Nokia Corporation (ADR) (NOK): Does Apple Inc. (AAPL)’s iWatch Signal a Cheap iPhone?

While the Apple Inc. (NASDAQ:AAPL) iWatch remains a rumor, albeit a very well-covered rumor, I wonder if the release of this device is a necessary condition for the ultimate release of a cheap iPhone that would allow the company to compete with Google Inc. (NASDAQ:GOOG)’s Android and even Nokia Corporation (ADR) (NYSE:NOK)’s Windows Phones at the low-cost end of the spectrum. A critical reason that Android has been able to command such a huge market share has been that in emerging markets where premium phones are unsubsidized and too expensive for most users, Android has options and Apple does not.

If you’re wondering what this could possibly have to do with a rumored but nonexistent Apple Inc. (NASDAQ:AAPL) product, then I would ask you to consider the history of iDevices. Before I go any further, I’ll also say as explicitly as possible that what follows is pure speculation, a theory, an interesting alternative view to consider. Nothing more. As long as the iPod was the leading mp3 player on the market, it also remained one of the most expensive. It was not until the iPhone came along and the iPod stopped being Apple’s flagship device that iPods in the more modest price range came along.

What about the iPad?
Certainly, the iPad has had no impact on the iPhone’s price level or its premium status. There are, I think, three reasons for this. First, the devices are largely billed as working together. This is a central premise of the entire Apple Inc. (NASDAQ:AAPL) ecosystem approach. With the introduction of iCloud — which replaced the MobileMe service — it became even easier to share content between the two devices. Second, the iPad was introduced long before the iPhone market was even close to mature or saturated. The iPhone had a degree of overlap with the iPod, but there are different paradigms at work.