Cook tacitly admits Apple blew it with iPhone 5c

“Apple sold a record 51 million iPhones in the fourth quarter of 2013, but acknowledged it had underestimated the appeal of the flagship iPhone 5S, making some analysts question the new two-model strategy and arguing that Apple had erred in pricing the iPhone 5C,” Gregg Keizer reports for Computerworld. “‘Cook signaled a couple of things on the call,’ said Ezra Gottheil, an analyst with Technology Business Research, in an interview after Apple wrapped up its conference call with Wall Street on Monday. ‘He essentially said, ‘Oops, the 5C was a mistake.””

“During that call, CEO Tim Cook acknowledged, albeit in carefully-couched terms, that the mix of iPhones sold had included a larger percentage of the top-dollar iPhone 5S than Apple had anticipated,” Keizer reports. “‘It was the first time we’d ever run that particular play before, and demand percentage turned out to be different than we thought. We sold more 5S than we expected,’ Cook said, tacitly admitting that the other model, the lower-priced iPhone 5C, under-performed.”

“In September, Apple unveiled two new iPhones for the first time, the top-end iPhone 5S and the middle-tier 5C. The latter was a repackaged iPhone 5 in a colorful plastic case that was priced $100 less than the 5S,” Keizer reports. “While Apple never splits out iPhone sales by model, the jump in the ASP (average selling price) strongly hints that the mix tilted toward the iPhone 5S. The smartphone’s ASP jumped from $577 in 2013’s third quarter to $637 in the fourth and nearly matched Q4 2012’s $642. While that was good for Apple’s bottom line — it booked $13.1 billion in net profit, equal to what it recorded in the same quarter the year prior — it made some wonder about the iPhone 5C strategy… ‘I think that the next time they bring up a less-expensive iPhone, they’ll use a bigger price separation between that and the newest,’ said Gottheil.”

Read more in the full article here.

MacDailyNews Take: That Apple didn’t see this obvious issue with the iPhone 5c pricing/feature set indicates there may be a issue with Apple management’s vision.

The iPhone 5s is separated from iPhone 5c in many ways: Touch ID fingerprint recognition, materials quality, the camera’s larger 8MP sensor with 1.5µ pixels, ƒ/2.2 aperture, dual LED True Tone flash, Burst mode, slo-mo video, improved video stabilization, a 64GB option, and, of course, the A7 chip with 64-bit architecture and M7 motion coprocessor.

Unless you’re allergic to aluminum and/or fine craftsmanship, there is no reason why anyone who can afford an iPhone would not buy an iPhone 5s (unless you’re buying a first iPhone for your son or daughter). Even then, if you want a brightly colored polycarbonate phone or some feeling of extra protection from drops and dings, slap a plastic case on the iPhone 5s. There, it almost weighs as much as the 5c now.

The bulk of any smartphone cost is the data, not the phone.

Am I missing something or is the price difference between the iPhone 5s and the iPhone 5c too insignificant to ever consider opting for the 5c?

Why the hell would anyone buy an iPhone 5c instead of an iPhone 5s?

It seems to me that Apple is using the iPhone 5c as a tool to push buyers to the 5s (well, at least those buyers who can grasp a simple value equation).

Once Apple gets the customer to the websites or into the stores and the prospective buyer can see and/or hold both phones and learn that they’re only separated by a mere $100, my guess is that Apple figures they’ll have plenty of upsales occurring. Upsales that will boost Apple’s iPhone margins nicely.SteveJack, “Why would anyone buy an iPhone 5c instead of an iPhone 5s?” – September 10, 2013 (the day both iPhones were revealed)

Related articles:
Was iPhone 5c the cause of Apple’s woes? – January 28, 2014
MacDailyNews presents live notes from Apple’s Q114 Conference Call – January 27, 2014
Apple beats Street with record quarterly revenue, record iPhone and iPad unit sales – January 27, 2014
Why would anyone buy an iPhone 5c instead of an iPhone 5s? – September 10, 2013

69 Comments

    1. The problem is that the iPhone 5C wasn’t a “cheaper phone.”
      The price difference between the 5S and the 5C was trivial.
      Given that small price difference, who wants the lesser phone?

      1. That’s right!! The problem was the iPhone 5C was not really a cheaper choice.

        Plus, to round the error up, not slashing the price of the iPhone 5C in half right after the first month of sales, when they should have realized people would not fall for it with only $100 away from the best iPhone. That was obvious.

        Listen Apple, you guys could still do that now…. Slash the price of the iPhone 5C and do it fast. Or stop making it.

      2. I agree that $100 was not enough of a price delta. But calling it “trivial” is a bit of an exaggeration. Many people called for a $200 price delta…would that have been enough? $250?

