But that doesn’t mean that Apple won’t have a lower-cost solution to the obvious problem of a very large market of developing countries that can’t afford an iPhone. Cook gave the example of Apple’s solution to demands for an Apple laptop that cost less than $1,000: Apple couldn’t respond to this demand with a laptop, but they did invent the iPad. “And now all of a sudden we have an incredible experience and it starts at $329,” Cook said. In this context, the rumored iWatch begins to make sense.
One way or another, the pressure for cheap products is on. Google Inc (NASDAQ:GOOG)‘s Android has made enormous progress by shipping its software on cheap smartphones at price points at which Apple struggles to remain competitive. In China, for instance, Android market share is growing by triple digits. In fact, a recent report claims that Google’s Android holds 86% market share in China. Google’s own Chromebook is priced at $249, and its Nexus 7 tablet at $199 — prime examples of the compelling offerings at lower price points that are putting pressure on Apple’s market share.
So don’t expect Apple to respond with a “cheap” product. Instead, Apple could likely respond with a new, lower-cost alternative to today’s iPhone. Maybe an iWatch? An iPhone Mini?
Cook’s comments reflect the Apple culture that brought the company so far in the first place, with a focus on making great innovative products.
With Apple now trading at a paltry P/E of 10.4, investors don’t need Apple to go out on a limb — they simply need Apple to maintain its competitive advantage and its reputation for innovation. A conservative and diligent acquisition strategy, combined with a determination to make revolutionary and innovative products, should help Apple do exactly this. On that note, my Apple outperform CAPScall remains one of my top picks.
The article An Apple Identity Crisis? Not Likely originally appeared on Fool.com and is written by Daniel Sparks.
Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Apple, Goldman Sachs, and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.
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