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    Apple’s Unlocked $199 iPhone Coming in Q3: Piper Jaffray

    Written by

    Michelle Maisto
    Published February 20, 2013
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      Apple is working on a low-cost, unlocked iPhone, analysts continue to insist.

      Piper Jaffray analyst Gene Munster continued to make a case for such a phone in a Feb. 19 research note, according to Apple Insider, which received a copy of the note. Munster expects Apple will debut a $199 iPhone in the September quarter, and sell approximately 37 million of them through the rest of the year, 96 million in 2014 and 170 million in 2015.

      “We believe a lower-priced iPhone will be a positive for [Apple] shares for two reasons,” wrote Munster. “First, despite its lower margin, it should accelerate gross profit growth given the size of the low-end market (we estimate $135B in 2013); second, investors have historically bought into [Apple] ahead of major new-product releases.”

      Munster looked at pricing in Germany, the U.K., France, China, Brazil and India, and offered a snapshot of the $135 billion low-end smartphone market, which in 2013 will account for 60 percent of smartphone sales, he said.

      The iPhone 4—the lowest-priced iPhone—still costs 133 percent more than the average low-end smartphone, Munster wrote, while the iPhone 5 costs 19 percent more than comparable flagship devices from Apple rivals.

      On average, an unlocked iPhone 5 costs $1,050, Munster pointed out, while the average low-end handset in China and India sells for $138 to $140—a divide Apple will need to cross if it’s to tap into that $135 billion.

      Apple CEO Tim Cook recently spoke to the topic of a lower-cost iPhone at a Goldman Sachs conference Feb. 12. While neither confirming nor denying the existence of such a product, he called great products Apple’s “North Star” and said that Apple would never simply create a cheap version of a great product. But a product could evolve in a way that makes it accessible to more customers, he said.

      “If you take something like the iPod, when we came out with the iPod it was $399. Where is the iPod today? Today you can … buy an iPod Shuffle for $49,” said Cook. “So instead of saying, ‘How can we cheapen this iPod to get it lower?’ we said, ‘How can we do a great product?’ And we were able to do that at a cost that enabled us to sell it at a very low price of $49, and it appealed to a lot more people.”

      In December 2012, Canaccord Genuity analyst T. Michael Walkley similarly told investors that he expected that Apple was working on a low-cost iPhone.

      “We believe Apple could launch a refreshed iPhone 5 along with a more mid-tier-priced competitive iPhone for pre-paid oriented international markets this summer,” Walkley wrote in a research note.

      Tech site iLounge has reported, citing “reliable sources,” that the low-cost iPhone will a feature a 4-inch display, an elongated, pill-shaped front button, rather than the circular button on the iPhone, and be shaped rather like the iPod classic.

      “The budget iPhone will look a lot like an iPhone 5 from the front, an iPod classic from the side and an iPod Touch 5G on the bottom—only made from plastic rather than glass or metal,” said the site.

      Follow Michelle Maisto on Twitter.

      Michelle Maisto
      Michelle Maisto
      Michelle Maisto has been covering the enterprise mobility space for a decade, beginning with Knowledge Management, Field Force Automation and eCRM, and most recently as the editor-in-chief of Mobile Enterprise magazine. She earned an MFA in nonfiction writing from Columbia University.

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