        Most consumers focus on the purchase price, not the total cost of ownership. For those people, $100 to $200 difference in price is meaningful, even though we consider the 5s to be the obvious choice given the small TCO delta.

      1. Exactly. I think Apple needs to go with the 5c design for the iPod and make iPods as low cost as possible.
        A $100 cheaper iPod or iPad running iOS 7 with no telco fees would be a highly desirable.
        A $100 cheaper iDevice with typical monthly telco fees is not a big deal.

    2. This article is like analyzing the response to that common job interview question, “What is your biggest weakness?” And you, the interviewee, are supposed to describe something that is actually a strength. For example, “My attention-to-detail sometimes annoys co-workers.”

      So here, Tim Cook is saying that the most popular iPhone was MORE popular than expected, NOT that the iPhone 5c was a “mistake.” The biggest “problem” for Apple last quarter was that Apple’s most popular product was more popular than we anticipated. WHAT A DISASTER! 🙂

      It’s actually a smart move to better distinguish each iPhone choice in the lineup. If Apple followed the previous practice, this year’s lineup would have been, iPhone 5s (high), iPhone 5 (mid), and iPhone 4s (low). But that would have made the physical appearance of the top two choices nearly identical. So, instead, Apple put last year’s iPhone 5 technology into a colorful plastic case. It’s not actually a “new phone,” but a better way of continuing to sell last year’s top phone as a lower-priced iPhone choice.

      And that choice DOES appeal to some customers, more than the ultra-serious iPhone 5s. I see them quite often when riding public transit, much more than a product that should be considered a “mistake.” But if the iPhone 5s is more popular than expected, then that’s Tim Cook’s version saying that a strength was a “weakness.” The iPhone 5c did a BETTER job of distinguishing “mid” from “high.”

      Here’s what’s going to happen with next year’s line-up:

      iPhone 6 (a “new look” iPhone) at the top
      iPhone 5s (the current top model) in the middle
      iPhone 5c (the current colorful choice) at the low end

      And the following year (similar to this year):

      iPhone 6s (a tech specs upgrade) at the top
      iPhone 6c (colorful plastic version of iPhone 6) in the middle
      iPhone 5s (in its third year) at the low end

      And so on…

    3. Yup. The jaw dropping idiocy that comes from the financial press that thinks it can cover technology just keeps streaming like hissing piss from a collection of “analysts” and “journalists” that manage to lower the bar every quarter.

  1. So what if the iPhone 5C wasn’t as popular as the iPhone 5S? It is still a quality piece of tech compared to many a Fragmandroid dumbphone! The iPhone 5C is simply a “budget” phone for the kids, similar to the iPod Mini of 2004. Tim Cook doesn’t seem very confident in the way he is running Apple. Maybe he is paying too much attention to the FUD Wall Street is spreading about his company, which is understandable, but if I were in his position, I’d ignore it, and just carry on.

    1. “The iPhone 5C is simply a “budget” phone for the kids,”

      I guess some people believe Apple can get away with calling $550 – $650 phone, a budget phone. Of course, Apple never made such a claim, only those defending bad marketing. Also, kids aren’t consumers, their parents are.

    1. MDN has been constructively critical of Apple at times and so have I concerning the particularly pathetic iOS7.

      Your point well taken.

      Regarding Apple Fanboy emeritus Derek Currie, don’t bother if you are expecting a constructive exchange.

  2. I’m not totally sold on the idea of 5c being the culprit. However, my 13 year old opted for a free 4s over the 5c. Secondly at launch I wanted a gold phone, but had to settle for space grey, which I am quite happy with. Most people I talked to thought the the colors were girlish and the white one was the only option for a man. It seems that it was definitely the most popular among men. Also Samsung was giving away free galaxy 4’s over the holidays and still got licked.

  3. My thirtysomething daughter bought a 5C and loves it. Frankly I wish 2013 models were more about the 5S and a larger model. The time has come for larger iPhones, like it or not. I am sure Apple will maintain the current size for those who want the same form going forward, I suspect many 4″ size diehards knees will go weak when they hold a larger iPhone in their hands. Maybe it’s that they don’t trust themselves so it’s better if Apple doesn’t offer it so they’re not tempted?

  4. A possibility. The nature of the buying public will always have sector who just don’t think they can afford the more expensive phone whether even if it make sense compared to the actual cost when the service contract is included. (Instead of a 50% savings it becomes more like a 5-10% savings)
    My thought is that many of the 5c crowd could possibly would have been Android buyers but when they saw they could get a latest build iPhone, they opted for that instead. (Being able to have the latest build of a phone could swing buyers who would have passed up a last generation iPhone)

  5. MDN, successful numbers from a tech company in this economy? That is a failure? How do you all rate your financial success, those that decide this is failure, please reflect on your own decisions. You must be so depressed.
    I wish I had such a failure to grow the current and future income of my company.

