Apple Executives Discuss Targeting Low-End Smartphone, High-Growth Tablet Markets

[TennisandMusic]

No it doesn't. Watch the iPad intro. Steve basically said he wanted it priced to put it into everyone's hands. I don't hear anything that's changed in that regard.

499 isn't "cheap" to most families, and they certainly have NEVER said "our products shouldn't only be for the rich." That implies that they currently are.

Read those quotes, they are all financially driven, "The mother of all halos".

If you don't see that Cook is clearly more money/business driven whereas Steve is more product/design driven, well...

 

[Mattie Num Nums]

most people don't care

my wife's iphone4 rarely goes above 200MB per month. almost every woman in NYC with an iphone is only using it for facebook and a few other low bandwidth apps. they don't care about games and the 300,000 other apps out there. you give them a cheap android phone with a big blue F on the main screen and they will buy it instead of an iphone

I'd venture to say 75% of the world is this. Android is proving that. Apps are really more of an Apple trend vs. a Smartphone trend.

The only app I have downloaded on my EVO is Angry Birds.

 

[alent1234]

I'd venture to say 75% of the world is this. Android is proving that. Apps are really more of an Apple trend vs. a Smartphone trend.

The only app I have downloaded on my EVO is Angry Birds.

and with the HTC Aria and other free on contract phones getting Froyo, there is no need for an app store. Adobe Flash

this happens in every market once it matures, the great commoditization. in the 90's Dell was awesome, now it doesn't matter who made your laptop. with smartphones the process started faster than with computers. in a year or two you will be a fool if you pay any money for a smartphone with a 2 year contract

 

[Robin4]

It sounds like the rhetoric has changed and Cook is basically in charge now. Apple has never in the last decade or so said, "We don't want our products to be just for the rich." They have always marketed themselves on being a "premium brand". I wonder where they are going from here.

As long as quality remains the same, they can go anywhere they want.

 

[TennisandMusic]

Reading between the lines, I envision Apple merging their computers into the iOS Eco-system. This would allow a reduction in staff & payroll. It would simplify operations and increase revenue. Reducing tech support costs via simple cloud based devices, instead of computers, would allow the savings to be spent on store expansion & even greater profits. An enhanced amount of attention would be focused on Apples ego driven high profile and keep them at the center of attention. Apple would in turn become the completely dominate player in the consumer electronics space.

Reading between the lines isn't necessary to see that OSX and iOS will one day be merged. That's just plain to see. As far as Apple being dominant? I doubt it. Even though they pull massive profit, they are still a pretty small player on the global stage. It's really ease to lose sight of that when you are firmly entrenched in Apple land. I know, because I've been there. Now I'm only halfway in. ;-)

 

[Piggie]

I'm not sure about the USA. But without question Apple NEED to produce a phone for the UK market that's cheap enough to be given away free with a 2 years contract that's not stupidly high, Something like £30 ($50 USD) a month.

At the moment you can get some very nice, highish end Android phones free on a 2 year contract and Apple is no-where to be seen.

 

[OllyW]

The expensive part of a smartphone at the moment is the contract, not the actual device.

Sure a $99 unsubsidized device would be great, but until data prices come down, at least in the US, the impact is minimal.

It suggests they are aiming at the international market where non-contract PAYG phones are very popular...

Cook apparently noted that the company is not ceding the low end of the smartphone market and is specifically working on "clever things" to address the prepaid market that offers significant potential, particularly in international markets.

 

[Andronicus]

Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 4_2_1 like Mac OS X; en-us) AppleWebKit/533.17.9 (KHTML, like Gecko) Mobile/8C148)

Before 2010, there wasn't an 8GB 3GS either.

You're absolutely right I forgot about that, maybe we will see an iPhone 4 8GB for cheaper then!

 

[dashiel]

Apple is expensive, comparing all features and quality to all of Apples competitors. Someone always has to be the most expensive and someone the least expensive...everyone else falls in between. Apple, very traditionally, has always been the most expensive (and that's fine) concentrating on high margins and low volume.

Empirically not true. Apple can be more expensive when competing against products where they don't have economies of scale. Desktop computers for example are more expensive than competitors, though not always the most expensive, Alienware, Sony and even Dell produce like for like computers that are more expensive than their Apple counterparts (e.g. the Dell Adamo).

However when Apple does compete or control economies of scale they are price competitive and even cheaper that their competitors. The iPhone is no the same consumer price as competitive products from HTC, Motorola, et. al., and the same price as inferior products from RIM, Nokia and older Microsoft Windows Mobile 6.5. The iPad is hundreds of dollars cheaper than competitive products, it's clear competitors in the market place can't come close to Apple's price and yet Apple has wiggle room with their prices as you may recall Tim Cook said they could reduce the price. Based on Apple's pricing history with the iPod and iPhone I wouldn't be shocked to see Apple drop the low-end iPad price to $399 on Wednesday and step on the throat of their competitors who can't match last year's price.

