Cheap iPhone rumors bruise apple

Reports that Apple will come out with a cheaper iPhone this year divided tech experts yesterday, but soured investors, who dumped shares on the news.

The Cupertino, Calif.-based consumer electronics giant fell 1.5 percent, or $8.21, to close at $517, and dropped even more in after-hours trading. But while the prospect of a lower-priced iPhone seemed to spook investors, N. Venkat Venkatraman, a Boston University professor of management, said Apple needs to take the risk if it wants to compete with lower-cost rivals and break into markets where consumers want the Apple name, but at a lower price.

“It’s a huge opportunity for them; if they miss it, they will lose out to Google in the long term,” Venkatraman said. “It’s not inconceivable that they could sell it in the $100 to $200 price range. The marketplace demands a lower-priced option. Samsung already is trying to position itself closer to Apple. This is going to be head-to-head competition.”

Apple could introduce the cheaper iPhone this year, with a less expensive body made of plastic, rather than the aluminum shell the iPhone 5 now has.

But Carl Howe, a vice president at Yankee Group, dismissed the reports as “speculation,” saying, “When was the last time Apple did cheap? They don’t.”

If the company were to come out with a less expensive iPhone, he said, it would likely have a different set of characteristics and a different target audience.

“It would not surprise me for there to be a family of iPhones,” Howe said. “They might release three phones at once: good, better and best. The iPad market’s kind of getting that way, with the iPad and iPad mini.”

Another possibility is that Apple might have one iPhone targeted at, say, students and people under 30, he said, and another targeted at professionals.

The real issue for Apple is that while emerging markets such as India offer the best prospects for growth in smartphone sales, the price points there wouldn’t have the kind of profit margin the company and its investors are accustomed to, said Paul Sagawa, a founding partner at Sector and Sovereign Research.

“Until now, Apple’s had more than enough growth from their old strategy,” Sagawa said. “But as the pace of iPads and iPhones is slowing, the temptation to go after that lower-profit segment gets more attractive.”

Another Silicon Valley star, Facebook, showed the same flair for the dramatic as Apple yesterday by releasing a mysterious invitation to visit its campus on Tuesday to “come and see what we’re building.” Some believe the social networking giant may be coming out with its own smartphone.

source  bostonherald.com