Former Apple (AAPL) CEO John Sculley may not seem like a good person to offer Apple advice, especially since he’s widely blamed for pushing Steve Jobs out of the company in 1985 and for making a series of mistakes during his tenure that left Apple in a precarious financial position. All the same, Sculley recently told Bloomberg that Apple should go ahead and make a cheaper version of the iPhone to compete with companies such as Samsung (005930) in emerging markets.
“Apple needs to adapt to a very different world,” Sculley said. “As we go from $500 smartphones to even as low, for some companies, as $100 for a smartphone, you’ve got to dramatically rethink the supply chain and how you can make these products and do it profitably.”
According to Sculley, the big problem for Apple isn’t so much that its own smartphones have gotten worse but that its rivals have done a good job of catching up over the past couple of years. So while the iPhone was the only game in town for people who wanted a top-notch touchscreen smartphone four years ago, rivals such as the Galaxy S III are now providing similar quality and are eating into Apple’s market share. And when you couple this with the fact that Samsung also has a very strong strategy for selling lower-cost smartphones in emerging markets, then you can understand why Apple may want to develop a cheaper smartphone of its own.
“Samsung is an extraordinarily good competitor,” Sculley said. “The differentiation between a Samsung Galaxy and an iPhone 5 is not as great as we used to see.”