In addition to forecasting that Apple would double existing investor dividends to 6% by borrowing low-interest cash domestically. Morgan Stanley’s Katy Huberty walked away from her recent meeting with another conviction: that a cheaper ‘iPhone mini’ aimed at emerging markets was extremely likely
Writing to clients this morning, Huberty said:
We also see several signs that a lower priced iPhone makes sense: 1) iPad Mini is expanding Apple’s customer base with 50% of purchases in China/Brazil representing new customers to the ecosystem. 2) Chinese consumers show a desire to purchase the latest version of iPhone (instead of discounted older generations). 3) iPhone 4 demand surprised to the upside in the December quarter. Even at a low 40% gross margin and 1/3 cannibalization rate, we see an “iPhone Mini” as incremental to revenue and gross profit dollars.
The emerging market is a big, big opportunity of growth for Apple. There’s a reason why Huberty is emphasinzing China here. China has overtaken the United States as the world’s biggest smartphone market, and the U.S. market has become saturated with smartphones. In China alone, though, there’s almost a billion people without smartphones yet. If Apple can make a device that addresses even a fraction of that market, its market share will explode.
Everyone who can afford a smartphone already has one. The next challenge is to figure out a way to bring a premium smartphone experience to less affluent and third-world customers. Dropping the price of older iPhones and keeping them in circulation has helped, but it’s not enough, as Samsung’s enormous 114% growth in 2012 suggests.
Certainly, getting an iPhone in everyone’s hands is something Tim Cook himself wants. Two years ago, Cook said that he wanted Apple to be “for everyone” and “not just for the rich.” Will the iPhone mini fulfill that promise in 2013? Only time will tell.
Source: Business Insider
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