Did Apple Make a Mistake By Releasing Two New iPhones? 348
Nerval's Lobster writes "As noted by CNET, Apple hasn't released data on the number of iPhone 5C units it presold in the device's first 24 hours of availability—a first for the iPhone since 2009. Why is that? Reporter Josh Lowensohn speculates that iPhone 5C sales 'may not be as impressive when stacked up against tallies from previous years,' with one outside analyst suggesting that Apple racked up 1 million iPhone 5C preorders last Friday, or roughly half the 2 million presales scored by the iPhone 5 on its first day of ordering availability last year. However well the iPhone 5C ends up performing on the open market, Apple's decision to launch two iPhones this year—rather than a single 'hero' device—could result in self-cannibalism, as users who would've bought the iPhone 5S instead gravitate toward the cheaper option. Cannibalism is a topic that Apple knows well, as it's been dealing with the iPhone cannibalizing the iPod for the past several years; but a new iPhone eating away at another new iPhone is fresh territory for the company. During earnings calls, Apple CEO Tim Cook likes to argue that cannibalization—whether iPhones feeding off the iPod, or the iPad taking the place of MacBooks—is a good thing, so long as it's Apple products eating other Apple products. But it's far more questionable whether he would welcome the iPhone 5C—almost certainly a low-margin device, despite its current-generation components and plastic body—taking a bite out of the more expensive, and presumably higher-margin iPhone 5S. Margin erosion remains a prime concern of investors and Apple watchers; anything that contributes to that erosion is bound to be viewed unfavorably."
Re:Apple makes money either way... (Score:5, Interesting)
The narrative around Apple has certainly shifted, and this is having a tremendous impact on how people view what Apple is doing. Especially hear on Slashdot, people seem anxious for any sign that Apple is failing. That said, I would argue that the iPhone 5s is just as "groundbreaking" as any phone that's been released in the last few years. The inclusion of a 64-bit processor and the fingerprint reader are sure to be huge selling points, even if most people don't understand what 64-bit means or why it's advantageous.
I agree with you, and disagree with the summary, in stating that the iPhone 5c is almost certainly not a low-margin device. In fact, the very existence of the iPhone 5c seems to be a response to the lower margins Apple has had in selling devices that are one and two years old. The iPhone 5c is an iPhone 5 in lower-cost packaging. This serves to increase Apple's margins. People here like to give Apple a hard time, but the reality is that the iPhone 5 remains not only a usable phone, but a phone that provide a tremendous customer experience. Instead of keeping the iPhone 5 in the lineup and selling it as one of their "cheap" phones (as Apple has done with the releases of their last two flagship phones), they designed a cheaper to manufacture version that has all of the same benefits.
It is true that selling two "new" phones instead of one this year will likely decrease the number of sales for either device individually. That said, I expect that next Monday (after the iPhone 5s has actually gone on sale) there will be a press release indicating that combined sales (and pre-orders) of these two new phones exceeds the initial sale of the iPhone 5. (I'm also prepared to eat crow if I'm wrong.)
Investors felt differently (Score:2, Interesting)
Sometimes I wish Apple was a private company and didn't have to look over the shoulder at "investors".
They had the largest shareprice drop since year start in one day. The reason was 1. Because they didn't announce a deal with China Mobile and 2. Because they don't have a competitive phone in that market...they thought that would be the iPhone 5C they were wrong.
Re:Apple makes money either way... (Score:5, Interesting)
The inclusion of a 64-bit processor and the fingerprint reader are sure to be huge selling points, even if most people don't understand what 64-bit means or why it's advantageous.
That's exactly why consumers don't care about it. In the past iPhone features have had a very visual and immediate "wow" factor that people can see the utility of straight away. App Store, 3G, Siri, Apple Maps (lol), widescreen, retina displays and so forth.
Instead of keeping the iPhone 5 in the lineup and selling it as one of their "cheap" phones (as Apple has done with the releases of their last two flagship phones), they designed a cheaper to manufacture version that has all of the same benefits.
