheap phone on subsequent media sales is on drugs, and not good ones, either.

  • Reply 27 of 67
    Quote:
    Originally Posted by DarkLite View Post

    What he's actually saying is that building a cheap iPhone while keeping the same profit margin wouldn't be viable. None of his arguments rule out Apple producing a cheap iPhone with lower margins (that's not to say that there aren't arguments against it, but this isn't one of them).

     

    edit: The recent article on App Store revenues breaking $10 billion is relevant here - with a low-cost device, the profit wouldn't be made on the hardware. It would be made on app / software / music sales, and also through longer-term sales due to ecosystem lock-in (get them into the Apple ecosystem with a cheap iPhone, and because moving to Android would cost them all their apps etc. you're very likely to have them hooked). 

     

    I disagree with your second paragraph. App Store revenues are irrelevant. This is because people who buy cheap phones usually don't send money on apps, books, services, etc. The money lost on the cheap phone would never be recouped. There have been a few articles here and elsewhere, namely Macrumors, that show iOS devices dominate mobile web traffic, app dollars, and on-line shopping purchases.
  • Reply 28 of 67
    charlitunacharlituna Posts: 7,217member
    This talk has been hashed out for how many years now. And Apple hasn't produced. Because they don't want to. They have even started 'we don't do cheap'. 2013 was supposed to be the year of us finally getting a 'cheap' iPhone for those emerging markets. We got the 5C and new payment schemes.

    And yet the analysts haven't sorted out that it isn't going to happen. Do they really need Tim Cook etc to flat out say 'Dudes it isn't happening, SFTU%u2018 for them to get a clue
  • Reply 29 of 67
    Building market share is not a waste of time. Once you've swamped the world with your standard and ecosystem, it can fuel your future earnings. You obviously need to optimize market share for future profitability vs current margins on expensive gear but I'm pretty sure apple is doing that.
  • Reply 30 of 67
    Who needs a phone? A $279 iPod Touch gets you into the iOS ecosystem. FaceTime and Skype if you really want to call.
  • Reply 31 of 67
    Well, unfortunately, we saw in the 80s what happens when Apple preserves its margins and profits above all else -- the momentum of a much cheaper, open ecosystem, however inferior, is hard to stop. As a pure defensive play, increasing marketshare will have other benefits - App developers and third-party support (like car manufacturers) will always chase the largest market. Selling a $299 phone that costs $130 to make is still a pretty good profit, and a generation of kids might grow up in the Apple fold.

    Largest market, huh?

    Developers and 3rd-party accessory makers already prefer Apple even though Android has had the most market share for years.

    Why? Here's what you're forgetting about "Android" market share: it's made up of tons of phones, from dozens of manufacturers, across all price ranges and capabilities, and that are sold in many different countries.

    I'm sure you look at Android's 80% market share and think "Holy crap! That's a huge number!"

    It is a huge number on paper. But it's also an illusion.

    How much of Android's phenomenal market share is made up of terrible phones sold in countries that barely have 3G access? All those $79 phones sold in developing nations won't be downloading a lot of apps or music. Nor will they be hooking into an automobile.

    But on paper... those terrible phones get weighed the same as a high-end Android phone. Or an iPhone. A phone's a phone... right?

    Clearly that's not the case. That's why developers ignore Android's phenomenal market share numbers... and focus on the iPhone. Market share isn't the trophy you think it is.

    Think about it... 8 out of 10 smartphones sold today are running Android. And yet the iPhone still gets all the developer and 3rd-party attention.

    I think that disproves your "largest market" theory...
  • Reply 32 of 67
    adamcadamc Posts: 582member
    Quote:

    Originally Posted by heroinsmoker View Post

     

    Well, unfortunately, we saw in the 80s what happens when Apple preserves its margins and profits above all else -- the momentum of a much cheaper, open ecosystem, however inferior, is hard to stop. As a pure defensive play, increasing marketshare will have other benefits - App developers and third-party support (like car manufacturers) will always chase the largest market. Selling a $299 phone that costs $130 to make is still a pretty good profit, and a generation of kids might grow up in the Apple fold.


