Apple's Rumored Low-End iPhone Could Undo Q2's Hero
NEWS ANALYSIS: Apple's Q2 results owed major thanks to older iPhones. How would its rumored low-end iPhone change that?Apple sold 31 million iPhones during its fiscal third-quarter, it announced July 24. This was down from 37.4 million iPhones the quarter before, but still a June-quarter record, said Apple. How do you sell iPhones when the newest model is nearly 10 months old and the next model is thought to be weeks away? Apple's answer was to first-time smartphone buyers, who are happy to have old models at low prices. While the iPhone 5 was "by far the most popular" during the quarter, Apple Chief Financial Officer Peter Oppenheimer said during Apple's earnings call, the iPhone 4 and 4S played very large roles in helping Apple keep revenues flat year-on-year (though profits took a 22 percent nosedive). The average selling price per iPhone was down 4 percent, or roughly $27, year-on-year, which Apple attributed to the mix of products it sold.
"As we anticipated, iPhone 4 sales accelerated as we offered more affordable pricing in emerging and other markets," said Oppenheimer. Sequentially, he added, "it was down about $32, and again, that was driven by a mix."
he doesn't expect older iPhone models to pile up, as "Apple and its partners would leverage discounts to help clear inventories ahead of a refresh." "Apple would be designing from the start with lower pricing in mind, packing in more capable, albeit less premium than top-tier smartphones, technologies into the device to take advantage of iOS 7 while saving costs in other areas," he continued. As such, Skonieczny added, a low-end iPhone would essentially be the iPad Mini of the iPhone line. Many believe Apple will introduce a lower-cost iPhone this fall, along with its next flagship iPhone and possibly an iTV—an actual television set, versus the Apple TV box and service it currently offers. "We believe strong demand for the more affordable iPhone 4 demonstrates the sizable [market] potential for a new lower-priced iPhone SKU, likely to launch later this year," Canaccord Genuity analyst T. Michael Walkley wrote in a July 23 research note. Oppenheimer said Apple is "on track to have a very busy fall." He added later in the call, "We are very hard at work on some amazing new products that we will introduce in the fall and across 2014."