Cloud Four Blog

Technical notes, War stories and anecdotes

Why is Apple Going to Release a Cheaper iPhone? Because They Said So.

The most common objection to my article on why a cheaper iPhone will be a big deal is that Apple competes on premium brand and won’t cannibalize sales of its high end product.

I was surprised people contested the idea that Apple is going to sell a cheaper iPhone. But then I realized that not everyone follows mobile as closely as I do and probably missed the news:

Apple said they were going to release a cheaper iPhone.

Apple COO Tim Cook, CFO Peter Oppenheimer and VP of Internet Services Eddy Cue recently met with Bernstein Research analyst Toni Sacconaghi who published an note to advise his financial clients1. Here is the key paragraph from Fortune’s summary of Sacconaghi’s note:

The analyst says Cook “appeared to reaffirm the notion that Apple is likely to develop lower priced offerings” to expand the market for the iPhone. Cook said the company is planning “clever things” to address the prepaid market, and that Apple did not want its products to be “just for the rich,” and that the company is “not ceding any market.”

What is there to debate?

You may think that they are going to cannibalize their high end sales or that they will damage their brand. I may think they proved they are willing to undercut their own products with the iPod Mini and Nano so they can do it again.

But regardless of who is right, it seems pointless to debate whether or not they are going to release a cheaper iPhone. It’s coming regardless.

Cheaper Doesn’t Mean Cheap

I think a lot of people are getting hung up on the word cheaper and hearing the negative connotation of cheap. I wonder if people would have had as strong of a reaction if I had used “less expensive” instead of cheaper.

No one looks at the quality of the iPod Nano and thinks “cheap,” but it is undeniably cheaper than the classic iPod or the iPod Touch. Expect the same from a “cheaper” iPhone—it will look and feel great, but cost less.

So why use “cheaper” instead of “less expensive?” Brevity.

1 I doubt a financial advisor could lie about meeting with Apple management. That would likely cause them some SEC grief. But if you want corroborating sources, check out the New York Times, Bloomberg, and Wall Street Journal. Everyone is hearing a cheaper iPhone is in the works. It is the details of the phone (e.g., size) that no one knows.