True. Itis certainly risky. But saying theiPad Mini destroyed Apples margins in the iPad business is also hard to proof. It is a lower margin product. But market share could have eroded faster without it. And mid-term that poses a risk for Apple, too. It may betrue that thisexperience keptApplefrom offering a truly low-cost iPhone. If thatwas a gooddecision only time willtell.
What so hard to prove? Just look at the ASP from Apple quarter earning report and you can see that it drop from mid 500 to low 400 in 3 quarter.. And you can also look at the Ipad revenue since Ipad mini launch.. It is not just the low cost product has lower margin, it also cannibalized the higher margin product. A $350 Iphone with 35% GM contribute $122.5 gross margin. A 650 iphone with 65% GM contribute $357 gross margin. If the low cost Iphone take away one 5s sale, Apple need to sell 3 low cost Iphone (in this example) to replace the profit. It is easy to yell "Apple should have a low cost Iphone", but it is hard to balance the long term profit vs unit growth objective.