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Old Feb 22, 2013, 03:20 PM   #1
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After Meeting With Apple CFO, Analyst Believes Lower-Cost iPhone Makes Good Sense




Following recent meetings with Apple Chief Financial Officer Peter Oppenheimer, Morgan Stanley analyst Katy Huberty today issued a research note sharing some of her takeaways from those discussions and her views on Apple's future plans.

While she did not disclose any specific information shared by Oppenheimer, Huberty did come away feeling that Apple will be working hard to expand carrier partnerships and distribution for the iPhone to drive growth in Apple's largest segment. She also believes that Apple is working to develop new services to take advantage of the "stickiness" of the Apple ecosystem.

On the topic of the lower-cost iPhone which has been the subject of increasing rumors, Huberty makes the case Apple's experience with the iPad mini and continued strong sales of the iPhone 4 that saw the company experiencing shortages throughout the fourth quarter of 2012 are driving the company's efforts to focus more on cheaper offerings.
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We also see several signs that a lower priced iPhone makes sense: 1) iPad Mini is expanding Apple's customer base with 50% of purchases in China/Brazil representing new customers to the ecosystem. 2) Chinese consumers show a desire to purchase the latest version of iPhone (instead of discounted older generations). 3) iPhone 4 demand surprised to the upside in the December quarter. Even at a low 40% gross margin and 1/3 cannibalization rate, we see an "iPhone Mini" as incremental to revenue and gross profit dollars.
Huberty goes on to note that she believes Apple has maintained its long-standing approach to product decisions under the leadership of Tim Cook and that the company remains committed to innovation with a strong product pipeline under development. Despite continued investments in that pipeline, Huberty believes that Apple is likely to return more cash to shareholders as its cash holdings continue to grow.

Article Link: After Meeting With Apple CFO, Analyst Believes Lower-Cost iPhone Makes Good Sense
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Old Feb 22, 2013, 03:21 PM   #2
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Wonder if we can get it in the US?
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Old Feb 22, 2013, 03:22 PM   #3
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And when does Apple listen to analysts?
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Old Feb 22, 2013, 03:24 PM   #4
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She forgot to mention the lifetime supply of iTunes gift cards she walked out with.
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Old Feb 22, 2013, 03:24 PM   #5
MTL18
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Not against a cheaper iPhone for nations with a large population and no carrier subsidization.

AKA keep this out of the US and Canada where your margins are huge and most people pay 199 for your phone!
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Old Feb 22, 2013, 03:24 PM   #6
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As usual, I stopped reading at "analyst".
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Old Feb 22, 2013, 08:53 PM   #7
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As usual, I stopped reading at "analyst".
+1,000 iMikeT.

Isn't it nice to know that if you can't do anything else, you can always be a Wall Street analyst.
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Old Feb 22, 2013, 06:35 PM   #8
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Not against a cheaper iPhone for nations with a large population and no carrier subsidization.

AKA keep this out of the US and Canada where your margins are huge and most people pay 199 for your phone!
Why?
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Old Feb 22, 2013, 08:29 PM   #9
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Originally Posted by MTL18 View Post
Not against a cheaper iPhone for nations with a large population and no carrier subsidization.

AKA keep this out of the US and Canada where your margins are huge and most people pay 199 for your phone!
It would make tons of sense for no-contract carries like Metro USA, Virgin Mobile, Boost, etc. Those phones are at full cost, meaning it's about $500 for an iPhone 4S right now. Drop a new model in there at $350 and you're competing with the Android-based phones sold by those companies.
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Old Feb 24, 2013, 12:52 AM   #10
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The problem isn't lowering the price of the phones. It's lowering the price of phone plans. When you have service providers like Verizon, AT&T, etc. sitting on an ever growing mountain of cash that they GOUGE from us every month, you have a problem.
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Old Feb 22, 2013, 03:28 PM   #11
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Originally Posted by MisterKeeks View Post
And when does Apple listen to analysts?
Maybe since the CEO is now himself an analyst.

I'm pretty sure Apple will get more of a "let's debate about it" style than with Steve.
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Old Feb 22, 2013, 03:36 PM   #12
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At some point the current target market gets saturated. Much as I love products, I'm only gonna have 1 iPad, 1 iPhone, 2 Macs (home & work) at a time, and (when available) 1 iWatch, upgrading each no more than every 2 years (and probably a lot less often); likewise for most current customers. The $500-$5000 market audience is limited and heading toward saturated. More products in that range will not sell proportionately more.

If is gonna grow more, they have to address & expand fringes. Higher cost devices is a exponentially-decreasing category. That leaves cheaper ... so of course lower-cost iPhones make sense. Make 'em more akin to iPod Nanos with phone capability.

Stickiness works. I bought an iPod Shuffle, and now I've got 4 iDevices in front of me, 4 more at home, and write iOS apps for a living. I have been assimilated. Resistance is futile.
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Old Feb 22, 2013, 03:37 PM   #13
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Maybe since the CEO is now himself an analyst.

I'm pretty sure Apple will get more of a "let's debate about it" style than with Steve.
When did Cook work as an analyst? He has an MBA on top of his engineering degree but never worked as a financial/accounting role as far as I know.
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Old Feb 22, 2013, 03:39 PM   #14
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why lower cost? its already free with carrier subsidies.

where would this have its advantage? only outside USA?
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Old Feb 22, 2013, 03:41 PM   #15
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Awesome!
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Old Feb 22, 2013, 03:43 PM   #16
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Originally Posted by Mattsasa View Post
why lower cost? its already free with carrier subsidies.

where would this have its advantage? only outside USA?
There are lots of people in the USA using iPhones on prepaid providers, and a lot of them pay full price. The iPhone 4 costs around $450. What is wrong with Apple making a new device in that price range? Why should the only device be one that was first released in 2010?
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Old Feb 22, 2013, 04:14 PM   #17
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why lower cost? its already free with carrier subsidies.

Its not really free, the cost of the handset is just included in the monthly price of that two year contract.
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Old Feb 22, 2013, 05:24 PM   #18
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Originally Posted by Mattsasa View Post
why lower cost? its already free with carrier subsidies.

where would this have its advantage? only outside USA?
I never understood americans view un subsidised phones?? It seems you think you are getting the phones for free, you even refer to the subsidised price when you talk about how much the phones cost. Do you know that you are actually paying more for the phone than they would cost paying full price right away? ...but the price is baked into the subscription...and the more money you pay to your carrier, the less you will have to pay for the phone.

We have these offers in Europe too, and most people use them, but at least we know it´s not a free phone.
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Old Feb 23, 2013, 07:17 PM   #19
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And when does Apple listen to analysts?
Exactly. This is what I don't want apple to become. A design by committee company.
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Old Feb 22, 2013, 03:26 PM   #20
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That seems like a fair statement. People would like to have current technology rather than a discounted device from years ago.
For the $450 no contract price of the iPhone 4 Apple could make a better device.
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Old Feb 22, 2013, 03:30 PM   #21
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As usual, I stopped reading at "analyst".

This.
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Old Feb 22, 2013, 03:32 PM   #22
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I wonder how much CFO knows about products in the pipeline.
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Old Feb 22, 2013, 03:33 PM   #23
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I still hate the idea. Apple is known for durability. Lowering that destroys their image imo.
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Old Feb 22, 2013, 03:45 PM   #24
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I still hate the idea. Apple is known for durability. Lowering that destroys their image imo.
Says the guy who probably won't buy it.
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Old Feb 22, 2013, 03:47 PM   #25
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Lower cost iPhone? how about the 3GS
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