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Wednesday, January 23, 2013

Does Apple Need a Cheaper iPhone

In the past month, there have been reports that Apple is working on a smaller, cheaper iPhone. But the latest sales numbers do not make it appear that Apple needs to sell one.

Apple released its quarterly earnings report on Wednesday. While its revenue grew 18 percent from last year, profit stayed flat at $13.1 billion. As for iPhones, Apple sold 47.8 million, up from 37 million last year.

Analysts paid keen attention to one particular detail about the iPhone: its average selling price. The theory goes that if the average selling price teetered to the lower side, it would indicate that Apple’s older iPhones were selling much better than the newest model, the iPhone 5. It would therefore behoov Apple to sell a new model of a cheaper and perhaps smaller iPhone, aimed at the lower end of the market.

But the average selling price of the iPhone over the past quarter was $641. That suggests the iPhone 5, which costs $650 at full price in the United States, accounted for the vast majority of iPhone sales. Tero Kuittinen, an independent mobile analyst and vice president of Alekstra, a company that helps people manage their cellphone bills, says that based on the average selling price, the iPhone 5 could account for no less than 70 percent of iPhone sales over the quarter.

Timothy D. Cook, Apple’s chief executive, would not clarify how many iPhone 5 handsets were sold specifically. But he told analysts that the ratio of iPhone 5 phones sold versus older iPhones was similar to the ratio for iPhone 4S phones sold versus older iPhones in the same quarter of last year. The iPhone 4S was the best-selling Apple phone last year, meaning the iPhone 5 is most likely Apple’s current best-sel! ling iPhone.

So is a cheaper new iPhone necessary A cheaper iPhone would very likely appeal to emerging markets where people have less disposable income. But Mr. Cook noted that the iPhone had the biggest sales growth in China â€" in the “triple digits.”

“This does not really signal that the low-end iPhone is a must,” Mr. Kuittinen said.

During the earnings call, one analyst asked what Apple would do to defend its market share. Mr. Cook did not reveal any hints that a cheaper iPhone was in the cards.

“The most important thing to Apple is to make the best products in the world,” Mr. Cook said. “We aren’t interested in revenue for revenue’s sake. We could put the Apple brand on a lot of things and sell a lot more stuff. We only want to make the best products. We’ve been able to build market share and have a great track record with iPod of doing different products at different prie points. I wouldn’t view those as mutually exclusive as some might.”