Now Apple is doomed if the company doesn’t match cheap Android phones aimed at the masses. Do you want to know how Apple is really doomed?
Follow The Leader To The Bottom
Among the smart phone crowd, Apple’s popular iPhone is the one to beat. And beat up on. After all, Samsung doesn’t compare the Galaxay S3 to a Nokia Windows Phone.
What’s the problem? Apple’s smart phone market share is growing slower than the overall smart phone market.
Android OS makes up the lion’s share of smart phones on a worldwide basis. Google gives Android OS for free to smart phone manufacturers, and they make cheap phones to compete with iPhone.
Therefore, the logic is that Apple must produce a much less expensive iPhone for the masses. Says who? None other that Piper Jaffray analyst Gene Munster.
Yes, he’s the same guy whose research methodology is asking a bunch of people what they think. He’s also the same guy who said Apple will avoid the netbook and build a tablet instead. Then again, Munster said Apple’s tablet would run a Mac OS X-like interface optimized for touch.
Here’s what Apple CEO Tim Cook said about netbooks.
When I look at what is being sold in the netbook space today, I see cramped keyboards, terrible software, junky hardware, very small screens, and just not a consumer experience, and not something that we would put the Mac brand on, quite frankly.
The key to understanding that position is the word brand. Apple chose to think different and launch the iPad instead. Munster says Apple must release a cheaper iPhone to compete with Android smart phones.
Why is that important? Other than Samsung, name another smart phone manufacturer that is making money selling smart phones? Google? Nope. Nokia. Uh uh. Microsoft? No way. HTC or anybody else?
No. The race to the top of the smart phone market share mountain is also a race to the bottom with nominal revenue, and absolutely no profits. Except for Samsung, which simply chose to copy Apple’s iPhone atoms and stick a Samsung logo on the front.
The same Gene Munster.
We are anticipating a new category of Apple products with an operating system more robust than the iPhone’s but optimized for multi-touch, unlike Mac OS X. Such a product line would be a sort of hybrid between the iPhone and the Mac, requiring a new operating system.
How’d that prediction work out? Apple’s iPad has the revenue and profit lead among a long line of trashy plastic iPad wannabes.
Here’s a little known secret about the iPhone and iPad. Customers buy them and then continue to use them for games, photography, productivity, communication, browsing, email, movies, music, and more.
Here’s another little known secret about Android smart phones and tablets. Customers buy the smart phone and then mostly use the phone. iPhone app, photo, and video usage dominates the industry. Customers buy the Android tablets and then stop using them. They gather dust.
In the U.S., a subsidized iPhone 5 starts at $199. With a contract, the iPhone 4 starts at $0. The iPhone 4S, still far more usable than most cheap Android OS smart phones, starts at $99. How much less expensive can Apple get than $0?
To be fair, there are cell phone markets outside the U.S. which do not use the carrier subsidized business model. In China, on the Apple Store, Chinese customers can buy an iPhone 4 for about half the price of an iPhone 5.
Munster seems to think Apple needs to have a much lower price, perhaps all the way down to zero, because, well, you know, zero is better for market share.
The thing to understand about Apple is that it is a premium brand with premium products. Customers stand in line to buy Apple iPhones. Do they stand in line to buy any other smart phone? Like BMW or Mercedes or Lexus or Cadillac, Apple’s quality commands a premium price.
If all those smart phone manufacturers that sell phones on the BOGO plan, or $49 or free are doing so well, why are they not making any money? Because you get what you pay for. Apple doesn’t need to giveaway a cheaper iPhone with fewer frills and lower quality. What Apple needs to be, and usually is, is the premium brand that customers aspire to own.
I could use the iPad mini as an example. Among the cheapest of the cheap small tablets, it’s the most expensive. Does a $329 starting price tag seem to have hampered the iPad mini’s sales?
Speaking of sales, exactly how many tablets has Amazon sold? How many has Google, or Microsoft or anyone else sold? No one knows because the numbers are so embarrassingly low. The same holds true for smart phones. Google won’t say how many Android Nexus phones were sold to date. Microsoft won’t say how many Windows Phones have been sold.
Only Apple releases the numbers of sold iPhones and iPads. Only Apple has customers stand in line to buy the latest. Yet, somehow, Apple needs to tarnish the brand and manufacture a cheaper iPhone for the masses. It seems to me that the masses are doing a good job hating the smart phones they have, and many of them move on to the iPhone.