Cheaper iPhone could boost Apple’s market share but ding margins

“Apple Inc. shares took a slight dip on Wednesday morning following reports that the company is considering a new, cheaper iPhone model that could broaden its appeal in the more price-sensitive international markets,” Dan Gallagher reports for MarketWatch.

“That points to the dilemma facing Apple: a cheaper iPhone would likely boost unit sales and market share in these key markets,” Gallagher writes, “but could also threaten the company’s margins, which are the highest by far among its peers and are largely driven by the iPhone and the high subsidies it receives from carriers.”

“‘As Samsung and Apple continue to fight for Smartphone market share, we believe a lower-end phone or ‘iPhone nano’ could be used to re-accelerate domestic growth and importantly give them a product to bolster emerging market growth,’ RBC analyst Amit Daryanani wrote in a note to clients on Wednesday,” Gallagher reports.

Read more in the full article here.

Related articles:
Gene Munster: 60-70% chance Apple debuts $199 iPhone for emerging markets – January 9, 2013
Bloomberg: Apple developing cheaper, smaller iPhone for 2013 holiday release – January 9, 2013
WSJ: Apple prepping less-expensive iPhone – January 8, 2013
Apple to launch low-cost iPhone with 5-inch display for emerging markets in 2H13, sources say – January 8, 2013
Barclays: Cheaper iPhone for emerging markets ‘key’ for Apple – December 4, 2012

25 Comments

  1. Apple isn’t fighting for market share. Never have, never will.

    In the process of applying the high quality, high margin product philosophy, they’ve become the largest company in the world. I don’t see this philosophy changing anytime soon to address market share stats.

    1. Apple doesn’t want costumers with no extra, or disposable cash. The sale doesn’t end with the phone. They want you to keep spending. If all you can afford is the phone, then they don’t need you.

      By having the the bar for entry so high, Apple make certain that they are not waisting time and energy on consumers who won’t continue to consume.

      When you buy an iPhone, the price is not $600 or $200 with a 2 year contract, the price is access to your credit card, forever and ever.

      1. “Apple doesn’t want costumers with no extra, or disposable cash. The sale doesn’t end with the phone.”

        You obviously have a better grasp of business principles than these so-called analysts. Nicely summarized.

    1. xactly. Wall street has decided that Apple is just to big. I’m afraid barring some new ground breaking product launch Apples PE will continue to compress. A 10 for 1 stock split will possibly throw a monkey wrench in the plans of the manipulators though.

  2. See, here we go again. If Apple goes after market share, Wall Street complains about loss of profit margins. Apple seems to be in a no-win situation on Wall Street. I’m not going by what this one guy is saying. It’s always that way when it comes to earnings. Loss of profit margins means a downgrade. Despite Amazon being able to function with nearly no margins and yet it still continues to steadily rise. Apple should just do whatever keeps the company wealthy, but it’s really confusing to shareholders if they see a healthy company just losing share value for no good reason. It will likely keep potential individual investors away, too. Why should they invest in a fundamentally good company that keeps losing value based on supposedly poor future growth? They won’t.

    1. No win? Apple is making loads of money and the iPhone is the best selling smartphone in the country. It’s been the best selling in the world for 6 years running briefly overtaken by Samsung in October but will likely regain the 1 spot once numbers come out later this month.

      Fuck the analysts. Apple is winning.

    2. It’s probably a moot point, but I would say that anyone who buys AAPL stock today is not investing in Apple since Apple cannot reap any reward from that investment. Instead, they are simply investing in the stock, based on their belief that at some point in the future they will be able to sell that stock for a higher price. Pretty much gambling on the stock market, not investing in a company.

  3. Or, they could just make a new iPhone that’s significantly cheaper than the iPhone 5, but still has healthy margins. The phone would just need to have 3GS-like specs.

  4. Nope, Apple almost never, ever sacrifices margins when they lower the price of hardware. If Apple comes out with a “cheaper” iPhone it will simply recycle previous generation tech and Apple will still make 30% – 40% margins.

    LIke MDN always says, Apple makes premium products at premium prices to sell to a premium customer base–regardless of the retail price of the product!

    1. They may or may not do this. I trust that Apple is clever enough to figure out a product strategy that lets them sell higher end phones in rich companies and less expensive phones elsewhere. They also have really smart marketing people who are pondering all sorts of things about how this affects their business in the future. Maybe this implies a sort of foot-in-the-door that they can leverage to future business?

  5. Why would Apple need a Cheaper iPhone? You can get an iPhone 4 for free, iPhone 4S for 99 dollars or the latest model for 199.00. Please tell me why apple would spend resources on a Cheaper IPhone?

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