Apple - Looking like doing things it shouldn't be doing..

Yes this is different. Apple under the reigns of Tim Cook is different to what Apple under Steve Jobs is. Remembering from the past, one of Jobs' last advises to Tim Cook is to never ask what Steve would have done. Just do whats right. He may be right from his Disney's experience but one gets a serious doubt that Cook may be taking this advice too seriously than what Jobs would have hoped for. At least that's my opinion.

And the results? iPad Mini cannibalizing the sales of iPad 4 thereby driving lesser profits for the company. One might argue that this product is for portability lovers and it is different from bigger iPad and truly so... But the rumors of a cheaper iPhone dubbed iPhone 5c are really terrifying if we dig deeper. What's Apple's north star? Doing the best but not doing the most! But painfully and much to many's surprise, for the first time, Apple's trying to sell the most for the first time with iPhone 5c!

Previously

Let's observe the previous scenarios where Apple tried to do just this. And with this thought, they ended up doing Mac Mini. Here Apple successfully produced a product that had a prize tag to bring it to affordable range to many. Here what I want to double upon is that this is the area where the type of the product allowed such budget constrains. One might argue that it is still costly but for Apple's quality assurance, it is quite affordable.

But at the end, Mac Mini didn't lure Macbook buyers to this less profitable product. Its altogether a different breed and didn't hurt sales of Macbooks as the customers buying this product are the first time Mac buyers. But does the same theory apply for iPhone 5c?

iPhone 5c

Going by gut instinct and by observing Jobs for several years (at least  from the time he had returned to Apple) one will say that Jobs wouldn't have approved this product.

Many part leaks suggest that iPhone 5c is indeed in the picture. Now what happens to the market share if cheaper iPhone becomes a reality? Yes the market share for iOS indeed increases but will it that be at the cost of draining profits for the premium iPhone? Is that feasible? Jobs once said "We prize aggressively and go for volume." If that mantra works here, we could indeed see more and more people foray in to the iPhone space. But the profits from the premium iPhone decreases. If Jobs' mantra works here, profits from the cheaper ones will be so much more that they may indeed gain more profits than the previous model of selling only premium iPhones. At least they might end up producing just as much profits as the previous model. But that celebration is not going to last forever for Apple. 

Here's Why

People are gonna absolutely like iPhone 5c. Budget buyers are going to love this and cannot live without this. But will that relationship last forever? There's a difference on where a user might opt for iOS or Android in a given budget. The average user (I don't mean them less intellectual but most in number) opts Android for that it looks interesting. For an average user, iOS is boring. They don't have widgets, live wallpapers, plethora of customizations like themes, etc.. alike Android. iOS is for people who are sturdy going and people who wants stability and take things one at a time. Moreover people don't want to buy premium apps. They want to sideload them. People don't want to buy music. They listen by sending through Bluetooth. People don't have internet connection too often. So its very tough to exchange photos. Most % of the budget buyers don't have computers in their homes. No computer implies no iTunes and no iTunes means it is very difficult to maintain an iPhone (People might have more resources in relatively richer countries like US but we are speaking of volume and should look at India or China). All these adds up to insecurity among iPhone buyers and they are going to hate this. Buying and maintaining iPhone requires spending money for the content but that's not the case that Budget buyers might feel happy doing.

There will still be people who understand these implications and truly know why they are buying an iPhone. These people would have opted for a premium iPhone by any means by going through the difficulty of earning more money. But these people who would have bought a premium iPhone will now turn their wallets to a cheaper one! 

So on the long run, market share increases, profit decreases and it will be painful to see. Apple is never feared of cannibalizing its own products but this is definitely a different scenario. 

Then what should Apple do?

If Apple really has this candid notion of making iPhone available to budget buyers, they should differentiate cheaper and premium phones so much more to an extent where the old premium buyer should still opt a premium one for the extra features it had to offer but cheaper iPhone should welcome only the new buyers. Yes it is very very tough to achieve but has to be done to truly dive in to mass market and still get the same or more profits!

(Throughout my article I've referred to terms Premium iPhone and iPhone 5c. By them what I mean is that the premium iPhone is one that is available now which costs around $650-$700 when unlocked and $200 on a contract. And iPhone 5c is the purported cheaper unlocked iPhone under shelves which is yet to be unveiled which is rumored to cost around $300-$400)

Update: Turns out, they have great advisers than what I had expected them to have. iPhone 5c is not unlocked and costs $99 on contract! Guess what? It costs $549 off-contract. Just a $100 shy of iPhone 5s. So, I believe there will be no decreasing profit as they seem to have making same amount of profit on 5s and 5c