iPhone 6 rumor rollup for the week ending August 23

Putting price(s) on the cheap Apple iPhone, the Golden Age dawns

With the Next iPhone(s) announcement barely three weeks away, the iOSphere hungered and thirsted for data, for facts, for truth about iPhone 6, iPhone 5C, and iPhone 5S.

Instead, it got five different definitions of what “cheap” means for the expected plastic iPhone 5C.

And it got gold.

You read it here second.

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“Personally, I don’t give a hoot about a gold iPhone. Mashable will continue to report on gold iPhone rumors, since our readers seem to care. I will not be making a big deal of it otherwise. Except for writing this post. Which is really about how I don’t care about the gold iPhone. Is that clear?”
Lance Ulanoff, editor in chief, Mashable.com, on why he, and we, don’t need no stinkin’ colors, even though his dumb readers seem to believe otherwise.

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iPhone 5C will be priced at, uh, less than the not-5C

If you’re already convinced that Apple is launching a cheap or low cost or less expensive iPhone, usually now called iPhone 5C, then the only question left, really, is: what price Apple will slap on it?

[IPHONEYS: The iPhone 6 & iPhone 5 edition]

This week the iOSphere was rife with answers. And when you add them all up, the answer is…that no one knows. Check our own coverage: Pricing a low-cost iPhone: How 'cheap' is cheap?

At KnowYourMobile, Clare Hopping assured readers that iPhone 5C will be priced at full retail between $400 and $500, based on speculation by KGI Securities analyst Ming-Chi Kuo.

Currently, the prices for iPhone 5 at Apple.com for an unlocked iPhone 5 are $649 for 16GB, $749 for 32GB, and $849 for 64GB. Typically, with a new iPhone, Currently, the unlocked iPhone 4S, in keeping with Apple’s practice, sells for $549.

Kuo also puts forward the novel theory that the plastic-bodied iPhone 5C will replace the aluminum bodied iPhone 5, which will no longer be sold. “We’ve learned that the iPhone 5 line will be terminated from 4Q13, while the iPhone 4S line will carry on,” Kuo says, according to KnowYourMobile. “From this, we infer that iPhone 5C is launched to replace iPhone 5.”

Meaning “the 5C model will be positioned as midrange,” according to Kuo. His breakdown of pricing: iPhone 5S, $600 to $700; iPhone 5C, $400 to $500; iPhone 4S, $300 to $400.

Another pricing option, suggested by John Gruber at his DaringFireball blog last week, is a lower-cost iPhone that essentially is based on adding a cellular radio to the iPod touch. The touch starts at $229 for the 16GB model, which has only a low-end video camera; and $299 for 32GB and $399 for 64GB, both of which have a 5 megapixel main camera. The cellular radio would add something to those prices, but Apple might be able to offer a plastic-bodied phone starting under or just over $300.

Another analyst, Citi Research’s Glen Yeung, offered his own pricing speculation, according to Brooke Crother’s CNET post summarizing Yeung’s conclusions. “Based on this assumption [that the iPhone 5C costs about $50 less to build], we estimate that the wholesale selling price of iPhone 5C will be $390 and the retail selling price will be $450.”

So there you have it. The iPhone 5C will be $300, $360, $400, $450, or $500. Somewhere in there for sure.

In a post at TechPinions, Ben Bajarin argues that an “entry level iPhone,” is or ought to be a “strategic move to acquire customers who seek value but not at premium price points and [to] get them into Apple’s ecosystem.”

In other words, Apple wants to attract those customers who are willing to spend money on apps, music, and other services that it offers to iOS users. The “key point for Apple and an entry-level priced iPhone is how low does it need to be to still acquire a customer who will spend money and add value to the ecosystem,” Bajarin says.

Evidence for Bajarin’s argument comes from an assessment by Morgan Stanley’s Katy Huberty, as reported by Apple 2.0 blogger Philip Elmer-DeWitt, at Fortune.

In a note to investors, Huberty outlined the results of proprietary survey of 2,000 Chinese mobile phone owners. Perhaps the most intriguing result is this: “Chinese consumers consider US$486 to be an acceptable price range for the lower-priced iPhone”; that’s 22% higher than Huberty’s own estimate of Apple’s final price for the 5C. And needless to say far higher than what most advocates of a “cheap” iPhone had in mind. By comparison, “the acceptable [to these buyers] price ranges for Samsung [Galaxy] S4 Mini and HTC One Mini were lower than the expected price.”