  6. So, admitting that one model was more successfully than expected means “tacitly admitting” that the other one was a mistake?
    Wow!! this guy decipher skills are awesome!
    not even NSA could became to that conclusion from what Tim said.

  7. “Why the hell would anyone buy an iPhone 5c instead of an iPhone 5s?”

    It’s simple. Because to some people, that $100 dollar difference is the difference between getting and iPhone… or not getting an iPhone. Not everyone can rationalize (justify) getting the higher priced model.

    Generalized car analogy: Someone wants (and can afford) a new GM car. They can’t swing getting a Cadillac, but they can get an Impala.

    1. RTFA.

      Steve Jack explained clearly:

      Apple’s iPhone 5S costs $100 more than an iPhone 5C — or $4.17 per month over the life of a typical two-year contract or, in other words, a completely negligible amount if you’re actually in a financial position to be able to buy and use a smartphone.

      Let’s get real: If $4.17 per month means anything at all to you, you really can’t afford a smartphone to begin with. Over a two-year contract, the difference between the two iPhones is less than 14-cents per day!

      $100 is not enough of a difference. It $100 matters to you, you’re not “in a financial position to be able to buy and use a smartphone.”

      1. That’s asinine. It was asinine when Steve Jack originally posted it, and it’s asinine now.

        Yes, it amounts to $4.17 a month and $0.14 per day … but you’re not spending that money over 24 months. You’re spending it at ONE TIME. And when you’re spending money at ONE TIME, in a single payment, sometimes you go for the cheaper option because it makes a significant difference in your life. And you know what? If you spend that extra $100 on something you actually need in your life, instead of on some luxury good like a shiny aluminum iPhone, that’s probably smarter than the rest of us who’d rather have the premium smartphone.

        Steve Jack and the folks running MDN are just arrogant twits who’d rather talk down to other Apple users than recognize that not everyone can justify spending an extra hundred dollars on a purchase just because.

        1. You can break down ANY frivolous purchase over a significant period of time and come to the exact same asinine conclusion as Steve Jack. “Well, golly gee, if you can’t see how LITTLE it actually costs you to get THIS luxury item, then you don’t deserve to have the cheaper one either!”

          It’s taken me a while, but I’m starting to realize that MDN really represents the absolute worst of Apple fans.

            1. I turned a blind eye to the Android hate because I see Android users doing the same thing to Apple users. I may not like it, but it exists–just like political bullshit. I’m the only Apple user amongst my close friends, and the only left-of-center person, so I’m used to dealing with right-wing and Android bullying. It comes with the territory.

              But Apple users targeting and putting down their own? Not acceptable.

  8. iPhone 5C wasn’t a cheap or even middle-tier option. It’s in the same tier as the 5S, with an insignificant price saving, and significant drawbacks in overall speed, camera quality, and feature set (no touch id and motion coprocessor).

    The marketing was all about it being colorful – as if people who cared about that don’t generally use iPhone cases. Those cases Apple made, the ones filled with holes that served no purpose other than exposing a the phone’s color underneath it: that should have been a clue that the color based marketing didn’t make any sense.

    I guess there was no secret brilliant hidden 5C strategy: it was just as bone headed a play as it looked. At least the iPhone 5S was awesome enough to make this mistake not really matter, and Apple might have learned something this.

    1. How to make the 5C stand out when the new iPhones make their debut:

      * Give the 6C translucency and deeper colors (ditch the pastels), in addition to adding the color black.
      * Give the 6C all of the capabilities of the 5S.
      * Sell the 5C with a $100 price cut in colors Black and White.
      * Give the 6S a 5″ screen.

  9. C’mon this is a non-issue. I think the iPhone c is awesome!! It’s one of my favorites. Trying to predict the public reaction to art is voodoo science. No big deal, I hope they keep making the c!!!!

  10. It feels pretty good in the hands, but I think it had a rather cheap appearance. If it feels like porcelain, it should look like porcelain.

    Also, I think the lack of Touch ID was a major factor. I wonder how they’ll handle the product mix on the next version. IMO, they need to make even higher-end phones. A larger screen phone for $299 or $399 should not be out of the question. They will sell whatever they make.

    I’m sure they are working on a larger screen version, but knowing Apple, it will be quite different from other phones, possibly having new input methods with a modified version of iOS (just like the iPad version is different).

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