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The new connectors for the iPhone 5 is displayed during Apple Inc.'s iPhone media event in San Francisco, California September 12, 2012. REUTERS/Beck Diefenbach

Today: Apple (AAPL) will reportedly offer a cheaper iPhone as early as this year, as carriers consider wiping away subsidies that make the phones cheaper for consumers. Also: Stocks dip, but Alcoa kicks off earnings season with a beat, and CES action continues.

Report says Apple will introduce cheaper iPhone as carriers ponder subsidies

The Wall Street Journal reported Tuesday that Apple will introduce a cheaper version of its iconic smartphone, possibly in 2013, as the Cupertino tech giant continues to diversify its current product line with new offerings.

Rumors of a cut-rate iPhone have simmered for years, but have been unfounded so far, including a similar report from the Journal two years ago, as CNet pointed out. Apple has found enough demand for its high-end smartphone -- despite a starting price of $650 for the iPhone 5 -- to avoid such a move in the past, as most consumers purchase the phone through carriers that heavily subsidize the price, knocking it down to a more affordable $200 and up.

Mobile phone carriers may be moving away from offering those subsidies, however. T-Mobile announced last week it would make that move, at the same time it said it would begin selling the iPhone this year.


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"We think there is huge room for a challenger to change some of (the subsidy model), in a way that the larger players will not be able to or will choose not to respond to," T-Mobile CEO John Legere said in announcing the change last week.

Verizon CEO Lowell McAdam did respond to T-Mobile's challenge this week in an interview with Reuters, admitting it was a move his company -- the largest U.S. wireless carrier -- has considered; however, McAdam said the iPhone was a reason to avoid the change.

"It's very intriguing. Every carrier has thought about doing away with subsidies," he said, but "I don't think U.S. consumers are ready to buy an iPhone for $700."

Apple does offer earlier models at cheaper prices without subsidies, but an unlocked iPhone 4 -- two generations older than the newest model -- still starts at $450 purchased directly through Apple. While the Journal did not put a price tag on the cheaper iPhone model it wrote about Tuesday, it did say Apple is considering driving down the price by constructing the smartphone out of cheaper plastic and parts from earlier models.

Tuesday's report, which counts its sources as "people briefed on the matter," follows Apple's move to diversify its iPad line with a smaller tablet, the iPad Mini. Despite years of protestations against a smaller tablet, even from legendary cofounder Steve Jobs, the Cupertino company made the move and could find new demand for a product that has been very popular with consumers.

While a cheaper iPhone may not find the same level of anticipation in the United States as the iPad Mini, it could help continue growth for Apple in countries with less affluence than the U.S. and Western Europe, including India and China.

Apple has faced a prolonged stock slump into "bear market" territory since releasing the iPhone 5 last September, with shares falling from an all-time high of $705.07 on the day of the release to Tuesday's close of $525.31. Even with a 0.3 percent gain on Tuesday, the most valuable company in the world has seen its market capitalization decline 25.5 percent in less than four months, with analysts offering a host of different reasons.

Wall Street falls before Alcoa kicks off earnings season

Wall Street declined for the second consecutive day Tuesday as investors continued to show concern about the upcoming corporate earnings season. The traditional kickoff to earnings season did not give credence to the concerns, however, as aluminum company Alcoa beat analyst expectations on revenue while matching projections for profit Tuesday.

The three major U.S. indexes declined 0.2 percent to 0.4 percent Tuesday before Alcoa -- the first of the 30 components of the Dow Jones industrial average to announce earnings every quarter -- took the stage after the bell.

After severe doubts about earnings in the face of weakening global demand pulled stocks down in the third quarter of 2012, with the actual earnings typically beating or matching diminished expectations, the company's CEO sounded a more positive note about 2013.

"I'm more optimistic that 2013 is a year with upside potential compared to where we came from," Alcoa CEO Klaus Kleinfeld said Tuesday.

Tech stocks again dipped slightly, as the SV150 index of Silicon Valley's largest technology companies fell 0.2 percent. After big gains Monday, SolarCity fell back with a loss of 7.8 percent, while Hewlett-Packard (HPQ) gained 1.5 percent.

Focus on televisions continues at Consumer Electronics Show

Most interested tech observers' eyes were on Las Vegas instead of Wall Street, as the 2013 Consumer Electronics Show continued Tuesday. After Monday night's keynote address from Qualcomm CEO Paul Jacobs, the focus continued to be on televisions.

As TV manufacturers ignored the 3-D craze that they heralded just a couple short years ago at the same event, they continued to focus on "smart TVs," gesture controls and offering larger, clearer screens with new technology.

For continuously updated coverage of CES, go to www.siliconvalley.com/ces or check out our live blog.

Silicon Valley tech stocks

Up: SunPower (SPWRA), Jive, HP, Yahoo (YHOO), Palo Alto Networks, VMware, Gilead, Adobe (ADBE), Apple, Cisco

Down: SolarCity, Electronic Arts (ERTS), Zynga, NetApp, Nvidia, Juniper, Netflix (NFLX), Tesla, Splunk, LinkedIn, eBay (EBAY), Applied Materials, Facebook, Yelp, Symantec, Intuit (INTU), Intel (INTC), Workday

The tech-heavy Nasdaq composite index: Down 7, or 0.23 percent, to 3,091.81

The blue chip Dow Jones industrial average: Down 55.44, or 0.41 percent, to 13,328.85

And the widely watched Standard & Poor's 500 index: Down 4.74, or 0.32 percent, to 1,457.15

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.