Those results seem to suggest that a significant number of potential Chinese buyers are willing to pay significantly more for a lower-end iPhone than for comparable Android phones, because of the iPhone’s higher perceived value.

iPhone 5S will be available in a “gold” color

There will be gold.

Of course it’s not actually gold, as in the 24-carat kind. It’s a gold color. Or goldish, anyway. There is some confusion on that score. Would Apple really create a gleaming yellow slab that looks like something worn on “Real Housewives of Orange County?”

The Consensus iOSphere Hivemind currently is that “champagne” gold is much more…Appleish.

“Yes, there will be a gold iPhone,” announced MG Siegler at TechCrunch.

“At first, I couldn’t believe Apple would break from the tradition of offering the simple choice: black and white (or “slate” and “silver” if you prefer for the iPhone 5) for their flagship device,” he confides. “Gold simply seemed too gaudy, perhaps even tacky. But a few compelling arguments countered my disbelief. And now, upon checking, sure enough, there will be gold.”

There will be gold.

IMore’s Rene Ritchie also backed away from gaudiness, swapping a gaudy mockup for the much more restrained champagne version.

“According to our own Ally Kazmucha, who's no stranger to the process, gold is among the easiest colors to anodize onto an iPhone,” Ritchie said. “It involves simple chemical reaction, with the possible addition of dye depending on the exact color they want to produce. (True black, conversely, is the hardest, and takes the most time, which is likely why we currently have "slate" instead.)”

But what’s the motivation, Ritchie wonders?

“Given how popular gold is as an aftermarket option for color-treatments, and how many gold cases there are - including but certainly not limited to the Asian markets - it could simply be the decision to offer supply where there's demand,” he concludes.

Or Apple could be pandering to another audience entirely. “Given the ignorant boring comments Apple had to endure after introducing the completely re-built iPhone 5 last year, gold would give the market the superficial appearance of change they seem to crave,” Ritchie said.

Later in the week, TheVerge, among others, posted “leaked” photos of The Gold iPhone, pulled from their original posting at a Japanese-language website.

“Photos purporting to show the phone have trickled out online, though the images published today on Japan's ASCII website look far more convincing than earlier leaks,” explained TheVerge’s Amar Toor, oblivious to the fact that we live in the Adobe Photoshop Age, or to online workshops on “How to Draw a Photorealistic iPhone 4 in Photoshop,” which have far more convincing results.

And still more photos, a veritable tsunami of images, appeared on the eponymous website, SonnyDickson.com, named for a Melbourne, Australian who is trying to make a business of posting photos of Apple prototypes. His latest batch shows rear housings, screens and various unnamed parts of both The Gold iPhone 5S side by side with a robin’s-egg-blue plastic iPhone 5C.

Perhaps predictably, the blizzard of posts and pictures sparked a reaction. Mashable’s editor-in-chief, Lance Ulanoff, let it be known that “This fascination with iPhone colors confounds me.”

It’s “irrational,” he says. “[I]t’s only a stinkin’ color.”

And we don’t need no stinkin’ colors.

“It’s a fashion statement….If that’s the case, what does a gold iPhone 5S say about you? That’s you’re classy? Fun? Rich? Perhaps it’ll also say 'you’re lucky,' since the gold iPhone 5S will probably be murder to get ahold of for its first few months.”

“Call me old school, but I like to think about what’s inside the phone,” Ulanoff says. Judge a smartphone not by its outward appearance, or at least by its stinkin’ color.

“Personally, I don’t give a hoot about a gold iPhone,” Ulanoff hoots. “Mashable will continue to report on gold iPhone rumors, since our readers seem to care.” The bane of online editors-in-chief everywhere: being forced to cover those things that irrational, color-crazed, fashion-obsessed, superficial, fickle, and let’s face it stupid readers demand to know about.

“I will not be making a big deal of it otherwise,” he vows. “Except for writing this post. Which is really about how I don’t care about the gold iPhone. Is that clear?”

[Ulanoff simply doesn’t appreciate the mystical hold of color. As is clear in the 2010 satire, “iMoby: the hunt for the great white iPhone,” by Herman Cox.]

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Microsoft Sued Over 'Misleading' Surface RT Statements

Microsoft has been hit with a class-action suit that accuses Redmond of hiding poor Surface RT sales, which resulted in huge losses for company shareholders.

Microsoft issued "materially false and misleading financial statements and financial disclosures for the quarter ended March 31, 2013," according to the suit, which was filed in Massachusetts district court. "These false and misleading statements materially misrepresented the true financial effect that Surface RT was then having on the company's operations."

