The Tim Cook Effect

As we inch closer to Apple’s expected announcement, it seems like everyone is scrambling to make their last minute predictions. What will the iPhone 5 look like? Is Apple really going to release a lower end model of its popular smartphone?

While most folks seem convinced that we’ll see two new versions of the iPhone this Fall, there are some skeptics. How can Apple offer a low-cost version of its exclusive handset? Wouldn’t it have to sacrifice quality? Not necessarily…
All of the information we’ve heard so far suggests that Apple is planning on rereleasing the iPhone 4 this year. And although the device is expected to be priced much less than its predecessor, it sounds like it will be a better handset.

But how could this be? How could Apple add a dual core processor to a phone that’s currently selling for $199 (on contract), and then reduce the price? You don’t have to look much further than the company’s tablet for that answer.

When Apple announced the original iPad, people were ready to pay $1000 for it. In fact, they were shocked when Steve Jobs unveiled its starting price of $499. Then in 2011 Apple made the tablet thinner and faster, and still continued to offer it for less than $500.

It can do this because of its major supply chain presence. No other company has Apple’s cash flow. And no other device-maker orders components like it does. But most importantly, no one else has Tim Cook.

Before he was appointed CEO, Cook was the best COO (Chief Operating Officer) in the business. He negotiated supplier deals, and made sure devices got where they needed to be, all while keeping costs down and without sacrificing quality.

The competition is still scratching its heads trying to figure out how Apple has managed to produce its iPad at such a low cost. Tablet-makers are struggling to make a 10″ tablet under $500, let alone sell one.

I’m guessing we’ll soon see Apple’s ability to manipulate supply costs spill over into its handsets. Can you imagine a low-cost iPhone 4 with an A5 processor and 5mp camera? It would be a category killer. And that’s the Tim Cook effect.