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Differentiation of Future iPhone Models to be Driven by Software?

Tuesday May 19, 2009 10:39 am PDT by Eric Slivka
Register Hardware reports on a meeting last week between Apple senior executives and analysts for investment firm Oppenheimer & Co. which provided a bit of insight into Apple's options for increasing iPhone market share. A report on the meeting issued by Oppenheimer analyst Yair Reiner mentions several obvious strategies that Apple could employ:

Yair Reiner, an analyst at Oppenheimer, recently met with several unnamed Apple executives who, he claimed, said: "[The] iPhone is still in its early days and could gain share by: providing more functionality, lowering prices, growing geographically, or segmenting the market with different models."

In seeking clarification about the market segmentation comment, Register Hardware learned from Reiner that "segmentation would focus on software." Register Hardware interprets this comment to mean that Apple is considering offering multiple models of the iPhone that would consist of essentially identical hardware, but have different software packages.

For example, Apple could market one 'YouTube' iPhone model with applications that provide video capture, editing and sharing features. Other iPhones might only offer basic video capture - or perhaps no video at all.

Selling models differentiated by hardware seems unlikely. Different iPhones with very different physical specs could have far-reaching implications for Apple's production methods, volumes and costs.

Another possibility is that market segmentation could still be offered using different hardware, but driven by differences in software, such as the rumored "iPhone nano" that could conceivably be released without a focus on the App Store found on the current iPhone. In broad terms, Apple's comments indicate that the company may be using software-based decisions to define feature sets for various iPhone hardware models.

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