Gail Fialkov, a Microsoft stock holder, is listed as the sole plaintiff at this point, but the law firm of Robbins Geller Rudman & Dowd is encouraging others to join the case in the next 59 days.

A Microsoft spokeswoman declined to comment.

The Surface RT tablet debuted in October alongside Windows 8. Last month, Microsoft revealed that Surface revenue was $853 million between Oct. 2012 and June 2013. That might not seem too shabby, but Microsoft recently incurred a $900 million charge for Surface RT inventory adjustments, and boosted advertising costs for Windows 8 and the Surface by $898 million.

The lawsuit, however, said Microsoft knew that its Surface RT was struggling months before that disclosure.

"Microsoft's foray into the tablet market was an unmitigated disaster, which left it with a large accumulation of excess, over-valued Surface RT inventory," the suit said. But Redmond delayed "Surface RT's day of reckoning" until June, which "eviscerated about $34 billion of the company's market value," according to the suit.

The lawsuit seeks to "recover damages on behalf of all purchasers of Microsoft common stock during the Class Period" between April 18, 2013 and July 18.

In recent months, Microsoft has dropped the price of its Surface tablets, shaving hundreds off the price of the RT version and $100 off the Surface Pro tablet.

Asus recently dropped support for Windows RT tablets, though Nvidia isn't quite ready to throw in the towel.

For more, see PCMag's review of the Microsoft Surface with Windows RT and the Microsoft Surface Windows 8 Pro.

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Pricing a low-cost iPhone: How 'cheap' is cheap?

How, and why, Apple may price an “iPhone 5C”

Though still unsubstantiated, a low-cost iPhone is now widely seen as a possible product announcement in early September, along with a new high-end phone. And it’s finally possible to create a coherent explanation of why such a move makes sense for Apple in 2013.

Analyses by a range of Apple watchers and others now paint a picture of a lower-cost iPhone, often dubbed “iPhone C,” selling for under $400, and as low as $300. It would have full support for the soon-to-be-released iOS 7, but lower-end hardware and features compared to the current top of the line iPhone 5.

[Background: 5 years ago they said iPhone would flop. Now?]

Such an average selling price would put the low-cost iPhone close to the range of Android phones globally, but not at the very bottom of their price range. The price paid by consumers could be even lower through promotions, special offers, and by offering it with a two-year mobile contract.

The new phone hardware features would be contrasted with the expected high-end “iPhone 5S,” the 2013 iPhone model, which presumably will have the same starting retail price as the iPhone 5: $649 for the 16-Gbyte model. The 5S could have a more powerful processor, improved camera, and possibly a fingerprint scanner integrated with the phone’s home button, all setting it apart from the low-cost phone, and from the existing iPhone 5. By contrast, iPhone 5C can realize cost savings by using a plastic instead of metal body, possibly using the iPhone 5’s existing A6 processor (or a tweaked version of it), less memory, and having only a front-facing camera. Yet it would give the “full iPhone experience” by virtue of supporting all of iOS and its attendant cloud services.

Between these two, Apple can then discount the iPhone 5, offering just the 16-Gbyte model at $549 full retail, or lower via promotions and two-year contracts.

As Apple watcher John Gruber argues, Apple’s model for the low-cost iPhone could be the iPod Touch, which starts at $229 for the 16-Gbyte model, introduced earlier this year without the rear-facing 5 megapixel camera still found on the 32- and 64-Gbyte Touch models (but it retains a 1.2 megapixel at the front for FaceTime video chatting, and for video and still photos.

“Take an iPod Touch and add cellular networking components. Boom, there’s your lower-priced iPhone,” he writes.

Apple charges $130 to add a cellular radio to the Wi-Fi-only iPad. At that price, a cellular-equipped 32-Gbyte iPod Touch would be $429, or $359 for the 16-Gbyte Touch. But Gruber believes the $130 is a premium and the actual cost of the radio is much less.

“All told, I think Apple could build and sell an iPod Touch-caliber iPhone 5C for $399, possibly as low as $349,” Gruber concludes.

That’s a lower price point than suggested in this analysis – “How will iPhones 5S and 5C be priced?” -- by Asymco’s Horace Dediu, an independent analyst who covers the mobile market.

He drew on Apple’s data on average selling price for both iPhone and iPad models, made a number of assumptions about the mix of models, and compared how the ASP tracked over time for both product lines. Here’s the diagram.

