Apple Inc. (NASDAQ:AAPL) is expected to release its latest smart phones on September 10 and hype has been building about the specs and targets of the coming devices. Of particular interest to many analysts is the iPhone 5C, rumored to be a low-end smartphone designed by Apple to compete with low price Android phones. Ming-Chi Kuo, an analyst for KGI Securities, thinks that view is all wrong.
According to a note released to investors earlier today, the iPhone 5C is not going to be a low end smartphone designed to replace the iPhone 4S; it is going to be a mid-range smartphone to replace the iPhone 5, the company’s current flagship.
Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More
Lightning argument makes little sense
One of the major arguments that has led analysts to predict the replacement of the iPhone 4S is on the base of the smartphone. The 4S uses a 30 pin Dock connector while the firm’s newest products use the smaller Lightning connector. According to the reigning consensus, Apple Inc. (NASDAQ:AAPL) wants to get rid of that issue as soon as possible.
Kuo doesn’t see the merit of this argument, and certainly doesn’t think Apple Inc. (NASDAQ:AAPL) is likely to make major decisions based on a wish to avoid legacy cable manufacture. The KGI analyst reckons the iPhone 5C is not the 4S killer everyone is talking about, it’s designed to replace the iPhone 5.
Apple iPhone 5 on the way out
Releasing the iPhone 5c in order to replace the iPhone 5 would be an interesting move on Apple’s part, and it would certainly add to the firm’s reputation with defying expectations. The major problem with releasing a low budget smartphone is the dilution of the company’s brand and its reputation for quality. Kuo’s solution could solve those marketing problems.
Instead of releasing a cheap iPhone, Apple Inc. (NASDAQ:AAPL) might be looking to release a version of the iPhone 5 that could be offered at a lower price. Less expensive components could add to the allure of such a plan for investors. Apple Inc. (NASDAQ:AAPL) margins aren’t what they used to be, and a budget iPhone has led to worries that the company is going to see further cuts in gross margin ahead.
A mid-range iPhone 5C could solve a lot of problems for Apple Inc. (NASDAQ:AAPL) but there’s no certainty about the phone until it’s actually released. Even the September 10 launch date hasn’t been confirmed.