Apple's Spring Event: Think Smaller and Cheaper

Apple's Spring Event took place on the 21st of March, 2016 at Apple's Infinite Loop campus. As widely expected, Apple unveiled a new iPhone and a new iPad. Here is my take on Apple's new product announcements which were probably the most accurately rumored in its history.A Smaller and Cheaper iPhoneBreaking its long tradition of announcing iPhones in its annual September Fall event, Apple announced the widely expected iPhone SE. The iPhone SE is Apple's follow up to its 4 inch iPhone 5S originally launched in 2013. Apple has continued to sell its 5S in many markets (30 million of them in 2015, no less). It made perfect sense to offer an affordable new 4 inch iPhone to emerging markets and for the 25% or so iPhone users in the US who are still using a 4 inch iPhone. With those numbers, the SE seems like a no-brainer.The 4 inch segment has been largely ignored by smartphone makers in favor of bigger and beefier devices that offer a larger screen and battery. But there was a sizable population of smaller screen users who have been stubbornly holding on to their older devices in the hope that Apple will someday unveil a follow-up to the 5S. Their prayers were answered today.The iPhone SE is pretty much a 6S in a 5S body and will sell for $399. The price is the critical point of interest here. Yes, Apple made the SE to tap into the 25% waiting to upgrade. But it is also trying to build a compelling smartphone for India, China, Brazil and other emerging markets. The SE is a phone that can compete with similar priced Android offerings that have taken the bulk of the market. For many, this could also be their first iPhone and sets up the 6S and 6S Plus as its aspirational siblings. The SE is also Apple's preemptive move on a smartphone market that is starting to stagnate. It will sell very well and bolster Apple's traditionally slow Q3 before the monster Q4 numbers from the iPhone 7.A Smaller and Cheaper iPad ProApple's iPad sales declines are well documented. Apple has been experimenting with different SKUs and pricing to get the market jumpstarted. Last Fall, Apple announced a tablet to complete with PCs- a 12 inch iPad Pro with a $99 stylus and $169 smart keyboard. In the Spring Event, Apple brought the stylus and keyboard support to a new 9.7 inch iPad Pro which will be a premium version of the iPad Air 2 that was cost reduced to $399.With the addition of the 9.7" iPad Pro, Apple now offers two PC competing tablets bearing the Pro moniker and continues to sell the iPad Mini and iPad Air line for consumer grade requirements. This could work out for Apple in two ways- it can convince iPad Air users to pony up more to upgrade to the 9.7 inch iPad Pro. It could also convince more people to consider buying the margin rich accessories like the keyboard and stylus. All this makes the iPad Pro a smart move. But if people are not compelled to upgrade to the beefier product, then folks will continue to stay with the $100 cheaper iPad Air and reduce the ASP on the iPad line. Q3 results will paint an interesting picture of this.A Cheaper Apple Watch SportApple also dropped the price of the entry level Apple Watch Sport to $299. The Apple Watch has been a fascinating case study for the past year. It launched to tremendous anticipation and has since underperformed in my opinion. Never have I seen an Apple product so regularly and so significantly discounted in its first year of existence. From October onwards, multiple retailers were offering the device for $100 off. This discounting continued through the new year and was widespread.I still think the wearable space is going to be huge and Apple is best poised to capitalize on its iOS install base and be a dominant player with the Apple Watch. It is just that the first generation product has not lived up to expectations- both from a customer and a sales standpoint. I dont think the $50 drop will do much to the sales of the product. I do expect a refreshed Watch 2 in Fall that addresses some of the shortcomings of the first generation product and do much better.Parting ThoughtsOverall, Apple did everything it needed to do to retain its dominance in the smartphone space and to revive flagging iPad sales. Apple's third quarter results will reflect the impact of the new product launches while we gear up for the bigger event in Fall that brings us iPhone 7 and the next generation Apple Watch.