“Barclays Capital’s Ben Reitzes today returns to a theme brought up frequently in the past couple years, namely the prospect of Apple offering a less-expensive model of iPhone to tap growth of smartphones in emerging markets,” Tiernan Ray reports for Barron’s.
Ray reports, “Reitzes, who has an Overweight rating on Apple shares and an $800 price target, posits Apple’s challenge as that of defraying Google‘s Android‘s advances with cheaper devices, writing ‘a key test of Apple’s long-term model will be whether the company can capture the growth associated with a new wave of emerging market consumers who could enter the smartphone market through low priced Android devices.'”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]
Barclays (and nearly every bean counter firm) just don’t get it.
Yes, they all think that the iPhone cost is the customer’s largest cost. It is the monthly fee people! 24 months times about $100 is multiple times the iPhone cost. (Sorry, my bill is huge and is a family plan. I wish my monthly bill was only $100.)
If you can’t afford the cost of the iPhone than you can’t afford the monthly bill to use it!
This article is about the need for a cheap to buy iPhone for sale in markets outside of the US. In those markets, pay as you go is the norm rather than monthly contracts. Therefore the initial purchase price is a significant factor for most customers as there are no subsidies from networks.
I don’t agree with Barclay’s take on this ( they’re going down that well trodden path of profit vs market share ), but it’s important to remember that there are massive markets elsewhere that do not operate in the same way as the US market.
I assume that Apple will not be interested in making a cheap phone in order to gain market share, but will continue to sell products where there is a solid business with a clear profit at the end of it.
No matter how cheaply Apple sold a stripped down iPhone, a Chinese company could drastically undercut that price. For the downside of selling low profit margin stuff to price conscious customers, you need to look no further than beleaguered Dell.
iPhone 5 is $650 . Most cellular consumers worldwide pay for the phone upfront, and have MUCH smaller monthly payments. We’re just very bad with monry here. If you think an iPhone is $200… You just put yours on a high interest credit card.
Right! Apple has a very nice ‘little’ business and DOES NOT NEED THE ENTIRE MARKET to be successful. If you think back to the days when the first digital watches hit the market, they were expensive and rapidly got cheap. Then the market decided that they were too cheap and it swung back to analogue watches. This smart phone market will push the ‘cheap’ limits with Android and then swing back to quality.
You are right on this one I think. Apple does not require the godlike wisdom of Barclay’s as to what should be done, as it will be content with merely lording it over everyone with the lion’s share of the profits, the universal accolades of the reviewers, and the anointing by media darlings and the general public as Most Desirable. Why pay attention to gratuitous advice?
Well written response! Thanks.
Apple already has a less expensive model. How’s $0? Apple doesn’t do ‘cheap’ just less expensive.
Everyone but Apple and Samsung are sailing into bankruptcy selling free phones.
Apple is not interested in going bankrupt.
It is called earlier versions of the phones which is why there is a robust market for them – both new and used.
Barclays’ POS
I’m seeing lot’s of Samsung Galaxie BOGO ads this holiday season.
Not surprised that such a crap advice from a shit bank like Barclays. Fact is, apple does have cheap phones, its the iphone 4 and the 4s. The iphone 4 is free on 2 year contract, and its a quality piece of kit, so why downgrade anymore. As i said, its Barclays, barking mad
The pay as you go plans need iPhone.
What these people who call out the iPhone 4 and 4S as “Cheap Phones for the Emerging Markets” don’t get, is that most emerging markets do NOT subsidize the phones, so you pay full price. The iPhone 4 costs $450, and the 4S costs $550. To a person in a place like India or China, this is a substantial chunk of their yearly income! Check into this on your own if you wish…
and why should apple target such poor people who will most likely not spend money on apples ecosystem? also why do these people need apple phones, they can get a cheap andriod and be happy
When the touchscreen iPod nano (the tiny square one) was released, I thought THAT would be the basis for a cheap Apple phone at some point. Not the design of the nano itself, but the minimalist touch OS, that mimics iOS, without being iOS.
With the new nano, it seems even more like a good fit for a cheap Apple “feature phone.” That is, if Apple plans to produce a cheap phone that is NOT an iOS device. I no longer think it’s likely…
what in the world makes Ray think that an “iPhone Shuffle” or “iPhone mini” would attract new users into the Apple ecosystem? neither make any sense whatsoever when legacy iPhones are already developed and easy to sell with a huge ecosystem of accessories in place.
Apple can ill afford to spend development money making yet another fragmentation of its iOS platform hardware just to enter low-margin markets. Instead, Apple ought to get its act together and fix its horrid Maps, its less-than-stellar iTunes 11, update its antiquated and limited iOS and Mac iWork applications, and so forth — all while keeping up with the smartphone styling & features arms race with a visibly refreshed iPhone 6 and Mac Pro and pro-quality Retina displays in the next calendar year or so.
Who pays these analysts anyway?
Every time I see the word cheaper and Apple in a title, I just know the article will not be worth reading.
We could even create an automated search to build a black list of authors that don’t get it.