Yes, but they seem to have missed their target. The point of the 5C was to break into markets where the 5S is too expensive to gain big market share. For years Apple fans were saying Apple didn't care about these markets and there was no money in cheap(er) phone, but actually they wanted in and just couldn't come up with a suitable product. It needed to be current generation (i.e. have a 5 in the name) to remain desirable but also be affordable, and it seems that most analysts think that it's too expensive.
Like it or not Android is offering very strong competition, and even on fairly low end hardware is now smooth and provides an excellent user experience. I recently installed Cyanogen on an old Galaxy S (~1GHz single core CPU, 512MB RAM) and it's a very nice phone. The reality is you can buy a pretty good dual core, 1GB RAM, large HD screen phone in China for a fraction of what Apple wants to charge and it's as good as the iPhone in most respects to most ordinary people.
Re:Apple makes money either way... (Score:2, Interesting)
It may still be since you can memory-map more than 4GB of storage.
Apple has little choice (Score:5, Interesting)
If Apple doesn't cannibalize some of their own phone sales, lower-end Android smartphones will eat those sales. Apple is not as able to command a premium price as formerly.
Apple products are well-made, work well, work well in the Apple ecosystem, and are premium priced. In the early days of the iPhone, Apple successfully sold premium devices to customers who normally don't buy premium, because those customers couldn't get a non-sucky smartphone anywhere else. And buying an Apple smartphone, even at a premium price, still only means a few hundred dollars of extra expense.
But as the premium Android smartphones of yesterday move down and become the budget Android smartphones of today, there is less need to pay a premium to get a nice smartphone. Apple needs to compete on price.
With the 5C, Apple is trying to walk a fine line. They are trying to lower the entry-level price of an iPhone enough to keep sales that would have gone to Android phones, while at the same time they are trying not to take too many sales away from their top-of-the-line iPhone. (IMHO the plastic case is an inspired bit of product segmentation. Whether it's significantly cheaper or not, it serves as a nice differentiator between the bargain iPhone and the premium iPhone.)
I think in the USA, the 5C will serve its purpose pretty well, because most people get subsidized phones and the $100 subsidized price looks attractive. But worldwide, the entry-level phone customers will all be buying Android devices. I don't think there is anything Apple really can do about this. Their choice is either to accept lower profit margins on phones, or else watch as Android solidifies its hold on developing markets. The conservative thing for Apple to do is to keep charging premium margins; if they ever slash their prices it will be very hard ever to change their mind and go back to premium pricing.
Did Apple Make a Mistake? No. (Score:4, Interesting)
They'll sell them as fast as they can make them and rake in huge profits.
Kind of the whole point.
Steve Jobs disagrees. (Score:3, Interesting)
Uh, you're just now tuning into the when will Apple fail meme that's about 20 years old?
20 Years!? you have no idea. this is the Video of steve Jobs in 1997 http://www.youtube.com/watch?feature=player_embedded&v=WxOp5mBY9IY [youtube.com] announcing Apple being rescued by Microsoft. This is what Steve Jobs thought "What ruined Apple was not growth They got very greedy Instead of following the original trajectory of the original vision, which was to make the thing an appliance and get this out there to as many people as possible they went for profits. They made outlandish profits for about four years. What this cost them was their future. What they should have been doing is making rational profits and going for market share.” many of us see the symmetry with Apple today. What we don't see is unlike the PC market Apple existing as a niche product.
Markets (Score:3, Interesting)
Consumer Market Dominant (Score:4, Interesting)
The 5S is aimed at the corporate and tech head market. The 5C is aimed at the "teens"
Bullshit. They are both squarely aimed at the consumer market, and that is exactly the right thing to do. Steve Balmer famously laughed of the iPhone as not suitable for the business market, his recent replacement thinks perhaps he should have thought differently.
Re:Apple such a loser (Score:2, Interesting)
Except Apples profits are falling
IIRC (I don't have the figures in front of me), it is their profit growth that is falling, not their profits themselves.
Dan Aris