RBC: Apple would only launch low-cost iPhone if it had 'category-killer' experienceAfter a meeting with two of Apple's top executives, RBC Capital Markets analyst Mike Abramsky said the company's primary requirement for launching a lower-end iPhone is whether the handset would provide an "innovative, category-killer experience."
Abramsky revealed the information through a set of "key takeaways" from his meeting with Apple COO Tim Cook and CFO Peter Oppenheimer on Wednesday, though he did not provide any direct quotes from the two executives. "Apples primary criterion for launching a lower-end iPhone is an innovative, category-killer experience," he wrote.
Though those familiar with Apple's design philosophy and strategy may dismiss the statement as seemingly obvious, it does run against the grain of recent assertions that Apple would release a contract-free iPhone for primarily financial reasons. For instance, Deutsche Bank analyst Chris Whitmore set off a round of speculation in June when he speculated that "it's time for a mid-range iPhone," largely based on the assumption that Apple is looking to reach the pre-paid market, which makes up two-thirds of the world's 1.5 billion mobile customers.
On Wednesday, Ticonderoga Securities analyst Brian White relayed recent Chinese reports suggesting China Telecom could release a "simplified" and more economical iPhone 4 alongside the iPhone 5 later this year. It is not known, however, whether the rumored device would require a two-year contract or would be the contract-free iPhone.
Several major media outlets (1, 2, 3) suggested earlier this year that Apple has been hard at work on a cheaper version of the iPhone that wouldn't require a carrier subsidy.
In addition to details surrounding Apple's interest in a cheaper iPhone, another takeaway from Abramsky's meeting was that Apple has maintained "sustained advantages" over Android, including an integrated approach to hardware and software, oversight of user experience and application ecosystem curation. These advantages should help the company weather the "expected explosion of low-priced Android smartphones" that will be detrimental to Nokia, Research in Motion and others, he said.
Abramsky added that he sees Apple's current legal disputes with Android vendors such as HTC and Samsung as likely to result in a settlement. Apple recently won a battle in its legal disagreement with handset maker HTC, which has said it's interested in settling outside of court.
The analyst also noted that iCloud is expected to be ready for "significant scale," with Apple having learned its lesson from the MobileMe service.
He came away from the meeting with an overall positive outlook on Apple. The executives affirmed Apple's "untapped global opportunity," especially in China, which has seen tremendous growth in recent years, the analyst said. Other emerging markets such as Latin America, the Middle East and India also provide Apple with a significant opportunity for expansion.
RBC maintains a price target of $500 for shares of Apple stock, reiterating its Outperform rating for the company.