We’ve been hearing rumors about Apple releasing a cheaper iPhone for a while, but J.P. Morgan analyst Mark Moskowitz this week has made a compelling case that a lower-cost iPhone will likely be a mid-range device that sells in the $350 range without subsidies and not in the $150 bargain-bin range with devices like the Nokia Lumia 521. Per Barron’s, Moskowitz writes that the success Apple has enjoyed with the iPad mini so far has shown the company that it can significantly expand its reach if it’s “willing to sacrifice near-term gross margins” in exchange for long-term dominance of the market. Although there aren’t too many well-known smartphones selling in the $350 range, Moskowitz notes that “Apple usually creates new demand when it steps into a price band” since “the $300-400 price range for tablets did not have much demand… before the launch of the iPad mini.”
According to recent estimates, Apple’s share of the smartphone market took a big hit in the first quarter this year. Market research firm Strategy Analytics estimates that the 37.4 million iPhones Apple sold last quarter were good for 17.9% of the global smartphone market, down from the 22.8% of the market Apple controlled in the same quarter last year. With no savior expected until September at the earliest — CEO Tim Cook recently said Apple is working on new products that will launch beginning this fall — Apple stands to continue losing market share until the iPhone 5S, and perhaps a new low-end iPhone as well, launch later this year. More →
Soon after its IPO, Zynga’s share price spiked above $15 in early 2012. Very little has gone right since then. Just last month, Zynga issued yet another warning and its share price now hovers just above $3. On Thursday, Zynga’s latest flagship game, Draw Something 2, dropped out of iPhone’s top-10 paid app chart after having spent only six days there. The original Draw Something spent nearly three months on the iPhone’s top-10 chart in early 2012. More →
The United States Department of Defense will reportedly grant security approval to Samsung’s Galaxy smartphones and Apple’s iPhone and iPad running iOS 6 for use by Pentagon officials, according to The Wall Street Journal. Both companies have been pressing officials to grant them clearance and allow Defense employees to switch from outdated BlackBerry devices. The Defense Information Systems Agency, which is in charge of sanctioning commercial technology for use in the Pentagon, will reportedly determine in the coming weeks that Samsung’s Galaxy line of smartphones that come preloaded with the company’s Knox security software comply with the agency’s Security Technology Implementation Guide. In a separate determination, the agency is also expected to allow Apple’s smartphones and tablets running iOS 6 to be used by military agencies for “nonclassified communications,” such as email and basic Web browsing.x
It is difficult for big tech companies to create hot apps. Very difficult. A few months ago, Nokia’s mapping app called HERE created a big media splash when it launched, becoming a top-5 iPhone app the day after it debuted. It then tumbled out of top-100 in just six days. Twitter’s much-hyped music app annoyingly titled “Twitter #music” managed to cling onto a top-100 position 96 hours longer — it dropped out on its tenth day. More →
Apple hasn’t announced any new smartphones yet this year, but the company’s plans seem like a matter of public record at this point. The “iPhone 5S” will reportedly be an incremental update that replaces Apple’s current flagship model in the late summer or early fall, and half a dozen solid reports suggest a new low-cost iPhone will debut in 2013 as well. Growth continues to slow at the high end of the smartphone market and a new opportunity is emerging at the bottom as feature phones become a thing of the past. It remains to be seen if Apple can build a phone that is affordable enough to compete in emerging markets, but market research firm ABI Research’s recent report might provide some incentive: Shipments of low-cost smartphones are expected to explode in the coming years. More →
One big reason Apple’s share prices have crashed over the past few months has been the perception that the company’s period of remarkable growth has ended and that it has now become a typical slow-growing tech behemoth. The best evidence of this has been the significant decline of Apple’s gross margins, which peaked at close to 50% in late 2011 but have now shrunk to 37.5% in the company’s most recent quarter. The big questions, of course, are why have Apple’s gross margins been shrinking and does the company have any hope of returning to its 2011 glory days? More →
Apple’s three available iPhone models combined to handily dominate rival smartphones on the three top wireless carriers in the United States last quarter. Verizon, AT&T and Sprint have now each reported their first-quarter financial results and in doing so, they have also released smartphone sales and activations figures. Enders Analysis analyst Benedict Evans charted the combined data and found that Apple’s iPhone line continued its reign in the first quarter despite the soured Apple sentiment. More →
For those who followed Nokia closely in the past decade, some of Tim Cook’s comments are starting to trigger a weird sense of dislocation. “Our competitors have made some significant tradeoffs in many of these areas to ship a larger display. We would not ship a larger display iPhone while these tradeoffs exist.” Is this Apple’s CEO in 2013 or Nokia’s CEO in 2007? The strongest parallel is in the weird way both companies started fighting the consumer preference for larger displays at the peak of their profitability… and then dug in as margins began eroding rapidly. More →
The United States International Trade Commission on Monday evening ruled that Apple’s iPhone does not infringe on technology Google gained when it acquired Motorola Mobility in 2011. The company had been seeking an import ban against the iPhone 4 because it allegedly uses Motorola’s protected technology. A panel of judges upheld an earlier decision, however, that found the proximity sensor patent Motorola was asserting is invalid. A Google spokesperson told Reuters that the company was “disappointed with this outcome and are evaluating our options.” The decision can now be appealed the to the U.S. Court of Appeals for the Federal Circuit.
While most market research firms will want to wait for Apple to post iPhone numbers on Tuesday before releasing their Q1 smartphone market share estimates, China-based firm TrendForce is confident enough in its sources that it went live with its numbers on Monday morning. While some analysts think iPhone sales during the March quarter came in as low as 33-34 million units, TrendForce’s chip division DRAMeXchange suggests Apple shipped 37.5 million iPhones in the first quarter this year. The figure would represent only modest growth compared to the 35.1 million iPhones Apple sold in the same quarter last year, but investors might be happy with any growth from Apple in light of the ridiculous estimates we’ve seen leading up to the company’s earnings report.
Another day, another key Apple supplier posting disappointing earnings. Per Reuters, iPhone and iPad display supplier LG Display has posted a 74% quarterly drop in earnings, thus adding to worries that “demand for iPhone and iPad screens weakened amid concerns that Apple was losing its luster in the mobile device market.” Apple devices account for roughly 30% of LG Display’s overall revenues, so it’s likely that at least some of LG Display’s drop in earnings can be attributed to substandard iPhone sales. iPhone audio chip supplier Cirrus Logic and iPhone manufacturer Foxconn both recently also posted disappointing earnings that were reportedly at least partially due to lackluster iPhone sales.
If iPhone sales volumes fall as low as some Wall Street analysts now expect during the spring quarter, the decline would actually be worse than the biggest disasters in mobile phone history, including Motorola’s post-RAZR crash in 2007 and Nokia’s collapse in 2012. Can it really be this bad or are analysts simply locked in a race to outpace the possible upcoming share price plunge? More →