Katy Huberty, an analyst with the banking firm, noted that after her meetings with Apple Chief Financial Officer Peter Oppenheimer, she's convinced that innovation remains a top priority for the Cupertino, Calif., electronics giant. She also believes that Apple will increase cash return to shareholders and expand carriers, distribution, and possibly price points to drive iPhone growth.
She noted that a lower priced iPhone makes sense for several reasons:
- "iPad Mini is expanding Apple's customer base with 50 [percent] of purchases in China/Brazil representing new customers to the ecosystem."
- "Chinese consumers show a desire to purchase the latest version of iPhone (instead of discounted older generations)."
- "iPhone 4 demand surprised to the upside in the December quarter."
Huberty added that while an iPhone Mini would have lower gross margins and cannibalize other iPhone sales, it would boost revenue and profits.
She noted that new iPhones, including a lower-priced iPhone for emerging markets, could launch this summer, while the iPad will likely be refreshed by mid-year. Many reports in recent weeks have pegged an iPhone Mini launch to the summer time frame.
Huberty also expects new carrier partnerships including NTT Docomo, T-Mobile, and China Mobile in the second half of the year or in 2014.
Speculation has been building that Apple will soon release a cheaper iPhone. While it continues to sell many models of its newest iPhone, many customers have been opting for the older, discounted generations. And as smartphone sales growth slows in the U.S. and other mature markets (because almost everyone has a phone), emerging markets will become even more key to future sales. A lower priced phone would help Apple sell more devices in places like China, where few people can afford to buy its priciest gadgets.