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Cook: 'Clever things' planned to address prepaid iPhones

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.






by MacNN Staff

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Comments

  1. Bobfozz

    Joined: Dec 1969

    +2

    Cook Is Sharp

    Apple has great talent. Of course the competitors want to see a succession plan, they would love to raid Apple... then there is no "succession" plan, once again and so they will push for another one.

    This whole thing is derivative of businesses who want to make money convincing these onions (er, unions) YOU NEED US.

  1. testudo

    Joined: Dec 1969

    -5

    Re: Cook is sharp?

    Huh? Somehow by Apple not saying "Cook is the successor to Jobs", this is keeping the competitors off-balance and they have no clue who to 'target' with a raid? Yeah, that's it. I'm sure there's fifty companies going "Dammit! If Apple would just announce that Cook is taking over, then we could go after Cook. But now, I just don't know. We could still go after him, but that seems risky."

    Of course, this has nothing to do with Cook, since he isn't the one who determines whether Apple has a succession plan or who would succeed him. But, hey, it does make him sound sharp, I guess.

  1. PRoth

    Joined: Dec 1969

    +2

    Not a business mind, myself

    So what does it mean when Oppenheimer says, "...Apple's capital structure is inefficient"? Does that mean the way it uses cash on hand to buy out other companies?

  1. facebook_Justin

    Via Facebook

    Joined: Feb 2011

    -1

    comment title

    I'd rather have a Job then a Cook or a Shilling.

  1. Inkling

    Joined: Dec 1969

    +3

    Unlock iPhones!

    If Tim Cook really doesn't want Apple products to be "just for the rich," Apple should unlock all iPhones when the contract expires. Those used iPhones will be cheaper than anything Apple can sell new and unlocking would allow their owners to pick the best service for their needs. It's also likely that, with a lively used iPhone market, Apple will sell more iPhones.

  1. testudo

    Joined: Dec 1969

    +2

    inefficeint

    So what does it mean when Oppenheimer says, "...Apple's capital structure is inefficient"? Does that mean the way it uses cash on hand to buy out other companies?

    No, since Apple doesn't buy many other companies. (If they used it to buy out other companies, that would be different). Note that he says they " use its balance sheet to secure partnerships for key components". As in "Hey, Samsung, we've got money on hand, you sell us chips!" (for example, pay up front for the goods, rather than being billed for them).

    The inefficient part comes from the fact they've got a boatload of cash on hand not really 'making money'. While some people think sticking $32 billion in the bank and earning a couple of percentage of interest is 'wise', others see it as watching prospective gains wallow away. So, it could be invested or used in various ways that would make more money for the company than sitting around as cash. There's trade-offs on it (sort of like "Should I put my money in a CD, where I can get a better return, but lose it's liquidity, or put it in a money market or other bank account, making less but having it on-hand for an emergency.

  1. elroth

    Joined: Dec 1969

    +2

    Re: Cook is sharp?

    Once again testudo has it backwards. If there were a list of successors, companies wouldn't go after Cook - they'd go after the others on the list. The list would reveal the most talented people at Apple. Apple's top people right now (Cook, Shiller and Ive) probably wouldn't leave, but the talented group behind them could be tempted. Other companies would love to get the next generation of leaders from Apple - it would be stupid for Apple to show those companies who to go after.

  1. Ratdude

    Joined: Dec 1969

    +1

    China is not the only place

    Most of Europe thrives on off-contract phones and especially Eastern Europe where contract phones are a rare thing. iPhones (bootlegged in from other venues where the are unlocked) go for a 20% premium in Ukraine.

    Unless they started bringing them in legitimately (since Ukraine cellular is slowly being purchased by Russia where iPhones live legitimately) this last 18 months or so. I have always been amazed sine Ukraine is the largest country wholly in Europe (Yes, bigger than France, but not as big as the Euro portion of Russia) and LOVES hi tech ,,, Might have to do with conflicts with the legit Apple products distributor laying claim to rights to control distribution of _all_ Apple products... Don't know but curious ...

    But from Latvia to Kazakhstan prepaid rules over contract phones (which are the wimpy semi-disposable variety when contract phones are offered) So ...

    I second the vote to get Apple and AT&T and others to unlock the phones once off contract! Anyone know the procedure to put it before the FCC. And maybe the FTC. In the interests of freedom to use my property the way I'd like (within reason not violating others rights) and also in the interests of the ecology of this rock (fewer landfill phones) the agencies need to be positioned to require carriers and manufacturers to unlock cell phones once they are off contract. Heck I'd like them to ban locked phones. They have a contract after all!!!!

    Tjp

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