More Evidence Apple Is Readying An Inexpensive Pre-Paid iPhone (AAPL)

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Image: Dan Frommer, Business Insider

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tim cook

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In October 2008, Steve Jobs made a rare appearance on Apple’s earnings call.

During the QA session an analyst asked if we could expect a cheaper Mac laptop to compete with low cost netbooks that were starting to flood the market.

Jobs’ response was a classic: “We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that.”

A year and a half later Jobs was on stage with a $500 computer he doesn’t think is a piece of junk, the iPad.

Today, we’re hearing echoes of those Jobs lines from his lieutenants who are telling RBC’s Mike Abramsky, they only want to release a pre-paid iPhone if it can be an “innovative, category-killer,” according to Apple Insider. (Abramsky’s words, not theirs.)

Abramsky met with COO Tim Cook and CFO Peter Oppenheimer. The fact that they’re addressing questions about pre-paid market, and how they’re answering the question sounds Jobsian, and seems to foreshadow something down the road.

Apple always thinks it can produce innovative category-killers. It called the iPad magical and revolutionary. When it rolls out an inexpensive iPhone lite, it too will be magical and revolutionary, according to Apple

We think Apple can produce an inexpensive phone that it is happy with, and we think we see it in the next year or so. Apple isn’t going to sit idle and watch Android clean up in the low end of the market.

Pre-paid phones are used by 72% of mobile subscribers. Unless Apple makes one, it’s missing out on a huge part of the mobile market.

Make no mistake about it, Apple is ready to compete on price and dominate markets. Just look at the iPad: It is the cheapest, best tablet on the market, and Apple is still producing impressive margins overall.

Certainly, Apple is happy producing a phone that takes the lion’s share of the smartphone profits with a small part of the overall market. But, it would be even happier taking all the profits and all of the marketshare.

And the easiest way to get there is through a cheaper, but still great smartphone.

When Apple does that, we look forward to hearing Steve Jobs on another earnings call trash talking his rivals.

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