Cheaper, Smaller Apple iPhone Will Be A Cash Cow: 10 Reasons Why

By Don Reisinger  |  Posted 2011-02-14

Cheaper, Smaller Apple iPhone Will Be A Cash Cow: 10 Reasons Why

Apple could be working on a new iPhone that would be smaller and cheaper than current versions of the device, according to recent reports from the Wall Street Journal and Bloomberg. So far, Apple hasn't confirmed that such a device is on track for shipment later this year, but some speculate that the device will cost half as much as current versions of Apple's smartphone.

Whenever rumors start to swirl about the possibility of a new Apple product hitting store shelves, everyone seems to chime in on whether or not the device will perform as well as Apple's earlier iPhone models. In the case of a smaller, cheaper iPhone, that speculation has arisen again.

Read on below to help get the answers to solve that debate. Yes, a cheaper iPhone is a risk, and it's something that Apple hasn't tried yet. But when it's all said and done, a smaller, cheaper iPhone will be a cash cow for Apple.

Here's why:

1. The iPhone 4 is expensive

Although its sales don't necessarily tell this story, the iPhone 4 is an expensive product. Currently, customers who want to get their hands on Apple's smartphone will need to dish out $199 for the 16GB model and $299 for the 32GB version of the device. That's no bargain. And for shoppers on a budget, those price tags are potentially too expensive. But a smaller iPhone that comes in at $99 might just be what those folks have been asking for.

2. More options always means more money

Whether it's Apple, Microsoft, or any other company in the technology industry, the more options customers have at their disposal, the more likely a specific product will sell well. That's why Microsoft sells so many different versions of Windows and why HP and Dell have so many computers for sale. There is no such thing as a "one-size-fits-all" device on store shelves. And Apple is seemingly realizing that with a smaller iPhone.

3. Look at the iPod model

Apple has been successful selling different versions of its products before. The iPod is a prime example of that. After the music player started performing well at retail, Apple offered up smaller versions, like the Mini and the Shuffle (and then the Nano) to appeal more to customers. The strategy worked. Apple's iPod is the most popular personal media player ever released. With the same strategy, Apple might just see the same success with its smaller iPhone.

4. Mobility plays a role

Apple has been able to attract smartphone seekers. But there are still many people using the basic mobile phones that have come to be called "feature phones." These people don't necessarily see the value in switching to a smartphone. A smaller iPhone, though, could help bridge that gap by delivering features of a smartphone, but the price and footprint of a feature phone. Simply put, the smaller, cheaper iPhone might just take advantage of the sweet spot that exists between those who don't want smartphones and those that do.

It's Hard to Bet Against the Apple iPhone

5. It could see strong enterprise adoption

The enterprise is still trying to find its way out of the Great Recession. That means the most part, company IT budgets are expected to stay relatively tight in 2011 companies are looking to save cash wherever they can. And considering how expensive full-featured smartphones can be, sticking with current devices rather than upgrading might be a good idea. But the cheaper iPhone might change that. At a reduced price, it might be a worthwhile investment for some companies that want employees to be more productive while on-the-go. It likely won't stack up to the iPhone 4, but in the enterprise, it could see strong adoption.

6. The student revenue could be major

Apple is often thought to be a consumer-facing company. And for the most part, that's true. But the company also has a strong presence in the educational sector and its many products are highly sought-after by students. But let's not forget that some students are on tight budgets. And no matter how badly they might want an iPhone, they still don't have one. A cheaper iPhone might be just what they're looking for. It can still deliver the functionality they want, but it will do so at a price that they're comfortable paying.

7. The iPhone 3GS is still selling well

Apple is already selling a cheaper iPhone. The company currently sells its iPhone 3GS for $99. That's an important element in all of this. Apple has already realized that there is a market for cheaper iPhones out there. And now, with the company offering a new device, it might plan to capitalize on that space in a different way. That strategy could yield major revenue for Apple.

8. It gives Android customers more options

One of the important draws to Google's Android platform is that there are a multitude of device options available to customers. Whether they prefer a specific company's products or they simply want to choose between different form factors that meet their needs, Android products help them achieve that goal. Currently, Apple isn't doing that as well as it could. But with the help of a smaller iPhone, it could show that it wants to give consumers more options and it can alert Android customers to the fact that Apple is getting serious about winning their business.

9. It's hard to bet against Apple

When it's all said and done, it's hard to bet against Apple's decision-making. Over the past decade, the company has delivered one smash hit after another in the mobile space. Save for the iPod Hi-Fi speaker, it's hard to find any major failures. As a result, it's probably not best to bet against the cheaper, smaller iPhone. It might not sell as well as the top-of-the-line iPhone, but given Apple's history, it will likely catch on with customers.

10. Customers respond well to new Apple products

Critics of Apple's possible decision to offer a cheaper, slimmer iPhone should keep in mind that whenever the company offers up new products, they usually appeal to customers. Consumers get excited by Apple products and they jump at the chance to get their hands on them. The same can't be said for most new products that hit the market. But with Apple's track record in mind, it's not a stretch to say that Apple's upcoming release could catch on like canned beer.

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