Cheaper iPhone could cost as little as $99

Lance Whitney
January 9, 2013
http://news.cnet.com/8301-13579_3-57563005-37/cheaper-iphone-could-cost-as-little-as-$99-bloomberg-says

That much-rumored "cheap" Apple iPhone could hit the market at a lowball price of $99, according to a story published today by Bloomberg.

Citing an unnamed source familiar with Apple's plans, Bloomberg said the phone would sell at a price range of $99 to $149 and would pop up late this year at the earliest.

Apple has already been chatting with at least one of the top U.S. wireless carriers about selling the phone, according to the source. The company has reportedly been working on a low-cost iPhone since February 2011 in a bid to grab more customers in developing countries, a tidbit also mentioned by a separate Bloomberg source.

This latest scuttlebutt follows a report from yesterday's Wall Street Journal claiming that Apple is prepping a low-cost iPhone for debut later this year. The Journal's story followed a rumor from DigiTimes pointing to a cheaper iPhone on the way this year geared for emerging markets.

The rumor is hardly new. Back in February 2011, the Journal reported that Apple had already started working on a new line of cheaper iPhones. The phones would be smaller than the iPhone 4 and available to carriers at half the full retail price Apple normally charges them.

More recently, Strategy Analytics analyst Neil Mawston chimed in, saying he believes Apple will launch an "iPhone Mini" in the next few years, possibly as soon as next year, to better compete with Samsung. Jeffries analyst Peter Misek also forecasts a low-cost iPhone but thinks it may launch as early as this summer with a price tag of $200 to $250.

Piper Jaffray analyst Gene Munster sees a 60 percent to 70 percent chance that Apple will unveil a lower-priced iPhone this year. In an investors' note out today, Munster reiterated that he feels Apple needs a cheaper iPhone to recapture market share lost to Android phone makers.

In contrast with Bloomberg, the analyst thinks a price range of $149 to $199 is more likely, with the cost trending toward the higher end. Such a range could be justified given Apple's history of charging a premium price tag. Munster also believes the main competition at that level would be Android phones selling for $99 to $199.

"We note that the cheapest iPhone, the iPhone 4, currently costs $450 off contract and more in many countries where additional taxes are levied," the analyst said. "We note that an off contract iPhone 4 is ~$490 in China and $750 in Brazil, thus the sub-$199 price would be a significant discount. Historically, we believe lower-priced products have had a measurable positive impact on overall revenue (iPad Mini, iPod Nano, iPad)."

As with most rumors, some of the "facts" and forecasts from the different sources don't quite match up.

The Journal's sources said the cheaper device would be smaller than the current iPhone models, a belief echoed by Strategy Analytics' Mawston. But DigiTimes' sources say the phone would sport a screen larger than the iPhone 5's 4-inch display. That claim seems dubious given that the phone would be cheaper than the current model.

Most of these reports say the phone will debut before the end of the year. But Mawston feels Apple has little incentive to launch a cheaper iPhone this year in light of the strong sales of the iPhone 5. Instead, Apple is more apt to wait until the iPhone's share of the global smartphone market reaches a higher saturation point.

It's a safe bet Apple has grown weary of being trumped by Android in general and Samsung in particular. The iPhone 5 has seen huge demand, but the company has lost significant sales and market share to its Android rivals over the past couple of years.

Of course, many people would argue that Apple already offers a low-cost iPhone, namely the iPhone 4S and the iPhone 4. With the standard two-year contract, the 4S can be had for just $99, while the iPhone 4 is available for free. But as Munster pointed out, those models sport higher price tags when purchased off contract, especially in other countries.

Apple could conceivably see a cheaper version of the newest iPhone as a more effective way to grab back some of the global sales and market share lost to the likes of Samsung.