 

[Thunderhawks]

So you think apple almost went bankrupt by selling low MSRP/low margin Macs?

Not exactly what I remember.

Starmax etc. and some weak other models required at the time 1997 a Microsoft "investment" of 150 million dollars.

 

[ozred]

quality = expensive = apple

less quality = less expensive = everyone else

High quality, depending on the product, generally requires better ethics & engineering. Better parts, assembly & quality control. If these elements are in place the end result is a high quality product.

Apple is genius when it comes to portraying their products as the best. Their talking head, Steve Jobs true expertise is convincing the public it's true.

However that's not always the case.

Believe what you want it's your money.

But the respected saying "buyer beware" applies to Apple just like all the rest.

Much of what Apple says is a carefully crafted myth.

Live in reality or live in denial, it's your money.

 

[currentinterest]

A smaller form factor with less storage, but with Web and email, and iPod capabilities would be a huge success. Sell it for $229 with no contract and give it away, include it in buy an iPhone 5 get one or two free, or charge $49 with a contract. The no contract version would be a universal GSM/CDMA phone, the contract phones would be only one or the other, though using the same hardware. My wife would trade in her iPhone 4 in a minute for a smaller iPhone.

 

[JohnSFO]

Exactly. I'd love an iPhone but with my Virgin Mobile PAYG plan, I pay only $25 a month. Why would I want to spend more than three times that? I wouldn't mind shelling out $200 for a phone but see no point in paying for minutes, texts and data time that I will never use.

I completely agree. It's the providers price fixing and price gouging the customers. I thought competition would bring the monthly fees down, but all I've seen is price matching. People are spending $80-100 a month to run a smartphone!? That boggles my mind. I get a month's worth of high definition TV for that price. Sending some texts, playing a few rounds of Words With Friends, and avoiding phone calls should NOT cost that much! Bring on PAYG please.

 

[gnasher729]

Low-end iPhone huh?

I wont buy it

Fact is that most people actually don't want a smartphone; they want a phone to make phone calls. That is most people if you count heads, not if you measure the noise they make. Just because there is a minority that you see hacking about on their tiny little phones all the time doesn't mean everybody does that.

So at home I have DECT phones in every room, used for making phone calls plus an answering machine. They are old and ugly. I'd love to replace them with something nicer. But if you look around, anything you can buy is either cheap tat or expensive weird-looking "designer" stuff. I bet Jony Ive could design one that looks really nice, and Apple could build one that is really nice to use. Probably for three times as much as the existing cheap ones, but three times as much is still not a lot of money. And people like _nice_ things.

Same with mobile phone. Many people would want just basic functionality but perfectly executed. Go to the phone shop. Look at the cheapest phone. Now imagine the same product, but done perfectly in every single way. That is something that Apple could build and sell to tens of millions of people. These people would not be sitting there hacking around on their tiny little screens all the time; but when they want to make a phone call, they would pull a beautiful phone out of their pocket and make a call.

 

[firewood]

old iPod Touch + voice-only cellular?

Maybe something like a voice-only cell phone, tacked onto a 4GB 3rd generation iPod Touch (lores display, slow CPU, less memory, etc.). Wifi only. No cellular data capability, thus zero data plan costs for any consumer.

Apple could probably manufacture and sell those profitably for under $250, without subsidy, or less than zero with a typical subsidy (something like a $50 iTunes gift card thrown in for "free"). Market price much less than the nearly $500 for the current 3GS ($49 + plan termination fees).

 

[lord patton]

there is still a 2 year contract for $70 a month minimum. you can get all you can surf, text, email whatever android phones for $25 a month. this market is apple's next target

and with the HTC Aria and other free on contract phones getting Froyo, there is no need for an app store. Adobe Flash

This is exactly it. The "low-price" smartphone *means* free on contract or sub-$200 no-contract.

Now, consider. The average selling price of an iPhone is more than $600, and its bill of materials is about $200. Apples' margin on each iPhone is $400 or more.

That means given their current margins, Apple couldn't match these low-price smartphones, not even if they could manufacture them out of thin air.

So forget about smaller screens, less storage, or whatever. The *only way* Apple goes to this market is by deliberately slashing their margins to gain market share.

The amazing, mind-blowing thing is that AAPL's CEO-in-waiting just told a bunch of analysts on the record that this is what they're looking to do.

 

[50548]

It sounds like the rhetoric has changed and Cook is basically in charge now. Apple has never in the last decade or so said, "We don't want our products to be just for the rich." They have always marketed themselves on being a "premium brand". I wonder where they are going from here.

In my opinion, this is TERRIBLE news for Apple - if Cook and the management team continue like this, they're gonna do exactly what Sculley et al did some 20 years ago: to cater to all markets like a jack of all trades and master of none, while at the same time trimming Apple's added value in a crowded market.

