Was iPhone 5c the cause of Apple’s woes?

“Judging by the comments – or lack thereof – from Apple executives, the company’s mantra for its less-expensive iPhone 5C seems to be: ‘If you don’t have something nice to say, don’t say anything at all,'” Daisuke Wakabayashi reports for The Wall Street Journal. “Apple sold 51 million iPhones in the December quarter, good enough for a 7% increase from a year earlier but less than the 55 million units that analysts were predicting. It was a disappointing figure, considering Apple had expanded its iPhone line-up for the first time by offering a high-end iPhone 5S and a more affordable 5C. Tuesday morning, Apple shares were down more than 7% on Wall Street.”

“Apple executives never directly pointed to the 5C as the culprit, despite repeated analyst questions. Instead, they stayed mum about the 5C while praising the 5S at every turn,” Wakabayashi reports. “The closest that Apple came to blaming the 5C was when CEO Tim Cook told analysts that the iPhone “did not do well” in North America because the demand “mix was stronger to the 5S.” Later on the call, Cook said consumers flocked to the 5S because of its fingerprint sensor, a feature missing from the 5C… One sign of the demand trend: The average selling price of the iPhone proved resilient to the pricing pressure facing other smartphones. It came in at $637 in the December quarter, compared with $577 in the previous quarter and $642 in the year-ago period. The iPhone 5S starts at $649 without a contract, while the iPhone 5C starts at $549 without contract.”

“The 5C represented a tweak to Apple’s iPhone strategy. In the past, Apple had targeted more price-sensitive consumers by offering its previous generation iPhone at a $100 discount,” Wakabayashi reports. “This time, it offered the 5C, ostensibly a new model but essentially the same hardware as the previous-generation iPhone 5 with a plastic case that comes in five different colors.”

Read more in the full article here.

MacDailyNews Take: MacDailyNews’ SteveJack on September 10, 2013, the day the iPhone 5s and iPhone 5c were revealed:

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!

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.

nless 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.

29 Comments

  1. Tim Cook said the the 5C was selling better than the 4S at this time last year. He also said most of the 5C buyers were new to iPhone. Apple’s woes were not caused by the 5C but rather by Apple underestimating demand for the 5S.

    1. Daring Fireball nails it:
      “5S had a very good quarter, and that the 5C didn’t really change things much from Apple’s prior practice of selling year-old iPhones at the mid-tier price point.”
      All the trouble of creating the 5c could have been spared by simply offering the iPhone 5 at a reduced price.

    2. The 5C was still one of the best selling phones, some put it 2nd, while others put it third, while the 5S took the top spot.

      Most manufacturers would be thrilled to have a smartphone in the top three best selling list, Apple has two and because only one of them can be the best seller, that’s somehow twisted round to be a problem for Apple.

      1. So you are saying the 5C sold better than all previous iPhones including the 5, 4S and 4? I can see how the 5C could be just a lure for and a push towards getting a 5S instead based on the slim prcing difference of $4.17/month. If this was the same difference as previous pairings of 3G:3GS and 4:4S it may just be that those intending to purchase/upgrade to the 5 that was replaced by the 5C may not have preferred the 5C’s plastic casing and thus decided to wait another generation to upgrade to the 5S when the 6 gets introduced.

  2. MDN’s point is correct. Most people would trade up to the S model because the price differential is low. Maybe that was Apple’s goal all along.
    Saying that putting pressure on the mid range market by lowering the cost of the 5C could be the best approach to hurt the competitors the most. Now that production has been fully ramped up and production start up costs covered, lowering the price to $99 could be a good angle.
    Remember SJ reduced the price of the original iPhone when he realized the price was a barrier.

    1. Getting people to “trade up” by offering an inferior model is a bad strategy. The prices were simply way too close.
      They should instead be working on $100 cheaper iPods and iPads where you aren’t locked into a monthly data plan.
      I also thot Apple would be able to rapidly lower the price of the 5c but that hasn’t happened.

  3. I supported the idea of making a new phone from effectively last years tech. But the 5c was not an inspiring piece of design and which clearly showed Apples fear of taking sales from the more expensive model. A bit too half hearted I feel and hopefully this can change this year when models can be somewhat more differentiated by size for example.

  4. There’s still an audience for colorful phones, especially with iPod Touch users migrating to full-fledged phones instead of just music players.

