If they press harder on pricing and their own lowered revenue forecast (which included Japan/China) is indicative, wouldn't your concern be that the modest sales growth coupled with lower margins wouldn't achieve $43/share?
Apple has shown that their high end sales are pretty much immune from their low end sales, so I'm confident they can safely move downmarket without cannibalizing sales at the high end. Pressing harder on price in certain markets in particular would only generate incremental sales, and while they may be at a lower margin and therefore reduce the blended margin percentage, they would increase absolute margin.
If you look at the past year in global mobile OS market share, Android has really started to run away with the lead. For Apple to counter this, do you think that mild price decreases will do the trick, given that many of the Android devices responsible for the market share shift are priced substantially lower and yet are still in the same "high end" category?
Apple's made it clear it is not their intent to counter Android's unit share lead. That said, I hope they realize it would be strategically advantageous and hugely profitable to address the premium low end segment beyond recycling 3 year old phones. I'm curious why you think Android's market share gains are coming from midtier phones that are functionally similar to high end phones. My impression is that the Android market is pretty barbell shaped-- lots of high end high priced phones (S4, Note 3 etc) and a lot of phones in Asian and prepaid markets who's main appeal is that they are cheap. Of the class of affordable, high end, I don't believe any of them sell in high numbers (eg Nexus 5, MotoX, last gen S3, phones of that ilk). Do you have different impression? Are there any successful midtier phones eating away at the high end market? Do you foresee a shrinking high end market as a consequence? I would agree that the atmospherics in the US is favoring handset price transparency, and therefore, it's reasonable to speculate that a $400 phone might be more appealing than a $650 phone, but I'm not sure the numbers bear that out yet.
As for new product categories, I don't believe investors are pricing that in. With brand and ecosystem (lockin) as leverage, I believe Apple has a great probability of success whenever they launch any new product, be it watch, TV, or mobile payments), but the earnings potential of any of those products pales in comparison to the iPhone. Making some extra pocket money is fine, but I hope Apple keeps their eye on their cash cow. |