This article, together with the rumor about Ive probably leaving Apple because the Board doesn't want him physically away from the US can only mean one thing:

SJ and his knack of perfectionism and long-term foresight are gone for good.

 

[alent1234]

and the awesome part is that iphones last for years. i have an old 3G with only music on it and my old 3GS is only apps. if my wife gets a new iphone next year i'll add her's to the collection as well while i get the cheapo free on contract phones with huge screens.

and unlike old computers you can still use them and carry them around with you

this is not a SJ leaving issue, it's a price issue. ipod always sold in line with the competition's prices. even today. iphones sell $600 or so but the competition can make something 90% as good for a lot less and people are not willing to pay the premium. it's not like the iphone 4 is super tough. i dropped my cheapo plastic ancient BB Curve down the stairs and not a scratch. if it was my iphone that would have been the end of the line

 

[JGowan]

I would surely welcome a cheaper iPhone

I think you'll get that soon enough. As the iPhone starts to get on all of the carriers and all they can do is compete on service, we should see reduction in the actual price from those whose service is not quite as good as the better ones. The competition will match the price and down and down we go to zero, with the companies rolling the whole price of the phone to secure the customer for 2 years.

Right now, I think $199 is a fine price and I wouldn't want the phone to be even FREE if it meant I was getting less than Apple's best effort. I gladly pay for quality every time. That's me.

 

[Jcoz]

Starmax etc. and some weak other models required at the time 1997 a Microsoft "investment" of 150 million dollars.

I'm a little confused with this...

Can you explain further? Not trying to be rude, I just don't understand what you said there...

 

[adztaylor]

In my opinion, this is TERRIBLE news for Apple - if Cook and the management team continue like this, they're gonna do exactly what Sculley et al did some 20 years ago: to cater to all markets like a jack of all trades and master of none, while at the same time trimming Apple's added value in a crowded market.

This article, together with the rumor about Ive probably leaving Apple because the Board doesn't want him physically away from the US can only mean one thing:

SJ and his knack of perfectionism and long-term foresight are gone for good.

Drama queen much?

 

[Datazoid]

Explain it to me then. The guy was saying with his prepay virgin phone his bill is $25/month. Does the phone he is using have access to the Internet, apps, email, etc...?

I mean don't get me wrong I would love for my iPhone bill to be 20 bucks a month too, but I understand why my bill is more than most phones I've had.

As I am in the same position, maybe I can clarify. I [reluctantly] purchased an LG Optimus V from Virgin Mobile for $139 (and got a $10 gift card). This phone runs Android 2.2 (Froyo). I have a $25/mo plan that includes unlimited texts and web, and 300 minutes. The cheapest configuration that I can see for your $49 iPhone 3GS is $54.99/mo (plus taxes, fees, etc) for 200MB and 450 minutes, with no texts. Over the two year contract, the iPhone 3GS will have cost $1,612.25 (including activation and fees listed hhttp://www.wireless.att.com/cell-phone-service/additionalcharges/?txtzip=83442). The LG Optimus will have cost $739 (Virgin Mobile charges $25/mo inclusive of all taxes, fees, etc). It's not the fastest smartphone ever built, and I'd prefer an iPhone, but for less than half the price, its a better deal to me, especially considering the unlimited features. If you were to increase the ATT plan $30 to bring the data to 2GB and include messaging, the value proposition only becomes more clear. Yes, it comes with the "prepaid stigma", but I can live with that.

 

[smulji]

If executed well it would be a good idea

No one can doubt the mobile device market is ********n exploding right now and represents a much bigger financial opportunity for Apple. Most people probably would agree that the majority of cell phone buyers can't afford an iPhone be it unsubsidized or even on an expensive monthly contract. So this strategy could work for Apple. They could have 3 tiers of pricing;

1. iPhone 5 - 16GB / 32GB ($199 / $299) on contract

2. iPhone 4 - 8GB ($99) on contract

3. "enhanced" 3GS using an A4 processor, 512MB RAM, 8GB storage, and everything else staying the same - $199 with no contract

 

[Jcoz]

In my opinion, this is TERRIBLE news for Apple - if Cook and the management team continue like this, they're gonna do exactly what Sculley et al did some 20 years ago: to cater to all markets like a jack of all trades and master of none, while at the same time trimming Apple's added value in a crowded market.

This article, together with the rumor about Ive probably leaving Apple because the Board doesn't want him physically away from the US can only mean one thing:

SJ and his knack of perfectionism and long-term foresight are gone for good.

I think considering Tim's actual quotes, you'd have to have gone far off the reservation to extrapolate that mess from 2 sentences and a rumor about Ive.

 

[50548]

Drama queen much?

Ask me again in one year...I just don't feel like revisiting the days of Sculley or, later, Spindler...