Cheaper iPhone Could Expand Apple's Market By 6x

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Posted February 16, 2011 at 1:45pm by iClarified

A cheaper iPhone could expand Apple's addressable mobile phone market by 6x, according to Bernstein Research analyst Toni Sacconaghi .

Forbes reports that Sacconaghi's analysis suggests the lower priced phone could result in 2.5x the revenue and allow Apple to capture 5% of the expanded 2011 market. He calculates that Apple would get an annual profit boost of $4.50 a share.

"Beyond helping address a potential saturation challenge, we believe that the possible introduction of a lower-priced iPhone is strategically important for Apple, and we are surprised the company hasn't introduced a lower priced offering previously," he writes in a research note. "We believe that Apple’s ultimate intention is to be the dominant smartphone vendor globally, and that the company has market share aspirations that are akin to its iPod business (rather that its Mac business, where it faces a sticky Wintel platform.) Given these aspirations, we are surprised that Apple hasn't moved sooner to introduce a lower priced offering that could help secure a more dominant installed base. After all, the smart phone world is a platform war, where first mover advantage and scale matter."

Cheaper iPhone Could Expand Apple's Market By 6x

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Wira - February 18, 2011 at 2:00am

Cheaper iphone means betraying the existing consumers

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Jeremy - February 17, 2011 at 2:20am

Y not just cut the current mark-up percent down to lower prices on the current models? And are we talking lowering the full retail price or the price that's cut from the service provider. Cause from what I understand about it Att and verizon pays x amount of money for the phone at a discounted price because how many they buy. Then the mark it up y percent to the consumers that get a contract and z percent for no contract. Now then businessly speaking that's how parts stores work I know because it's what I do, is the cell phone industry any different? Cause with that scenario no matter how low the price is Att and verizon will still buy the same amount of phones untill they lower their price bringing in more customers.

Arminium - February 16, 2011 at 4:23pm

FYI, just saw a commercial from AT&T, the 3G S is now $49

Nick - February 16, 2011 at 2:05pm

Are people really that cheap that they can't afford to spend $100 on the previous model iPhone?

Jordan - February 16, 2011 at 2:12pm

That is what I was thinking. $99 for a 3G[S] is a great deal.

Tunger - February 16, 2011 at 2:30pm

Market dynamics are not as simple as you make them out to be. There are a number of things at play. First, there is the "last year's model" syndrome - it may be a great deal and more than adequate for the majority of users who would like to but haven't yet taken the iPhone plunge, But the average consumer also sees it as an outdated model with outdated technology and outdated capabilities. Additionally, the availability of the less-expensive older models doesn't get as much market visibility, for obvious reasons, so a lot of people just don't know they are available. If Apple introduced a less expensive current generation phone, it would be more visible and more attractive for the reasons stated above than a $99 3GS to a large portion of the yet-untapped market. Additionally, it stands to reason that a cheaper model would likely be differently/less featured than the full-price current generation device - perhaps smaller, as recent reports speculate. This in addition would appeal to a subset of the potential market, and broaden Apple's reach.

Nick - February 16, 2011 at 2:34pm

I see your point, but in the same light, why would you want a phone that has half the capabilities of last years phone? I mean it'd be smaller and most likely won't even have onboard storage (at least according to reports at the moment), it most likely won't have as good of a camera, and the speed would most likely be cut because of the small size. So I guess they're really looking at the crowd of people that want that cute little cuddly cell phone or the people that don't want all the iPhone capabilities but want the latest iPhone for a cheap price because it's the newest! I mean in June this year you'll be able to get the iPhone 4 for just $100, you can't beat that.

Tunger - February 16, 2011 at 2:57pm

To answer your question, I wouldn't! :-) But you're absolutely right on with the rest of your post. There are plenty of people out there that want smaller, cute and cuddly, an apple logo, don't care about all the features or storage, don't want to pay a premium, but still want the "latest technology," even if they are getting a stripped down version of it. I'm not one of them, but they're out there in droves.

lions - February 17, 2011 at 8:29pm

here in NZ they are like gold bars @ $1300-1500 (US$ 600-700) to buy new ( not this US$99). I could only wish we had the pricing you have in the states. A cheaper version would be great