As he notes, the iPad 3 was replaced with a “’bracketed’ portfolio of the higher-priced iPad 4 and the lower-priced iPad mini. Note also that the mini reflects similar pricing to the legacy iPad 2.”

Based on this iPad bracketing, Dediu assumes that Apple will do the same with the upcoming 5S and 5C. “This means that the 5C will take up the [average selling price] trajectory of the 4S while the 5S will take up the upper bracket around $650,” he concludes.

The end result: 5S starts in the $650 range at the high end, the discounted 5 at about $550, and the low-end 5C at something under $500, perhaps close to $450.

The final price for the low-end iPhone will hinge in part on the savings Apple can achieve in hardware, and in part on how much lower a profit margin it will accept for the cheaper handset.

Apple may be willing to quite aggressive with regard to margin and price for the 5C, according to an analysis by Benedict Evans, who writes about mobile technology for, among other outlets, Enders Analysis, a subscription research service. In his own blog, Evans posted an excerpt, “Defending iOS with cheap iPhones,” from his more extensive Enders analysis.

Evans argues that the key change in the competitive dynamic between Android and iOS is not mainly the larger number of Android devices sold compared to iOS devices – raw market share. What’s really important is that Android users are finally starting to do more with their Android smartphones.

“Android has had a larger installed base than iOS since mid-2011, but [user] engagement remained far behind,” Evans writes. “Until well into 2012 publishers and developers tended to see app download rates on Android of a half to a quarter of what they experienced on iOS, in absolute terms, while payment and purchase rates were a quarter or lower of iOS rates.”

That has now changed, he says, with engagement measures rising for Android. “Hence, by the first half of 2013 Android cumulative downloads caught up with iOS (both at around 50bn), and both now see a run-rate of something around five apps downloaded per active device per month.”

“If total Android engagement moves decisively above iOS, the fact that iOS will remain big will be beside the point,” Evans writes. “This is a major strategic threat for Apple. A key selling point for the iPhone (though not the only one) is that the best apps are on iPhone and are on iPhone first. If that does change then the virtuous circle of ‘best apps therefore best users therefore best apps’ will start to unwind and the wide array of Android devices at every price point will be much more likely to erode the iPhone base.”

A successful low-priced iPhone can block that erosion. “A new, cheaper, high-volume iPhone would have the potential to mitigate or even reverse this trend,” according to Evans. “Clearly, like current low-end Android, [iPhone 5C] would sell to a demographic with a lower average engagement and purchase rate and so the average iOS rates would drop. However, it would mean that iOS’s reach would expand significantly at the expense of Android. How would a $200 or $300 iPhone sell? Easily double digit millions, possible up to 50m units a quarter.”

Clearly that projection would change if the iPhone 5C was priced higher. If Evans is right, the iPhone 5C is intended to counter this “strategic threat,” and not simply add incremental revenue and profits.

“This means that the financial value of a cheaper iPhone cannot be considered in isolation,” he concludes. “A large part of its purpose is to defend sales of the high-end model.”

Many had expected that the iPad mini would be priced under $300. Instead, Apple slapped on a $329 price tag. It’s possible the low-ball estimates for the low-cost iPhone will also prove too low. Evans himself says Android phones average $250-300 globally versus $600 for the iPhone. A low-cost iPhone for around $350 may achieve Apple’s goals.

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Trend Micro: Hacker threats to water supplies are real

A security researcher has shown that hackers, including an infamous group from China, are trying to break into the control systems tied to water supplies in the U.S. and other countries.

Last December, a decoy water control system disguised as belonging to a U.S. municipality, attracted the attention of a hacking group tied to the Chinese military, according to Trend Micro researcher Kyle Wilhoit. A dozen similar traps set up in eight countries lured a total of 74 attacks between March and June of this year.

Wilhoit's work, presented last week at the Black Hat conference in Las Vegas, is important because it helps build awareness that the threat of a cyberattack against critical infrastructure is real, security experts said Tuesday.

"What Kyle is saying is really neat and important," said Joe Weiss, a security expert and consultant in industrial control systems (ICS). "What he's saying is that when people see what they think is a real control system, they're going to try and go after it. That's a scary thought."

Indeed, people behind four of the attacks tinkered with the special communication protocol used to control industrial hardware. While their motivation is unknown, the attackers had taken a path that could be used to destroy pumps and filtration systems or whole facilities.

