Apple’s Commoditization Discount

Horace Dediu, Dirk Schmidt:

When asked where Apple’s growth will come from, most analysts or observers will cite new products. As long as there are new products, then there is growth. Conversely, if there are no new products, then there will be no growth. This is such a commonly held belief that it’s axiomatic: Apple is being valued based on short-term foreseeable growth.

At first I thought, “Another post bashing stupid financial analysts.” But then I thought what makes a new product a new product. The next iPhone, probably the iPhone 5, is without doubt a new product; it did not exist before. But what about a free iPhone 4? It might seem obvious the answer is no: The iPhone 4 is not new. But isn’t a free iPhone 4 something new? I think it is. I would consider a future US$99 iPhone 4S a new product as well. Using this definition of new product I think the assumption that there is growth only when there are new products can continue working. Let’s test this. If Apple does not lower the iPhone 4S to $99 when the iPhone 5 comes out there will be no growth in smartphone sales from iPhone 4S sales. Sounds about right.