“On Monday, September 23rd, Apple announced the company had sold more than nine million 5c and 5s handsets in the first weekend of sales. The surprisingly high unit sales number for Apple’s newest iPhone handsets caused analysts to rewrite and reconsider their narratives on Apple’s prospects for early success,” Robert Paul Leitao writes for Posts at Eventide.
“Apple’s decision to focus its new handset efforts on the top tiers of the smartphone market and forgo an aggressive effort to gain market share in emerging markets at this time is in line with Apple’s approach to the company’s primary product markets,” Leitao writes. “As the smartphone market continues to mature, Apple will address the hundreds of millions of potential customers in the world’s emerging markets. But that time isn’t now. Apple’s next big step will be a carrier agreement with China Mobile. China is Apple’s largest national market outside the United States and the only country other than the US to deliver 10% or more of Apple’s reported revenue total. Apple doesn’t currently have an iPhone revenue problem. Apple is first confronting the challenge of reduced operating income per revenue dollar due in large part to falling gross margin.”
“Adding China Mobile as an authorized iPhone carrier in the December quarter and ahead of the early 2014 Lunar New Year celebrations will ‘turbo charge’ unit sales. The carrier will be added after the substantial completion of the global rollout of the new iPhone 5 series handsets. At that time the production ramp for the new handsets will accommodate the addition of the world’s largest carrier. But Apple’s continuing focus is on the top tiers of the smartphone market,” Leitao writes. “By this time next year Apple may choose to address emerging markets with a lower-cost iPhone handset. But Apple’s biggest challenge at this time isn’t iPhone unit sales growth. The biggest challenge is the company’s increasing reliance on the iPhone line for revenue growth and aggregate gross margin performance. Management’s obsession with customer satisfaction and attractive gross margin puts emerging market initiatives on the proverbial back burner for now… Apple will first cement its position as the market leader in the high-end tiers of its current product markets.”
Read more in the full article here.