Why Apple might risk its brand identity to hawk cheaper iPhones

Pressure from rivals and allure of developing world may drive Apple to gamble its rep on a lower-end smartphone

Rumors that Apple is tinkering with one or more lighter-weight, lower-cost versions of the iPhone have been quite persistent the past few days -- so persistent, in fact, that they're becoming difficult to dismiss.

At first blush, it's akin to Rolex launching a low-cost line of casual-wear leather-strap watches at JC Penney's: It just doesn't seem like prudent move on the part of a company that has built its reputation on selling high-quality products at a high price, rather than good stuff at a good price. But then, the combined realities of increasing competition from rival smartphone makers and growing mobile demands among consumers worldwide might just make a low-cost iPhone a necessary risk for Apple -- and potentially lucrative one at that.

A smaller, more flexible iPhone?

First, to recap the rumors: Publications like Bloomberg and, more recently, the Wall Street Journal, are quoting Apple insiders as saying that the company has been working on a couple of different low-end (for lack of a better word) versions of the iPhone 4.

According to the WSJ's source, one prototype exists that is half the size of the iPhone 4, weighs significantly less, has an edge-to-edge touchscreen, a virtual keyboard, and voice-based operation.

The most remarkable part of the rumor, though, is that consumers could get this trimmed-down version at little to no cost rather than paying $199 for an iPhone with a two-year contract.

Bloomberg, meanwhile, offered fuzzy details on a prototype iPhone that was one-third smaller than the current model, that lacked a Home button, and that the company has considered selling for about $200 without any sort of contract obligation. This could be the same smartphone the WSJ's insider spoke about.

According to Bloomberg, Apple has also worked on a less-expensive iPhone capable of operating on either of the two major wireless standards, thus letting users move between carriers without having to abandon their coveted device. It also gives users more flexibility, as they can more easily afford a smartphone out of pocket, rather than relying on subsidies from a carrier in exchange for longer contracts or expensive add-on services.

Another Nano ... or Performa?
Is it conceivable that Apple would really shed its boutique status and sacrifice its premium prices to get more iPhones into more pockets? The company has taken a stab at this before, with a mixed success. Its line of low-cost Macs, the Performa series, proved disastrous. It fared better with the iPod Nano, though the line initially suffered criticism and bad publicity.

Apple seems to be taking a bigger risk with a lower-end version of the iPhone than it was with the iPod Nano in that a smartphone is a more complicated beast than an MP3 player. An MP3 player isn't a vital communication tool for both personal and professional purposes, it doesn't need to provide reliable voice and mobile computing service, and it doesn't need to reliably run apps from various developers. Too many incidents of bad reception, spotty Web performance, or uncooperative apps could tarnish Apple's reputation, even if wireless providers or developers are to blame for some of mishaps.

Still, Apple may be feeling the pressure to fight for a bigger piece of the mobile pie -- or perhaps to maintain its current share. The battle for mobile supremacy is far from over, and rival phone makers are rolling out devices that can go head-to-head with iPhone. Apple rolled out the iPod Nano in response to opponents' increasingly feature-rich and less-expensive MP3 players; it may feel the need to do the same now.

Additionally, Apple likely does not want to cede market in counties like China and India, or the developing world where mobile is catching on. A $199 iPhone wouldn't fare too well in that market; a lower-cost iPhone capable of jumping between services might.

For the time being, rumors of a low-cost iPhone are just rumors, tantalizing as they may be. Should Apple venture down that path, its stockholders will certainly hope they don't have another Performa debacle on their hands.

This story, "Why Apple might risk its brand identity to hawk cheaper iPhones," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest business technology news, follow InfoWorld.com on Twitter.


Copyright © 2011 IDG Communications, Inc.

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