Apple is effectively supplying the marketplace with "cheap" iPhones by insuring that older versions of the product are viable for resale and use on the Apple ecosystem. At present, 48% of iPhones in use are iPhone 4 and 4S. Both are compatible with iOS 7 and likely a majority of those are already on iOS 7. When refurbished and marketed by 3rd party firms, these are sub $200 - $300 phones (look at completed listings on eBay) which offer a viable iOS experience. Their robust physical construction certainly helps.
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
I suspect there are other motivations for the rumors to persist, so not sure it's that the analysts "haven't sorted out that it isn't going to happen". I think there is a game that is played to cast Apple in a bad light. Apple performs better than most (if not all) companies, and generally meets what they set out to do. Don't know, but I’ve noticed many of these rumors resurface when Apple's stock price is on the rise. It may just be a coincidence...
Apple isn’t perfect, and they have had some miscues, but for the most part they deliver on what they say they will do.
So, if Apple doesn't make enough blunders to hurt their image, you can always fabricate rumors and later “ding” them when they don’t come to fruition.
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.
Mercedes builds the smart car. I don't think that has any impact on their brand.
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...
IMHO anyone who buys a Louis Vuitton bag is a moron as is anyone who buys an iphone just because it is peceived to be the high end brand.
I have an iphone because all in all it was functionally the best phone for me. If I wore a watch it would more likely be a Casio than a Cartier as functionally there is no difference between the two.
iMessage and Facetime need better integration with competing operating systems.
Why? I have never had a problem sending an iMessage to a non Apple phone. I much prefer it to the new hangouts app in Kit Kat. Also there are other video chat options on iOS that are compatible with other phones although none seem to work as well as FaceTime.
Wall Street, and these analysts, are so self-important. I would love to see public ownership go extinct. That would save products, employees, and even entire companies, from the greed of market playpen bullies, know-nothing traders, and vulture capitalists. It's a broken system that once provided function but is now just an exploitation and manipulation feature in a market that had totally escaped its own regulation.
Then just offer a black 8GB version. Not a downgrade, just a new option of the same product. It won't cannibalize anything, and will expand the iOS economy and dent the growth of Android.
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).
What? Can you not do basic math? 10 billion across the entire App Store is nothing. Selling 50 million $500 phones is 25 billion in revenue. Get a clue.
These are the articles that bring on the real morons. People with no business acumen whatsoever, with their wild idiotic "profit" ideas. It is absolutely hilarious.
Then just offer a black 8GB version. Not a downgrade, just a new option of the same product. It won't cannibalize anything, and will expand the iOS economy and dent the growth of Android.
Why? I have never had a problem sending an iMessage to a non Apple phone. I much prefer it to the new hangouts app in Kit Kat. Also there are other video chat options on iOS that are compatible with other phones although none seem to work as well as FaceTime.
You may have used the Messages app to send a message to a non-iPhone, but it was an SMS or MMS message, not an iMessage.
@ Michael Scripp. Good comments. Also Tim Cook noted that it is a mistake to look at a market like China and believe it is just ONE, unified market. With 1.3 billion people, there are at least two markets going on there, with the higher end approaching the size and demographics of the higher end market in the US! Therefore, there may be hundreds of millions of consumers able to consider an aspirational purchase such as an iPhone. And Horace Dediu (founder of Asymco), notes that the market for smart phones will likely not even approach saturation until around 2017 and notes that even the US and Western Europe constitute only around 10% of the global population.
Speaking of aspiration, this is anecdotal, but at the Bellevue (WA) Apple store, I personally saw a gentleman purchasing 1,000 unlocked iPhone 5s's! (I counted the shopping bags and their contents.) One of the salespeople told me they see this all the time in that store, as the customer calls in ahead of his arrival. I was told the purchaser pays full price and he had an Oregon driver's license so there is no sales tax charged.) Those will be taken to Asia or India. On my next visit, I saw a well dressed couple (perhaps Eastern European), bagging up 10 unlocked phones, and several boxes of iPad Airs (for what it is worth). When you look at the globe, and the brilliant hiring of Angela Ahrendts away from Burberry, one can see that Apple is just getting warmed up, IMO.
I think Apple needs to be careful about going down market. I Suppose one could argue that selling their products in Walmart is already doing just that. But I think to many they are still seen as a premium brand and changing that to grab market share at the low end is not wise, IMO. As someone asked earlier what is the value of customers at the low end? Will these customers spend money on apps, accessories and services? Of corse market share matters to Google because their customers are advertisers and the more eyeballs, the more ad revenue. What's the point of Apple having a larger customer base if the customers they're adding aren't profitable? Also it seems a lot of this analysis assumes that once someone goes Android they're lost to Apple forever. I don't believe that for a minute. Especially people who are buying Android purely based on price. If their circumstance changes and price is no longer the driving factor will they stay Android? My guess is Apple is focusing on those moving into the middle/upper classes.
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.
It's not as simple as that. The cash hoard isn't sitting in a Wells Fargo account. A good chunk of it is stuck overseas, and Apple would incur a hefty tax bill to repatriate those funds. That looming tax bill is so large, they decided to take on debt to facilitate the stock buyback instead of using their own cash because debt is cheaper.
Lowering the price of the iPhone as you suggest might increase sales volume, but it would be at the expense of profit. If you're familiar with Apple's approach to business, it's profit first, market share second.
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.
