updated 11:55 am EST, Mon February 28, 2011
Hopes products not 'just for the rich'
Apple has "clever things" planned in order to address the prepaid market for iPhones, says COO Tim Cook. The executive joined CFO Peter Oppenheimer and VP of Internet Services Eddy Cue in speaking with Toni Sacconaghi, an analyst with Bernstein Research. While the iPhone is in high demand, a new model can cost at least $600 off-contract. Apple doesn't want its products to be "just for the rich," according to Cook, and is "not ceding any market." He notes that the company has spent "huge energy" in China, said to be a "clasic prepaid market."
Sacconaghi suggests that the statements are evidence Apple intends to offer budget iPhones. Rumors of cheaper devices have intensified in recent weeks, although a smaller size may have been ruled out, and Apple is believed to be focused on developing the next flagship iPhone.
Cook adds that the iPhone is "the mother of all halos," having expanded sales of other Apple products, particularly in poorer countries. Carrier expansion is a particular priority; Oppenheimer notes that whereas Apple is currently involved with 175 carriers, Research in Motion already has deals with 550. SK Telecom became the second Korean iPhone carrier just last week.
Oppenheimer also admits that Apple's capital structure is inefficient. The company will probably continue, though, to use its balance sheet to secure partnerships for key components, he comments. Back on the topic of the iPhone, Cook claims that it's just under food and water on Maslow's hierarchy of needs, and that all phones will eventually become smartphones.
The Apple COO argues that that the tablet market will eventually trump the PC market; Sacconaghi suggests that this could amount to between $60 billion and $100 billion for Apple. Cook moreover proposes that tablets will see much more intense competition than smartphones, with every PC or smartphone maker developing a product. Apple is said to have a good head start with new products in the pipeline.