After Meeting With Apple CFO, Analyst Believes Lower-Cost iPhone Makes Good Sense

iphone_5_black_whiteFollowing recent meetings with Apple Chief Financial Officer Peter Oppenheimer, Morgan Stanley analyst Katy Huberty today issued a research note sharing some of her takeaways from those discussions and her views on Apple's future plans.

While she did not disclose any specific information shared by Oppenheimer, Huberty did come away feeling that Apple will be working hard to expand carrier partnerships and distribution for the iPhone to drive growth in Apple's largest segment. She also believes that Apple is working to develop new services to take advantage of the "stickiness" of the Apple ecosystem.

On the topic of the lower-cost iPhone which has been the subject of increasing rumors, Huberty makes the case Apple's experience with the iPad mini and continued strong sales of the iPhone 4 that saw the company experiencing shortages throughout the fourth quarter of 2012 are driving the company's efforts to focus more on cheaper offerings.

We also see several signs that a lower priced iPhone makes sense: 1) iPad Mini is expanding Apple's customer base with 50% of purchases in China/Brazil representing new customers to the ecosystem. 2) Chinese consumers show a desire to purchase the latest version of iPhone (instead of discounted older generations). 3) iPhone 4 demand surprised to the upside in the December quarter. Even at a low 40% gross margin and 1/3 cannibalization rate, we see an "iPhone Mini" as incremental to revenue and gross profit dollars.

Huberty goes on to note that she believes Apple has maintained its long-standing approach to product decisions under the leadership of Tim Cook and that the company remains committed to innovation with a strong product pipeline under development. Despite continued investments in that pipeline, Huberty believes that Apple is likely to return more cash to shareholders as its cash holdings continue to grow.

Related Forum: iPhone

Top Rated Comments

iMikeT Avatar
117 months ago
As usual, I stopped reading at "analyst".
Score: 11 Votes (Like | Disagree)
cojocu Avatar
117 months ago
As usual, I stopped reading at "analyst".


This.
Score: 5 Votes (Like | Disagree)
iMcLovin Avatar
117 months ago
why lower cost? its already free with carrier subsidies.

where would this have its advantage? only outside USA?

I never understood americans view un subsidised phones?? It seems you think you are getting the phones for free, you even refer to the subsidised price when you talk about how much the phones cost. Do you know that you are actually paying more for the phone than they would cost paying full price right away? ...but the price is baked into the subscription...and the more money you pay to your carrier, the less you will have to pay for the phone.

We have these offers in Europe too, and most people use them, but at least we know it´s not a free phone.
Score: 4 Votes (Like | Disagree)
ctdonath Avatar
117 months ago
At some point the current target market gets saturated. Much as I love :apple: products, I'm only gonna have 1 iPad, 1 iPhone, 2 Macs (home & work) at a time, and (when available) 1 iWatch, upgrading each no more than every 2 years (and probably a lot less often); likewise for most current customers. The $500-$5000 market audience is limited and heading toward saturated. More products in that range will not sell proportionately more.

If :apple: is gonna grow more, they have to address & expand fringes. Higher cost devices is a exponentially-decreasing category. That leaves cheaper ... so of course lower-cost iPhones make sense. Make 'em more akin to iPod Nanos with phone capability.

Stickiness works. I bought an iPod Shuffle, and now I've got 4 iDevices in front of me, 4 more at home, and write iOS apps for a living. I have been assimilated. Resistance is futile.
Score: 4 Votes (Like | Disagree)
Squilly Avatar
117 months ago
I still hate the idea. Apple is known for durability. Lowering that destroys their image imo.
Score: 4 Votes (Like | Disagree)
AppleScruff1 Avatar
117 months ago
The problem isn't lowering the price of the phones. It's lowering the price of phone plans. When you have service providers like Verizon, AT&T, etc. sitting on an ever growing mountain of cash that they GOUGE from us every month, you have a problem.