The current design has no glass back like the 4/4s. Aluminum bends more easily. It says nothing about the quality of the device. A 20kt gold ring will also bend more easily than a 14kt gold ring. It's a function of the materials used. Apple's priority with the 5/5s was making the phone as thin and light as possible. People complained the 4/4s was heavy.
That said, in my experience the iPad mini (both original and retina) seem to be built like tanks. They handle being dropped a lot better than an iPhone does. I wouldn't be surprised if the iPhone 6 takes design cues from the iPad mini.
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,
I doubt a cheaper iPhone would add significantly to App sales. There won't be enough memory space available.
Evidence is the current lower cost iPhone 4s 8GB,
which has very little space left (only about 1GB) for user data and Apps.
Comments
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
I suspect there are other motivations for the rumors to persist, so not sure it's that the analysts "haven't sorted out that it isn't going to happen". I think there is a game that is played to cast Apple in a bad light. Apple performs better than most (if not all) companies, and generally meets what they set out to do. Don't know, but I’ve noticed many of these rumors resurface when Apple's stock price is on the rise. It may just be a coincidence...
Apple isn’t perfect, and they have had some miscues, but for the most part they deliver on what they say they will do.
So, if Apple doesn't make enough blunders to hurt their image, you can always fabricate rumors and later “ding” them when they don’t come to fruition.
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...
Please specify broken. How so?
I know several people who have the iPhone 5, including myself and there are no problems to report. Everything works.
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.
Mercedes builds the smart car. I don't think that has any impact on their brand.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...
IMHO anyone who buys a Louis Vuitton bag is a moron as is anyone who buys an iphone just because it is peceived to be the high end brand.I have an iphone because all in all it was functionally the best phone for me. If I wore a watch it would more likely be a Casio than a Cartier as functionally there is no difference between the two.
Why? I have never had a problem sending an iMessage to a non Apple phone. I much prefer it to the new hangouts app in Kit Kat. Also there are other video chat options on iOS that are compatible with other phones although none seem to work as well as FaceTime.
Wall Street, and these analysts, are so self-important. I would love to see public ownership go extinct. That would save products, employees, and even entire companies, from the greed of market playpen bullies, know-nothing traders, and vulture capitalists. It's a broken system that once provided function but is now just an exploitation and manipulation feature in a market that had totally escaped its own regulation.
There already are cheap iPhones on the market. They're called Galaxys.
Then just offer a black 8GB version. Not a downgrade, just a new option of the same product. It won't cannibalize anything, and will expand the iOS economy and dent the growth of Android.
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).
What? Can you not do basic math? 10 billion across the entire App Store is nothing. Selling 50 million $500 phones is 25 billion in revenue. Get a clue.
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...
LOL yea ok.
These are the articles that bring on the real morons. People with no business acumen whatsoever, with their wild idiotic "profit" ideas. It is absolutely hilarious.
Perhaps that's this fall's 5C.
Why? I have never had a problem sending an iMessage to a non Apple phone. I much prefer it to the new hangouts app in Kit Kat. Also there are other video chat options on iOS that are compatible with other phones although none seem to work as well as FaceTime.
You may have used the Messages app to send a message to a non-iPhone, but it was an SMS or MMS message, not an iMessage.
@ Michael Scripp. Good comments. Also Tim Cook noted that it is a mistake to look at a market like China and believe it is just ONE, unified market. With 1.3 billion people, there are at least two markets going on there, with the higher end approaching the size and demographics of the higher end market in the US! Therefore, there may be hundreds of millions of consumers able to consider an aspirational purchase such as an iPhone. And Horace Dediu (founder of Asymco), notes that the market for smart phones will likely not even approach saturation until around 2017 and notes that even the US and Western Europe constitute only around 10% of the global population.
Speaking of aspiration, this is anecdotal, but at the Bellevue (WA) Apple store, I personally saw a gentleman purchasing 1,000 unlocked iPhone 5s's! (I counted the shopping bags and their contents.) One of the salespeople told me they see this all the time in that store, as the customer calls in ahead of his arrival. I was told the purchaser pays full price and he had an Oregon driver's license so there is no sales tax charged.) Those will be taken to Asia or India. On my next visit, I saw a well dressed couple (perhaps Eastern European), bagging up 10 unlocked phones, and several boxes of iPad Airs (for what it is worth). When you look at the globe, and the brilliant hiring of Angela Ahrendts away from Burberry, one can see that Apple is just getting warmed up, IMO.
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.
It's not as simple as that. The cash hoard isn't sitting in a Wells Fargo account. A good chunk of it is stuck overseas, and Apple would incur a hefty tax bill to repatriate those funds. That looming tax bill is so large, they decided to take on debt to facilitate the stock buyback instead of using their own cash because debt is cheaper.
Lowering the price of the iPhone as you suggest might increase sales volume, but it would be at the expense of profit. If you're familiar with Apple's approach to business, it's profit first, market share second.
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.
The current design has no glass back like the 4/4s. Aluminum bends more easily. It says nothing about the quality of the device. A 20kt gold ring will also bend more easily than a 14kt gold ring. It's a function of the materials used. Apple's priority with the 5/5s was making the phone as thin and light as possible. People complained the 4/4s was heavy.
That said, in my experience the iPad mini (both original and retina) seem to be built like tanks. They handle being dropped a lot better than an iPhone does. I wouldn't be surprised if the iPhone 6 takes design cues from the iPad mini.
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,
I doubt a cheaper iPhone would add significantly to App sales. There won't be enough memory space available.
Evidence is the current lower cost iPhone 4s 8GB,
which has very little space left (only about 1GB) for user data and Apps.