“The higher-than-expected price of Apple Inc’s new cheaper iPhone eased worries about gross margins, while arousing concerns the company was not being aggressive enough in its fight against Google Inc’s market-dominating Android operating system,” Eileen Anupa Soreng, Neha Alawadhi and Saqib Ahmed report for Reuters. “‘We worry that Apple’s inability/unwillingness to come out with a low-priced offering for emerging markets nearly ensures that the company will continue to be an overall share loser in the smartphone market until it choses to address the low end,’ Sanford C. Bernstein analysts said in a note. Still, Bernstein maintained its “outperform” rating on Apple’s stock, saying that it expected the new iPhones to have little impact on gross margins.”
Soreng, Alawadhi and Ahmed report, “‘Rather than offer attractive pricing for consumers, and move the iPhone 5c into a new and growing price segment, Apple retained a premium pricing strategy in targeting the $400-800 smartphone segment,’ Credit Suisse analyst Kulbinder Garcha said in a note. Garcha said that Apple’s share of the smartphone market, where it faces intense competition from Samsung Electronics Co Ltd, would likely fall to 15.5 percent this year and 13.1 next year from 18.1 percent last year.”
“Saying the 5C was “nobody’s low-margin phone”, Cowen and Company analyst Timothy Arcuri said Apple’s new relationships with Japan’s NTT DoCoMo Inc and China Mobile Ltd supported the view that 2014 Street estimates for Apple earnings looked too low. Arcuri said gross margins for the 5C appeared to be as high as the mid 50 percent area,” Soreng, Alawadhi and Ahmed report. “Lazard Capital Markets raised its share price target to $570 from $500, noting a ‘best in class user experience… With escalating investor focus on Apple’s diminishing product differentiation, slowing growth and margin compression, we think it’s time to revisit what makes Apple unique,’ Lazard analyst Edward Parker wrote in a note. ‘We propose that Apple is a ‘storage’ company, not only levered to data creation but instrumental in driving data creation in ways its competitors are not,’ he said.”
Read more in the full article here.
MacDailyNews Take: By SteveJack
Many analysts also called for Apple to invest their resources in creating a cheap netbook.
Those “analysts” didn’t understand Apple then and they don’t understand Apple now.
Apple does not exist in order to pile up meaningless market share. Apple exists to delight customers.
When you do that, you end up with the best customers – the cream of the crop – the type of discerning customer who will pay for apps and content, not constantly expect coupons, BOGOF deals, and other assorted freebies.
The also-rans of the world can have as many of those type of “customers” as they can amass and they can swim in their meaningless, bottom-of-the-barrel “market share” until they drown.
SteveJack is a long-time Macintosh user, former web designer, multimedia producer and a regular contributor to the MacDailyNews Opinion section.
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