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

[acslater017]

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.

Well, maybe not in those words. But Steve and the gang have often used phrasing like:

-We want to get ____ into the hands of as many people as we can. That's why we're pricing it at just $____.
-We really want everyone who wants ____ to be able to pick one up.
-Starting at just $___, we feel the pricing is very competitive.

 

[fabianjj]

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IMHO:

An 8 Gig iPhone 4 (when iPhone 5 is available) for $49.

They'll keep iPad 1 around (16Gig Wi-Fi) - $399?

I doubt Apple would start making an 8GB iPhone 4...there isn't an 8GB iPhone 4 now why would they start making one with less storage?

Thats what they did with the 3Gs. I'm not saying that's what they're gonna do now, but they've done it before.

 

[clibinarius]

An hdd based phone? How is that safe

A small flash...about 8 gigs for apps and os only and a harddrive for media I think its very safe. No less safe than an ipod classic, anyway.

 

[nonameowns]

iphone 5, iphone 4, stripped down iphone/enhanced iphone 3gs?


or a iphone nano...

phone, 3g, wifi, apps. no camera or video.

 

[Mr. Chewbacca]

Calling the iPhone "the mother of all halos" for its ability to draw in new customers for the iPad and Mac, [/url]

No kidding, My brother gave me his 2g iphone when he upgraded to the 3gs. That phone was the hook that set off my 5,000 new crack....umm Mac habit.

I need to send my brother a thankyou card

 

[alent1234]

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

then apple needs to make something up

i have some family that wanted an iphone since i've had one since the 3G. told them $199 or $299 plus $25 a month for data. as soon as i said $25 a month for data the interest went to zero.

last night i showed them my new 4.3" android phone and they were shocked when i said it was only $80. next month it will be free or $10 or so. $49 for an iphone with a tiny screen or a phone with a larger screen? the screen wins, it's why apple has always had the best monitors on their computers. except they screwed up with a tiny screen on the iphone 4

 

[Benjamins]

problem with "low-end" iPhone really is not the cost of the phone. It's the cost of the contract, and mandatory Data plan.

Get rid of the mandatory data plan, and you get yourself a "low-end" iPhone.

 

[clibinarius]

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.

The thing about lowering margins is it doesn't imply fragmentation; if Apple has two models of phones that would be fine-they have three models of desktops and three models of laptops currently!

Reducing margins also doesn't hurt your profits if you expand your markets by as much as you lower margins by. Suppose, in fact, you can hire twice the staff and make twice the devices but sell them with half the market. You make the same amount of revenues but you've now afforded to hire more people. No one expects it to be a break-even point though, everyone expects Apple to maximize their profits, and there are plenty of ways Apple can do that while lowering its margins.

If you think high margins are good for Apple, you should buy an XServe. That's what killed it.

And for the record, SJ has ALWAYS wanted to keep things around the $500 price point. He wanted the Mac to go there, and there's a reason the iPad was: Even though yes, $500 is expensive, the Model T cost that back in the day, and Jobs wanted computing for the masses. Still does. He wants to make a lot of money off it-but he's an arrogant man. The notion of premium products only is what did Apple in.

Remember, despite the premium on Apple devices, since Jobs has been at the helm, the iPod is affordable compared to a stereo system back in the 80s. An iPhone is affordable after subsidies compared to most phones (and that's the corporates paying their margins to Apple for it). An iPad is MUCH more affordable than people thought it would be (and much cheaper than computers back in the 80s). Even the "Apple Tax"-Apple products are still affordable. $400 for that Apple OS, glass trackpad and a unibody build? 10% of computer buyers think its worth it.

And many Americans tend to spend $400 quickly on drugs, alcohol and tobacco anyway in a year. So the "Apple Tax" isn't out of their possibilities.

 

[SAD*FACED*CLOWN]

why not make their computers cheaper? I'd like to switch over to a Mac without bartering away my first born

 

[Jcoz]

The thing about lowering margins is it doesn't imply fragmentation; if Apple has two models of phones that would be fine-they have three models of desktops and three models of laptops currently!

Reducing margins also doesn't hurt your profits if you expand your markets by as much as you lower margins by. Suppose, in fact, you can hire twice the staff and make twice the devices but sell them with half the market. You make the same amount of revenues but you've now afforded to hire more people. No one expects it to be a break-even point though, everyone expects Apple to maximize their profits, and there are plenty of ways Apple can do that while lowering its margins.

