Edible Apple

Sanford Bernstein analyst Toni Sacconaghi issued a note to investors today in which he asserted that Apple needs to come out with an iPhone Nano and an iPhone Touch.  Don’t adjust your computer screens – you read that correctly.

Sacconaghi argues that since Apple sells more units as its products become cheaper and cheaper, Apple should sell, drum roll please… a cheaper iPhone!  The problem is that simply selling more of a product doesn’t necessarily result in higher profits.  Take Motorola for example, they sell a ton more phones than Apple, yet Apple makes a lot more money from its phone business than Motorola does.  Cheap phones have slim margins, so its baffling how an analyst, who presumably gets paid to study and research this stuff, can make such a claim without any financial evidence or data to back it up.  Just because Apple could sell 1 billion phones priced at 10 bucks a pop doesn’t mean that it should.

Sacconaghi goes on to point out that the high cost of a data plan inevitably causes certain consumers not to purchase an iPhone.  Fair enough, but Apple has explicitly stated that it has no desire to produce low-end voice phones.  Sure, it could easily create an iPhone Nano that would essentially be an iPod with voice capabilities, but what’s the point?  What advantage would that have over any other cheap phone out there on the market that has the ability to play media content?  In the end, this would only tarnish Apple’s image, and might ultimately hurt overall iPhone sales in the process.

Sacconaghi also suggests that Apple should release an iPhone Touch which essentially would be an iPhone without 3G service, GPS capabilities, or a data plan.  I suppose Sacconaghi wants Apple to re-release the original iPhone?  Also, people tend to forget that Apple isn’t operating in a vacuum, and it therefore can’t tinker with the cost and availability of data plans without having to consult with a little company called AT&T.  It’s astonishing how many times analysts come up with their own theories about what Apple should do without taking into consideration, for even a second, the fact that Apple doesn’t operate in the smartphone market independently.

In the end, Sacconaghi’s latest report is similar to those of many other analysts who cover Apple – comically misguided, incomplete, and uninformed.