Apple Inc. (AAPL) – Three Reasons To Break Into A Big Smile

With some shareholders of tech giant Apple Inc. (NASDAQ:AAPL) feeling a little jittery about the future of the stock, now is probably the best time for CEO Tim Cook to prove that he is a true multitasker. Three factors  should help him in this regard: a cheaper iPhone altogether, a possible collaboration with China Mobile Ltd. (ADR) (NYSE:CHL) through an upgraded version of the current iPhone model, and an innovative iWatch.

Apple Inc. (NASDAQ:AAPL)For Apple, these three things will mean:

A turnaround in the face of increased competition from cheaper smartphones powered by Google Inc (NASDAQ:GOOG)’s Android system.

Access to the world’s biggest mobile subscriber base, in what is slated to become the biggest smartphone market of the world.

Unlocking the potential of another iconic product that can change everything, again.

And the best part is, all three events will almost inevitably happen (albeit with some variations), since the company will try and retain its premium positioning at any cost.

What makes a cheaper iPhone a necessity

Let’s start with the bad news first. As per research firm IDC, Apple’s smartphone supremacy has been on the downslide, with its share of global smartphone shipments falling from a high of 23% in Q1 2012 to a considerably low 14.6% in Q3 of the same year. And the two main factors responsible have been its premium pricing, coupled with the onslaught of low-cost Android smartphones.

What’s important is that both these factors, along with the absence of carrier subsidies, have impeded its success in the emerging nations – the markets of the future. This makes it inevitable for Apple Inc. (NASDAQ:AAPL) to have a rethink on the pricing strategy of its iPhones – its steady revenue cash cow. Merely selling older models at a discount or breaking down the cost of existing models into affordable installments is just not proving to be enough.

The obvious solution at this juncture would be to sell different types of the same phone at a range of price points, which is what a cheaper iPhone is really all about. Apple Inc. (NASDAQ:AAPL) has already played around with this strategy with the iPad Mini, and the whopping sales figures are proof of its success.

And here’s the real potential

Having a cheaper iPhone would bring it within range of a massive untapped cost-conscious consumer segment in emerging countries such as India and China. For some of you who may be thinking that a cheaper iPhone would have a negative impact on Apple’s profit margins, I’d like to remind you that most of these potential customers will be the ones who have never used an Apple product before due to their prohibitive prices in such regions.

And the few who can actually afford an $800+ iPhone 5 (for China and India) would never settle for a cheaper option. I’m saying the word ‘few’ because once you stop gushing over the 2 million unit sales of iPhone 5 in China over just 3 days following its launch, you realize that’s not even 1% of its humongous population of 1.3 billion.

What makes China so important

The Chinese story doesn’t end there. The country’s potential to surpass the US as the planet’s biggest smartphone market by the end of this year itself, according to IDC, is also another broad reason to launch the next generation iPhone – dubbed the iPhone 5s. On a more specific aspect, the reason lies in the dominance of China Mobile and the fact that the iPhone does not figure among its offerings.