    There is already a generation of kids growing up in the Apple fold using the iPhones which were passed down from their parents.

     

    Besides there are plans ahead to make owning the iPhones less painful in India and China.

  • Reply 33 of 67
    512ke512ke Posts: 782member
    Say you were a loyal BMW customer. How would you feel if BMW suddenly released a low end Beamer that cost less than a Honda Fit? It would degrade the brand.

    What if Apple created a second brand for its cheap phone? Apple would be Lexus and have its new Toyota brand.

    Naaaaah.

    Apple is aspirational and high end.

    I see Apple becoming a pricier but more elegant, more capable, and better integrated alternative to its competitors.
  • Reply 34 of 67

    A lot of what you are saying is all true, for the time being. But look 5, 10 years out. The momentum of Android needs to be slowed. One way to do this is to not let billions of people get hooked into the Android ecosystem, and to try and create as many Apple users as you can. Sticking your head in the sand saying, "We're the best!" is not useful.

     

    Without action, future car dashboards will run Android apps and sync flawlessly with your Google account. Future TVs will run Android apps and sync flawlessly with your Google account. And Apple will be making a lot of money selling pricey phones to 1-5% of the population, as the economies of scale with Android seduce plenty of people into that ecosystem.

     

    I don't want to see that future happen.

  • Reply 35 of 67
    Originally Posted by Constable Odo View Post

    All Apple would need to do is take some of that unused reserve cash pile and expand the business into other areas such as mobile payments, cloud services or creating its own search engine and ad business. That way Apple could lower the price of some of its iPhones and still be able to boost revenue and offset some of those margin losses.

     

    Right, but that’s evil and contrary to everything that Apple has ever done, so never bring it up again. We’ll get morons thinking it could actually happen.

  • Reply 36 of 67
    thedbathedba Posts: 685member
    Quote:

    Originally Posted by nuttyappledude View Post



    Building market share is not a waste of time. Once you've swamped the world with your standard and ecosystem, it can fuel your future earnings. You obviously need to optimize market share for future profitability vs current margins on expensive gear but I'm pretty sure apple is doing that.



    Really? And what has 80% market share netted all of the Android manufacturers put together?

    Answer: Far les profits than Apple's measly 15% world wide market share. That's what.

  • Reply 37 of 67
    frankiefrankie Posts: 380member

    Meanwhile my iphone 5 along with several other people's I know have all borken with in the 1st year of use. This never happened with my 3 or 4.

     

    Unfortunately I'm pretty sure Apple is already cutting corners and costs and getting inferior parts...

  • Reply 38 of 67
    The days of Apple being the only premium phone are gone. But it will always be an aspirational brand. Why not start a new division to produce a Chevy to give its Cadillac a base of aspirants? Just don't call it an iPhone.
  • Reply 39 of 67
    Would you ask Chanel or Louis Vuitton to make a low cost bag? or Cartier to make a Casio-priced watch? It is not a matter of cost... but a question of brand perception & value. Luxury brands are selling small volumes in China but making much more profits than any low cost brand and Chinese people are ready to spend a fortune to get these brands while they don't want to spend a penny on "cheap products".

    Samsung & Apple are not playing exactly in the same market segment... Samsung is selling a piece of electronic equipment... while Apple is selling a premium consumer brand...
  • Reply 40 of 67
    frankie wrote: »
    Meanwhile my iphone 5 along with several other people's I know have all borken with in the 1st year of use. This never happened with my 3 or 4.

    Unfortunately I'm pretty sure Apple is already cutting corners and costs and getting inferior parts...
    Hate to say it, but I agree. My 3GS was a tank; sold it in perfect working order after it migrated through four family members. 4S on/off switch died (despite being in an OtterBox case) and battery would only take half charge after three migrations. 5S got dropped on kitchen floor before case arrived and the gold metal frame bent out of square making the on/off button hard to use. Anecdotal, I know, but it does seem as though strength and durability may be slipping.
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