The problem has to do with perception and expectations. Wall Street determined that Apple needed to sell 55-million iPhones and the company only managed to sell 51-million iPhones. Another quarter of record numbers for Apple sent the stock into a dive. Why? The iPhone 5c is killing Apple.
Damned If You Do Or Don’t
For the past few years Wall Street analysts and tech pundits have argued that Apple needed a low price cheaper iPhone to compete with Android smartphones.
Apple responded with the plastic iPhone 5c which sells for $100 less than the flagship iPhone 5s.
How well did the iPhone 5c sell? Only Apple knows and Apple isn’t saying.
Traditionally, Apple’s newest iPhone takes over the top spot, and last year’s iPhone becomes the second fiddle; last year’s technology at a lower retail price.
That was the case with iPhone 3GS, iPhone 4, and iPhone 4s, but was not the case with iPhone 5. Instead of dropping the iPhone 5 to second place on the ladder, Apple dropped the iPhone 5 altogether, and introduced the iPhone 5c with a plastic shell.
Wall Street looked at the iPhone’s average selling price and average gross margins and determined the iPhone 5c to be a dud. The stock market reacted and sent AAPL into a free fall.
Wishing And Hoping
While the iPhone 5c is priced $100 less than the more popular iPhone 5s, only Apple knows how many of each were sold, and only Apple knows how much gross margin was made on each unit, and only Apple knows how many of each they expected to sell.
Everyone else had to guess how many iPhones Apple will sell, and when they guessed wrong, they blamed the iPhone 5c for the disparity. Even Apple CEO Tim Cook said the iPhone 5s sold better than expected.
Yet Wall Street’s analysts and tech pundits were certain that Apple needed the iPhone 5c to compete as a lower priced option in the company’s iPhone lineup. It should be apparent that Apple’s strategy for prosperity is solid. Customers do not want a cheap iPhone. By and large, customers want an iPhone with the latest and greatest technology at whatever the price.
We will know whether or not the iPhone 5c was a success or not when the iPhone 6 models become available. If there is a plastic iPhone 6c with the same features as the iPhone 5s, then Apple’s strategy of price and feature differentiation is good. I am rather certain Apple will expand the iPhone line and introduce at least one (and possibly two) models with larger screens in 2014.
An iPhone with a larger screen will further fragment the iPhone line, but don’t expect a larger iPhone with a plastic case any time soon.