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Tue, 19 Jun 2007 Apple developing cut-price iPhone?

Apple will need to widen its iPhone market with lower priced versions

Jonny Evans

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Two weeks before the product's US launch, Apple is already developing cheaper iPhones to widen the products market appeal, an analyst said last night.

American Technology Research analyst Shaw Wu believes Apple is reacting to the market pressure to make such a move. Historically, he cites the manner in which Apple introduced the iPod mini and iPod shuffle to widen the addressable market for its media player range.

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"Apple needs to round out its iPhone product line at lower price points (similar to iPod) if it expects to replicate the success of its iPod with sales of 100 million units," the analyst told clients.

The analyst also claims to be "picking up" news of: "lower cost iPhone prototypes for release at unspecified future dates".

Wu also warns that his sources are voicing some concerns at Apple's decision to implement only a software-based touchscreen keyboard, but believes this won't be a major inhibitor on the product's success.

"We believe one overlooked advantage iPhone may have over other smartphones is that when making calls, its virtual dialler has no extra clutter, and it is likely easier to dial unprogrammed phone numbers than on fixed QWERTY keyboards," the analyst said.

Citing Apple's news on battery life yesterday, when it confirmed 250-hours standby time for the product, Wu notes: "We hope those times are accurate, but our sources have indicated iPhone's active use battery life may be closer to around 4-5 hours for heavy use, similar to other smartphones. However, because an iPhone also serves as an iPod, unless Apple’s claims on performance are accurate, 4-5 hours of video playback may not be enough.

"We would like to see Apple move to a replaceable battery design at some point."

Wu also discussed the iPhone's potential as a corporate business-class tool, noting that (according to his sources): "iPhone works with corporate email systems based on Microsoft Exchange, but will not be as robust as the push technology offered by Blackberry. We believe this may deter usage among some corporate users; however, for consumer users, it is not likely an issue as iPhone works well with email systems from Yahoo and Google."

However, support for Safari may enable corporate users to access their email through Outlook Web Access, he proposed.

Summing up, Wu repeated his current 'Buy' rating on Apple stock and cited a $145 target price.

However, Pacific Crest Securities analyst Andy Hargreaves told CNN: "It's easy to look and say that the iPhone is overhyped. The attention that has been given to the iPhone is probably more than the significance of the product at this point."

Despite the hype, Hargreaves sees the product introduction as highly significant: "It's hard to underhype the importance of this project," he said. "If Apple captures a meaningful portion of the market, there's a big opportunity for new services for them."

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