    The 5C was just an introduction for them to try the waters, see how much demand to expect for future devices. Early expectations were off, but they adapted the production ratio quickly to also accomodate the higher demand for 5S.

  5. The problem was not the 5S or the 5c. The 5S is a pretty amazing phone for that size, and the 5c was better for margins than just offering the iPhone 5 at a discount. The problem is that Apple has been way too late in offering an iPhone with a larger display, and that has hurt Apple sales significantly over the past 12 months, particularly in Asia but also in the rest of the world.

    1. True apple took years to even get to a 4in screen while everyone else had been to 4 and beyond. Apple needs a 4.5in or something in that range to compete. I like my iphone 5 but when I see these 4.7 and so on screens it’s like that’s nice. Now you can get to big I totally agree however I think there is a point it’s to big but apple does need to offer something bigger. I personally would like one.

  6. But not everyone has need for all the features of the 5S I like the 5c just as well. I don’t want the fingerprint sensor and I don’t play any games that would take advantage of the faster chip. So for me especially since I have to pay full price or I lose my unlimited data It makes a big difference to me.

  7. So these analcysts are saying just because these new iPhones come in different colors, it may not be appealing because of how “garish” and “gaudy” they are? Where were these goofballs in 1998 and 2004, when the iMacs and iPods came in a variety of colors? The iPhone 5C is simply continuing this trend.

    1. Before I got my 5S, I thought about the 5C, but other than white, I wouldn’t be caught dead with any of the other pastel colors. Now, if they had regular colors, I may have saved myself $100.

      Bigger screens are the bigger issue though, not the plastic case.

    1. That “massive success” you realize has been in part helped by introducing the iPhone to ever larger number of countries each year. Now that they finally have China, it will be interesting to see how well they hold onto even their current positions.. I suspect like other luxury brands, they will find a comfortable place and make their profits but will contribute no more or less to the total mobile market in years to come if they continue to innovate at the pace they have since Jobs’ passing.

  8. The 5C was cheaper and easier to make and upsold customers to the higher priced 5S. Win win situation. The 5C should do well when it gets lowered to the “free phone” on contact option.

  9. Apple’s woes ? They sold more phones than ever before.

    Ever since the iPhone 5S & 5C were released, analysts have been trying to pretend that the sales were disappointing and just before the financial results announcement, they conjured up a very high sales figure that they would expect Apple to meet.

    All that happened is that the analysts guessed wrong yet again and instead of taking the blame, they point the finger at Apple for not meeting their expectations. It’s the analysts who are woefully inadequate.

      1. Growing market share while not making money is no way to run a sustainable business. Apple generates 50% of the smartphone profits from 10% of the market share. That’s how you run a healthy business.

        Sadly Wall Street is as petulant as a moody teenager and refuses to see the true position, while having a tantrum about something that is only an imaginary problem.

        1. Well, that may be, but Wall Street does have Cook dancing to their tune. The gambling den always finds a way to get its cut. If that means devaluing AAPL stock until Cook forks over to them all the cash hoard that Tim hasn’t allocated to company investment, then that’s what will happen. Cook is stupid to let it accumulate. Now that overseas pile o’ cash has attracted the greediest scum on the planet, and there’s no fending off those mobsters. Imagine how many small investors would be behind Apple if Apple was opening more retail stores and announcing more new products, or at least communicating with the public with some more effective ad campaigns. Jobs had a backbone, and he inspired people with an awesome vision. It doesn’t appear Cook has either.

  10. The 4S has been restricted to only the 8GB version so if you want a bigger capacity but not the top of the range then the 5C should offer the entry point into the eco-system. If the entry point is too high people will go elsewhere for their kids first smartphone. ( I did, I went for a Nokia – because they have been making good phones since before Apple even had an iPod – and we will just live with the non OS software for a couple of years).

  11. My 11-year-old daughter didn’t consider the iPhone 5s for one second. She was on Apple.com daily looking at all the color combinations, trying to figure out exactly what she wanted for her birthday. That’s who the 5C is for – 11-year-old girls. Not a bad idea, but also not a huge demographic.

  12. Even if the 5c isn’t considered a sales hit, it’s not a big deal for Apple to drop the price, clear out inventory and replace it with something else. How much impact would that have on Apple? Minimal impact, I’m sure.

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