Apple Wont Battle for the Midmarket

 
 
By Don Reisinger  |  Posted 2011-06-27
 
 
 

Apple Sure to Release Just One iPhone 5 Version: 10 Reasons Why


On June 27, Deutsche Bank analyst Chris Whitmore sent a note to investors, claiming Apple will be launching not one, but two iPhone 5 models in September. One version, he said, will be the logical follow-up to the iPhone 4, delivering a high-end experience to consumers and enterprise users.

The other option, however, will be a less-capable version Apple will call the iPhone 4S. Whitmore believes that version will be ideal for the prepaid market that Apple thus far hasn't capitalized on.

Though there is a possibility that Whitmore is correct in his prediction-after all, with Apple, anything can happen-the chances of that happening seem slim. For years, Apple has followed the same basic strategy in the smartphone market by releasing one major device each year, and that won't change this time around.

As important as the prepaid market is, Apple has a strategy that doesn't necessarily encompass that. Looking at the company's track record, the Cupertino, Calif.-based firm will be far more likely to release one blockbuster smartphone-not two.

Read on to find out why Apple will release only one version of the iPhone 5 this year.

1. History must be the guide

Though Apple has been known to change things up from time to time, the company is predictable. Over the years, it has released a new smartphone each year, its Macs come out at around the same time, and its level of secrecy has been constant over the last decade. Simply put, Apple is more predictable than some think. Realizing that, the company won't release two iPhone models this year. It has seen success with one version of its device, and the chances of it moving away from that strategy seem rather slim.

2. Apple only competes in the high end

If there is anything that defines Apple, it's the company's commitment to the high end. The iPhone 4 is considered one of the most advanced and sought-after smartphones on the market. The company's Macs are high-powered and expensive. The same can be said for its iPad 2. Apple competes in the high end and leaves the rest of the market to all others. That won't change with the iPhone 5.

3. It still has the iPhone 4

Whitmore's belief that Apple will release two iPhone models this year fails to acknowledge one important fact: Apple already has the iPhone 4. In previous years, Apple has sold the prior iPhone model at a discounted price. The iPhone 3GS, for example, can be purchased for $49 right now. AT&T has even offered a free iPhone 3GS to current customers who commit to a new two-year contract. Whitmore believes one of the models Apple releases will appeal to those on a budget. But considering Apple's penchant for getting more out of its old models, wouldn't it make more sense if the company released one iPhone 5 model for the high end and kept the iPhone 4 on store shelves to appeal to budget-conscious shoppers?

4. The iPhone Nano rumors have been swirling forever

Whitmore's comments in the note to investors dovetails on previous rumors that Apple will eventually announce an iPhone Nano that's smaller and thinner than its larger counterpart. Whitmore says that the iPhone 4S won't actually be smaller, but will be a redesigned version of the iPhone 4 that will seemingly cut back on features to differentiate it from the more-expensive iPhone 5. Rumors of Apple following such a strategy have been swirling for years, and Apple hasn't followed through. It won't follow the strategy this year either.

Apple Wont Battle for the Midmarket


 

5. This isn't the iPod

After the iPod became successful, Apple released several versions of the device to appeal to consumers looking for different things from their music players. The company now offers the iPod Touch, iPod Classic, iPod Nano and the iPod Shuffle. And it has made billions of dollars over the years because of it. But it's important to point out that the iPhone is not another iPod and Apple is following a much different strategy with its smartphone. Apple wants to make each iPhone unique-it doesn't want to water it down for different markets.

6. Customers are already buying the more-expensive option

If Apple were having trouble selling the iPhone to customers around the world, the idea that the company would release a cheaper version would make some sense. However, iPhone sales continue to rise. If people around the globe are willing to invest in Apple's smartphone now, it wouldn't make much sense for the company to invest in a new device that would generate less revenue.

7. The logistics are too costly

Earlier this year, Apple announced the launch of the iPhone on Verizon's network. With that, the company made production far more difficult. Rather than simply manufacturing GSM devices, it needed to prepare CDMA options, as well. From a logistical perspective, things became more complex. Considering that complexity can sometimes cut into margins, it wouldn't be the best idea for Apple to prepare another new smartphone designed for GSM and CDMA carriers. It would be a production and logistical nightmare that could cut into the availability of its flagship smartphone. At this point, it seems that releasing two versions of the iPhone would spawn too much risk and not enough upside.

8. How will carriers respond?

It's important to keep in mind that Apple isn't making decisions in a vacuum about its smartphone's future. The company must consider the impact its decisions will have on its relations with carriers around the world. Offering up another smartphone at a cheaper price with the option of prepaid service might have an impact on carrier relations. Whether or not that impact would be good or bad is unknown, but it would weigh heavily in Apple's decision-making. That must be considered before one believes that Apple will release an iPhone 4S solely for its own gain.

9. Competition is too fierce in the midrange

Whitmore argues that Apple's decision to release a cheaper iPhone this year would be directly related to the issues the company's competition is having. Whitmore specifically cited Nokia's and RIM's struggles as prime reasons to jump into the "midrange smartphone market." Though Nokia and RIM are struggling, the companies are still competing. With the Nokia N9 coming out soon, there's no telling how the world's consumer base will respond. Combine that with the many other companies, including HTC, Motorola and others, that are competing in the midrange space, and it quickly becomes clear that Apple might face too much competition in that sector for it to justify launching another smartphone for the midrange market.

10. Apple has always employed a "pull" strategy

When one considers Apple's product strategy over the years, they will find that the company has consistently used the "pull" method to attract customers. Rather than find a market and try to compete in it, Apple has found a way to coax consumers to its products, which in some way or another break new ground. Considering that, it doesn't make much sense for Apple to push another iPhone model into a space that it's not necessarily comfortable competing in (see item 2). Apple pulls customers to devices that consumers never knew they wanted. It doesn't try to sell me-to products that are following a well-worn path that consumers have already passed over. That alone could be enough to scuttle a midrange-focused iPhone launch this year.

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