ROFLMAO! Yea, those carriers are gouging while poor Apple's cash pile is only $137 billion. Thank goodness Apple sells their products for a minimal profit to help out the poor consumer.
Score: 3 Votes (Like | Disagree)

Popular Stories

intel vs m1 max chip purple

Benchmarks Confirm Intel's Latest Core i9 Chip Outperforms Apple's M1 Max With Several Caveats

Wednesday January 26, 2022 8:56 am PST by
Benchmark results have started to surface for MSI's new GE76 Raider, one of the first laptops to be powered by Intel's new 12th-generation Core i9 processor. Intel previously said that its new high-end Core i9 processor is faster than Apple's M1 Max chip in the 16-inch MacBook Pro and, as noted by Macworld, early Geekbench 5 results do appear to confirm this claim, but there are several...
General Dropbox Feature

macOS 12.3 Will Include Cloud Storage Changes Affecting Dropbox and OneDrive

Tuesday January 25, 2022 3:31 pm PST by
Dropbox today announced that users who update to macOS 12.3 once that software version becomes available may temporarily encounter issues with opening online-only files in some third-party apps on their Mac. In a support document and an email to customers, Dropbox said it is actively working on full support for online-only files on macOS 12.3 and will begin rolling out an updated version of...
Apple Watch Red Yellow Green Feature 1

Apple Launches Black Unity Braided Solo Loop With 'Unity Lights' Watch Face

Wednesday January 26, 2022 6:05 am PST by
Apple today announced the Black Unity Braided Solo Loop for the Apple Watch, as well as a new downloadable watch face, to celebrate Black History Month. Following the launch of the limited edition Black Unity Apple Watch Series 6 and Sport Band in 2021, Apple today launched the Black Unity Braided Solo Loop as part of its celebrations for Black History Month this year.Apple is launching a...
ios 15

Apple Releases iOS 15.3 and iPadOS 15.3 With Fix for Safari Bug That Leaks Browsing Activity

Wednesday January 26, 2022 10:00 am PST by
Apple today released iOS 15.3 and iPadOS 15.3, the third major updates to the iOS and iPadOS 15 operating systems that were released in September 2021. iOS and iPadOS 15.3 come almost two weeks after the release of iOS and iPadOS 15.2.1, minor bug fix updates. The iOS 15.3 and iPadOS 15.3 updates can be downloaded for free and the software is available on all eligible devices over-the-air in ...
iOS 15

Everything New in iOS 15.4 and iPadOS 15.4: Face ID With a Mask, Emojis, Apple Card Widget, Universal Control and More

Thursday January 27, 2022 12:08 pm PST by
Apple today seeded the first betas of iOS 15.4, iPadOS 15.4 to developers for testing purposes, adding a slew of new features to the latest iOS operating systems. iOS 15.4 is the biggest update that we've had to iOS 15 to date, and it brings Universal Control, Face ID with a mask, new emojis, and tons more. Face ID With a Mask With iOS 15.4, there is now an option to unlock your iPhone...
mobeewave

Upcoming iOS Update Will Allow iPhones to Accept Credit Cards Directly Using NFC

Wednesday January 26, 2022 6:00 pm PST by
Apple is working on a new payments service that will allow iPhones to accept payments directly on device with no additional hardware, reports Bloomberg. Right now, iPhones can accept credit cards with add-ons like the Square Reader, but Apple's new technology will eliminate the need for a third-party product. Individuals and small businesses will be able to accept payments with the tap of a...
macOS Monterey on MBP Feature

Apple Releases macOS Monterey 12.2 With Safari Vulnerability Fix

Wednesday January 26, 2022 10:19 am PST by
Apple today released macOS Monterey 12.2, the second major update to the macOS Monterey update that launched in October. macOS Monterey 12.2 comes over a month after the release of the 12.1 update, which brought SharePlay support. The ‌‌‌macOS Monterey 12.2‌‌ update can be downloaded on all eligible Macs using the Software Update section of System Preferences. Apple has also...