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Cheaper iPhone could, paradoxically, increase Apple’s margins

Credit: Ferry Passchier

Credit: Ferry Passchier

While the markets may worry about the effect of cheaper products on Apple’s still-enviable margins, those concerns may be misplaced in the case of a low-cost iPhone, reports¬†Fortune.

Not to fear, writes Morgan Stanley’s Katy Huberty in a note to clients Monday.¬†According to her calculations, a lower-priced iPhone should — paradoxically — raise those margins.

The way she sees it, if Apple lowers the cost of owning an iPhone, more people will buy them. And because the profit margins on even a lower-cost iPhone are so much higher than the margins on Apple’s other products, the net effect will be to lift the company’s gross margin …¬†