To sabotage specific systems, attackers would need design documents. Wilhoit's research showed that there are hackers willing to destroy without knowing the exact consequences, according to Andrew Ginter, vice president of industrial security at Waterfall Security. "If you just start throwing random numbers into (control systems), the world is going to change," said Ginter, who studied Wilhoit's research. "Things are going to happen. You don't know what. It's a random type of sabotage."

The Chinese hacking group, known as APT1, is the same team that security vendor Mandiant had tied to China's People's Liberation Army. The group, also called the Comment Crew, is focused on stealing design information, not sabotage, experts said.

Because sabotage would open itself up to retaliation and possibly war, China is unlikely to mount that type of attack. Those kinds of restraints do not exist for terrorists, however.

While Wilhoit did not identify any terrorist groups, his research did show that the attackers are interested in small utilities. He created eight honeypots, each masked by Web-based login and configuration screens created to look as if they belonged to a local water plant. The decoys were set up in Australia, Brazil, China, Ireland, Japan, Russia, Singapore and the U.S.

Attackers will often start with smaller targets to test software tools and prepare for assaults on larger facilities, Weiss said. "The perception is that they'll have less monitoring, less experience and less of everything else (in security) than the big guys," he said.

While Wilhoit's honeypots showed that a threat exists, they did not reflect a real-world target. Control systems are typically not as easy to access through the Internet, particularly in larger utilities.

Buried within a company's infrastructure, a control system would not be accessed without first penetrating a company's defensive perimeter and then finding the IP address of the hosting computer, said Eric Cosman, vice president of standards and practices for the International Society of Automation.

None of the attackers in Wilhoit's research showed a high level of sophistication, which wasn't surprising. That's because hackers typically use only the technology needed to succeed, nothing more.

"(Advanced attackers) are known to have many cards in their pockets, and they pull out the cheapest card first," Ginter said. "If they can win the game with a two of hearts, then that's the card they'll play."

Wilhoit's research is seen as one more step toward building public awareness of the threats to critical infrastructure. In addition, such reports are expected to have an impact on regulators.

"You're going to have public utilities commissions reading this report and asking the utilities questions," Ginter said. "In a sense, this is a good thing. The awareness level needs to go up."

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U.S. workers found to outperform offshore staff

Interest in contracting for services in the States is 'coming back a little bit,' said research company's chief

U.S.-based workers show more initiative, are more innovative and more understanding of the business than offshore workers, a new study that looks on sourcing services in the U.S has found.

These qualities are helping to boost use of domestic IT services, especially as companies move to cloud-based services, said HfS Research, an IT services research firm and consultancy.

Domestic workers also work harder than offshore staff, but not by much. The difference was 83% to 79% when responders were asked to assign attributes to their U.S.-based and non-U.S.-based staff, said the report, which was based on a survey of 235 enterprise buyers of $1 billion or more in revenue.

In most areas associated with productivity, U.S.-based staff exceeded offshore staff by wide margins in this survey. When it came to cultural and communication skills, U.S. based staff was rated 82% versus 33% for offshore staff. In taking initiative, it was 77% to 40%, and for being innovative, it was 77% to 45%.

"U.S.-based workers more often exhibit skills deemed most relevant to productivity in today's business environment," the HfS Research report said.

When the survey looked at specific IT services functions, the findings narrowed some, but with U.S.-based workers maintaining leads nonetheless. Survey takers were asked, for instance, how satisfied they were with application development work, 77% said they very satisfied and satisfied with U.S.-based staff, versus 61% for offshore. For IT help desk, it was 71% to 54%, in favor of U.S. workers.

There are a number of things going on influencing these trends. The cost of doing work overseas is rising with wages, and while U.S. wages pay more the differences aren't what they used to be, said Phil Fersht, CEO of HfS Research.

As more work is shifted to cloud-based, it means business knowledge is needed as well as technology skills, said Fersht.

These trends are strengthening the demand for U.S. domestic services, as well as prompting overseas firms to increase U.S.-based staff.

"It's coming back a little bit," said Fersht of demand for U.S.-based IT services resources. "I wouldn't say there is a heavy swing toward using U.S. resources, but it's certainly there."

He said the trend is being helped by the visa issue in the U.S. Indeed, U.S. domestic companies have been urging Congress to tighten the rules on H-1B use.

As enterprises move into the cloud and use services such as Workday, for example, the skill requirements are "more of a business transformational skill," Fersht, "so there is a shift going on."

The survey found that 25% of all respondents are already tapping into U.S. based services delivery.

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