If you think high margins are good for Apple, you should buy an XServe. That's what killed it.

And for the record, SJ has ALWAYS wanted to keep things around the $500 price point. He wanted the Mac to go there, and there's a reason the iPad was: Even though yes, $500 is expensive, the Model T cost that back in the day, and Jobs wanted computing for the masses. Still does. He wants to make a lot of money off it-but he's an arrogant man. The notion of premium products only is what did Apple in.

Remember, despite the premium on Apple devices, since Jobs has been at the helm, the iPod is affordable compared to a stereo system back in the 80s. An iPhone is affordable after subsidies compared to most phones (and that's the corporates paying their margins to Apple for it). An iPad is MUCH more affordable than people thought it would be (and much cheaper than computers back in the 80s). Even the "Apple Tax"-Apple products are still affordable. $400 for that Apple OS, glass trackpad and a unibody build? 10% of computer buyers think its worth it.

And many Americans tend to spend $400 quickly on drugs, alcohol and tobacco anyway in a year. So the "Apple Tax" isn't out of their possibilities.

Did you mistakenly quote me on this?

Just doesn't seem to be directed toward any point I've made....

On another note, $400 in a year? More like a month or two, lol.

 

[pika2000]

Apple, sell the freaking iPhone unlocked in the US. Geez, how hard can it be? iPhones outside the US have been sold for free under contract and prepaid. But not in the US, where we are still paying $$$ for a locked phone that requires expensive plans. Mind boggling.

The iPad proves that consumers are willing to shell out money for a no-contract/unlocked device, $500-$800.

 

[clibinarius]

Did you mistakenly quote me on this?

Just doesn't seem to be directed toward any point I've made....

On another note, $400 in a year? More like a month or two, lol.

Meant to quote the quote in there, didn't realize it was only your quote coming through!

Although I do agree, far off the reservation.

 

[firewood]

why not make their computers cheaper?

Why don't you quit your current job, and take a job that pays less and requires longer hours?

That's essentially the same question as you are asking about Apple pricing. (Or for any other business with profitably priced products.)

 

[SandynJosh]

tim cook is no leader with visions, he is just a manager who does the things right ... thats maybe the beginning of the end for apple

While I agree with the first half of your statement, it doesn't necessarily lead to your conclusion.

A company that successfully segues into filling vacant talent spots has the management structure in place to make excellent choices.

With poor management you get a turf war and a decade of power struggles.

 

[fjsiskilroy]

the iPod model applies here

This move to have a "cheaper" iPhone would equate to what Apple did when the iPod mini was introduces. Back then, only the iPod (now classi) existed with the difference being the capacity. Now we have the same issue with only 2 basic iPhone (16gb and 32gb varieties).

The big speculation would be what kind of form this new phone might take. Logically you would assume that htis cheaper iphone would be smaller. But the current screen size of 3.5" would make it difficult to do something smaller than is usable. Based on what the market has shown, the smallest that you could go to would be 3.2" (like Palm Pre). Snything smaller might be too small to even use.

But having a 3.2" vs 3.5" wouldn't have enough of a size difference to differentiate the 2 versions. The cheaper version sell more to the detriment of the bigger part. The 3.5" version should be bigger. This then explains why there's the rumor of a larger screen iPhone 5 (4.0" or 4.2") version.

My own suspicion is that the iPhone 5 would be a bigger size screen and then introduce a new version (the 3.2") either at the same June event or as part fo the ipod introductions in September.

Tim Cook mentioned that they are looking at hte prepaid market, so this new phone could be part of the iPod family as just another unsubsidized device. The iPdo are slowly coming down in sales volume (only the iPod tocuh is growing). So this might be a way of growing that business.

 

[Andronicus]

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.

Wow that is a good deal you have. Ok, I understand the point now thanks. Luckily with my iPhone 4 I am grandfathered into the unlimited data plan, but yah my bill is about $90/month. So it definitely is pricey.

 

[fjsiskilroy]

miniPhone, what would it look like?

