During Apple's earnings conference call yesterday, Apple COO Tim Cook fielded a wide variety of questions, but two answers in particular helped shed a bit of light on the likelihood that Apple would enter the netbook market or release a lower end iPhone.
The origins of a rumored iPhone Nano stretch back to July 2007 when a JP Morgan analyst essentially made it up out of thin air (citing "sources" in the supply channel). Since then, other analysts have chimed in and noted that if Apple truly wants to garner significant market share in the smartphone market, it needs to offer a variety of iPhone models at different price points.
Over the past few months, rumors about a cheap iPhone Nano have taken various forms. Some predicted an iPhone with a smaller screen, while others speculated that Apple would release an iPhone Nano with limited functionality (i.e, no access to the App Store). Adding fuel to the flames of speculation were case renderings for an iPhone Nano like device that were recently posted online by case manufacturers.
Tim Cook, however, squashed any notion of an iPhone Nano at Apple's conference call. In response to a question about iPhone pricing, Cook stressed that Apple will not be producing low-end phones, and that Apple has no desire to be the market leader in terms of units sold. Instead, Cook emphasized that Apple will continue to focus on building the "world's best phone."
This makes perfect sense in light of the fact that the iPhone 3G hasn't even been out yet for a year, and that the iTunes App Store continues to grow at an astounding rate. It makes more sense for Apple to continue pushing the feature-rich iPhone 3G instead of trying to introduce and market a new iPhone model with comparatively limited functionality and lower margins.
As a final nail in the coffin, Cook, in response to a question about iPhone competitors, put to rest any ideas that a smaller form factor iPhone is something Apple would even consider:
Software is the key ingredient, and we believe that we are years ahead of our competitors. Having different screen sizes, different input methods, and different hardware makes things difficult for developers.
Cook also put to rest the rumor that Apple would soon be (or should be) entering the increasingly popular netbook market. Netbooks are extremely popular right now, and have even eroded some of Apple's market share in the overall notebook market. Nevertheless, Cook noted that the majority of netbooks ship with less than impressive software and hardware, which makes for an overall inferior user experience. That, according to Cook, isn't something Apple consumers want. At Apple's last earnings conference call, Steve Jobs had some colorful remarks about the potential for an Apple-branded netbook when he stated, "We don't know how to build a sub-$500 computer that is not a piece of junk."
Cook did mention, though, that Apple will continue to watch the growing netbook market, and while an Apple netbook might happen a ways down the road, don't expect to see it at your local Apple Store anytime soon.
For the time being, though, Apple seems to be doing just fine without an iPhone Nano or a netbook. This past quarter, Apple recorded over $10 billion in revenue for the first time in its history, while also recognizing its largest quarterly profit in company history. Analysts who steadfastly argue that Apple needs to release either of the above-mentioned products need to remember that more market share does not always equal greater profits.
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