Pixel Envy

Written by Nick Heer.

It’s Time for Apple to Nuke Their Margins From Low Earth Orbit: A Translation

Haydn Shaughnessy, writing for Forbes:

A widespread estimate of Mini sales is around the 12 million mark in the last quarter, meaning it now handsomely outstrips iPad sales.

Oh, you think this is good news for Apple? That’s only because you don’t know how “watered down” the iPad Mini is.

The Mini is a watered down version of the iPad.

See?

Its launch risked the dreaded cannibalization effect, potentially eating into iPad sales. But it looks as well to have sustained Apple’s market share considerably.

What if Apple loses iPad sales to another iPad?

The point is that real growth is down market and what is needed there is an iconic phone to sweep it up. The idea of a really cheap iPhone offends some sensibilities but we have a really cheap tablet in the iPhone Mini [sic], one that is well below the innovation capabilities of Apple but one that is really preserving Apple’s presence and reputation as a market leader.

Because nothing says “market leader” like making a “really cheap” version of an existing product.

Surely then would it be rational for Apple to enter the low cost market, possibly with one of its existing devices, for example taking the iPod Touch into the 3G realm. The Touch already does good Face Time once users are in a WiFi zone – and more and more homes, as well as public spaces, have WiFi.

Surely it would be rational for Apple to nuke their margins from low earth orbit. Nothing helps a company more than short-term gains at the expense of a long-term strategy. Right, Wall Street?

(Aside: “iPhone Mini”? “Does good Face Time”? Did Forbes fire all of their editors?)

Recall, if you would, yesterday’s fantastic Benedict Evans piece:

Phone are also bought on price, and the iPhone is expensive, but the subsidy system weakens the effect (to a varying degree depending on the market and on the proportion of contract versus prepay). Moreover, the price gap between an iPhone and a cheap Android is much smaller in absolute terms than the gap between a Mac and the cheapest PC.

Meanwhile, back in Forbes land:

ABI estimates the low cost smartphone market will more than triple, in devices sold, between now and 2018 whereas the mid-range will grow at only (roughly) 50%. Mid range is estimated at the $250 – 400 mark, while low cost is sub $250.

Take a $299 iPod Touch, add some 3G capabilities, and sell it for $250. What could possibly go wrong?