In thinking about this further, this si how I think the lineup might look like by Holiday 2011:

iPhone 5:

4.0 " screen (Retina Display)
NFC, GPS, gyroscope, wi-fi,Bluetooth 2.1 +EDR,Compass,
2 cameras (1.0mp front side, 8.0 mp, back)
32 GB & 64 GB capacities.
Gorilla-Glass front and backside
$200-$300 with 2 year contract

miniPhone:

3.2" screen (Retina Display), lowere solution than bigger brother though.
NFC, gyroscope, wi-fi,Bluetooth 2.1 +EDR,Compass, (no GPS)
2 cameras (0/3mp front side, 3.2 mp, back)
8 gb capacity (only 1 capacity, but various colors).
Glass front side only, back side will be the metal frame that the iPod touch uses.
$ 150 usd without contract (free w/ 12 month contract)

None of this is substantiated, it is only my own speculation based on what would make most sense. The biggest thing will what kind of plans the carriers will use for these new phones. At best the model they can use is the same as the one for the 3G iPad ($ 15 a month for 250 mb, $25 for 2Gb)

 

[ilovemyibook]

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The iphone 3GS is already at $49 a pop. How cheaper can you go?

Yes, it's $49 with a two year contract. Why would you add two years to your contract with a phone that is about to be two models behind!? I hate when people say the 3GS is ONLY $49.

 

[wolfboy]

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...?

Yes it does. The LG Optimus V runs on Android Froyo, basically has comparable specs to an iPhone 3GS. Believe me, the market for prepaid smart phones is just emerging. Best of all, you're not locked into a contract!

$25 a month for unlimited data, unlimited text, and 300 anytime minutes. The Android phone itself is only $150. It doesn't get any better than that. And if I want access to Apple's enormous app selection, I'll just bust out my 4th gen iPod Touch, it's a win-win situation!

 

[alent1234]

the smartphone market is now where the PC market was when it became a commodity.

a low end phone like a 3GS is good enough for almost everything you want a smartphone for except gaming. even with games, the software is 18-24 months behind the hardware.

 

[-=XX=-Nephilim]

Will it support Flash Apple?

No?

Yawn in that case...

 

[vincenz]

Apple says they're targeting the lower end, but in reality, they never will. I just don't see it happening.

 

[Ugg]

So get a voice/data/text plan that you would use?

Or get an iPod touch.

I actually have an iPod Touch, but the one thing it's missing is GPS.

My point was, why pay an arm and a leg for something I won't use. Virgin Mobile has a $25 a month, pay as you go plan. It's enough for me, but I'd rather have an iOS device than an android device. I wouldn't mind paying a little more, maybe $40 a month, but $80 is simply a waste of money.

The iphone 3GS is already at $49 a pop. How cheaper can you go?

It's not the phone, it's the contract.

low prices ... means lower quality. i don't want lower quality ... there are enough other companies which do exactly this.

I spent $300 on my first iPod back in 2004. I recently bought an iPod Touch for just over $200. The Touch is infinitely more powerful, versatile and of an equal if not better quality. You're obviously out of touch... with reality?

 

[clibinarius]

I actually have an iPod Touch, but the one thing it's missing is GPS.

My point was, why pay an arm and a leg for something I won't use. Virgin Mobile has a $25 a month, pay as you go plan. It's enough for me, but I'd rather have an iOS device than an android device. I wouldn't mind paying a little more, maybe $40 a month, but $80 is simply a waste of money.



It's not the phone, it's the contract.



I spent $300 on my first iPod back in 2004. I recently bought an iPod Touch for just over $200. The Touch is infinitely more powerful, versatile and of an equal if not better quality. You're obviously out of touch... with reality?

Ugg, you're wrong. When gas is $3.20 a gallon its much higher quality than when its $1.60!

 

[Ugg]

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...

Apple was the first out of the gate with a truly usable AND desirable smart phone. They are now at a crossroads. I'm sure a lot of discussions are being had about their future. Should they go for market share or high profit margins or both?

With the iPhone and the App Store, I think they have the opportunity to retain their high margins and increase market share without degrading the Apple brand. The way to do that is by keeping the quality and reliability up.

Apple is almost the biggest publicly held company in the US. Do you honestly think that anybody at Apple is happy with "almost"?

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.

This is excellent news for Apple. They have a long term plan for the iOS market and part of that plan is to grow, not to shrink. Their quality control is truly amazing. Last year there were hardly any major manf. problems, with the exception of them being not able to make iPads fast enough. If anything, that should be proof that Apple is not into degrading its reputation for the sake of profits.

I also believe that Phil's announcement is healthy. Steve's hyper secrecy probably isn't in the company's best interests.

Ugg, you're wrong. When gas is $3.20 a gallon its much higher quality than when its $1.60!

Why, because it's got more ethanol in it? Or maybe it's made from a genetically engineered T-Rex?

Bad analogy clibby.