6 ms·

New iPhone 5c has analysts talking about possibly poor sales

26 points by tod222 13y ago

lchitnis 13y ago
Of course sales are poor...we are so used to paying a premium for the cool factor, and for quality (debatable), why would we go for plastic? It's largely (if not completely) a case of perception here. I just got off the phone with Apple because I need a new laptop. After tallying up a 15" Mac Book Pro with Retina Display, 3-year Apple Care, and a few other necessary extras, I'll be paying about $3k out the door. I wince as I write this but it's worth every penny for me...if I'm at Apple and I'm already being gouged, why not just get the best thing they have?
- jasonlmk 13y ago
  Comes down to how inelastic I am at that price point as well. Personally, if I'm going to pay $739 for a 5c here in Australia, I might as well fork out an extra $130 to 'future proof' myself with the 5s. I get the feeling that Apple still needs to get the price of the 5c right.
gfodor 13y ago
Of course, the catch here is that the 5C is not a "new iPhone" in the traditional sense. The 5S is the "new iPhone." The 5C is taking the place of the 5 in this cycle. If the 5C's numbers look better relative to the last analogous period, the sales of the 4 when the 4S was released, then this was a win for Apple (on a revenue basis.)
- film42 13y ago
  Exactly! The 5C wan not about making a new phone, it was about cutting costs of the old 5 so they could hit their market goal of $99 with 2/yr contract.
batiudrami 13y ago
The price difference between the 5C and the 5S appears even more minimal in countries where the phone payments are split across the life of the contract, rather than being upfront as in the US. For instance, on the same plan with the same inclusions in Australia, the 5C is $64 a month, and the 5S is $69. From my perspective, there is no chance I would go for the 5C, and I think for it to be a successful device it needed to be $200 cheaper than the 5S (unsubsidised/retail), and really be a midrange device. But then, I've been wrong about Apple products in the past, so who knows.
- tadfisher 13y ago
  The system most common in the US is a subsidy on the purchase of the phone, which for most people ends up working in a similar fashion. This is part of why the traditional phone contract here is much more expensive than the equivalent service in other countries, as phone subsidies make up a large portion of per-subscriber costs. As most subscribers purchase subsidized devices, this system ends up working much like the system you described, but with a key difference: the up-front cost can be easily manipulated to serve the needs of carriers and manufacturers. At AT&T, the 4S is 0$ up front, the 5C is $99, and the 5S is $199, and that is the price the customer will see and reason about more than the monthly fee. This effectively creates a market for the 5C. Things are getting complicated now that T-Mobile has introduced their à-la carte pricing scheme, where the service sold is decoupled from the cost of the device (whether paid in installments or up front). There you see a much less stark difference in the up-front costs between iPhones, and I'm curious about the sales numbers there.
  - oneeyedpigeon 13y ago
    I find the use of the term "subsidy" hilarious in this context. You DO realise the phone companies just sting you through your monthly bill, and you end up paying MORE for the phone, right? That's an interest-charging loan you're getting, not a subsidy.
    - nolite 13y ago
      Poster does most certainly, but most Americans don't
InclinedPlane 13y ago
There's a lot of money in the low-end of the market, especially in the near future. Over the next decade or so the developing world is going to add on trillions of dollars in GDP. That's going to bring a lot of people to the table who will be able to afford a low-end smartphone or tablet, and for many of those people it will be their first computing device. Due to sheer volume alone there is a ton of money in that market. And that's in addition to the low-end of the market in existing developed countries, which is already huge. However, the 5c isn't in that market. It's a $550 phone. It's only seemingly "cheap" because the usurious financing that most cell companies use enables them to offer a low down payment amount. Look at it in two ways. When you lock yourself into a 2 year contract you're going to be paying about $1k for whatever device you upgrade to. The difference between $100 and $200 up front is trivial in comparison to this. So paying $1100 for a $550 phone versus $1200 for a $650 phone is, well, stupid. Even more so when you consider the performance and quality differences between the 5c and 5s. That's at the high-end, for people who can afford expensive plans and expensive phones. At the low-end the 5c isn't competitive either. If you comparison shop un-subsidized phones on prepaid services you see that you can get LTE android devices in the $200 to $300 range, a Galaxy S3 is only $350. With an S3 and a $35/mo plan (virgin mobile) someone will be saving a minimum of $500 and closer to $1000, for comparable service, over 2 years compared to buying a subsidized 5c from verizon or AT&T. Even more if they opt for a truly low-cost phone (which can be as cheap as $150 unsubsidized for LTE capable devices, and essentially free if you don't care about LTE). So it doesn't compete on the low-end because it's too expensive and it doesn't compete on the high-end (where its price puts it) because it's missing stuff. No wonder no one is buying it.
- alwaysinshade 13y ago
  > No wonder no one is buying it. "Months of rumors about order cuts and so forth, so let me take a moment to comment on these. No comment on any particular rumor. I suggest its good to question the accuracy of any kind of rumor about build plans. Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant to our business. The supply chain is very complex and we have multiple sources for things. Yields can vary, supplier performance can vary. There is an inordinate long list of things that can make any single data point not a great proxy for what is going on." - Tim Cook, Q1 conference call, regarding rumors that demand for the iPhone 5 was waning. Q3 results? 31.2 million iPhones sold. Analysts aren't very good at predicting things when they're using isolated data points from the supply chain.
rebel 13y ago
The move seems so logical by Apple, although I've yet to really see any journalist comprehend it. Apple has lowered their cost to produce a product they were going to offer anyway (they always sell last years model at the same discount), while at the same time, visually differentiating it from the high end product. One would have to assume this has pushed more purchasers up-market to the newer device, while also attracting new customers who don't care about specs and are more concerned about the colors/fun factor. So Apple has not only gained a higher profit margin, they presumably have improved their device yield by making a simpler phone to produce. On top of all that, they have a product to appeal to a different segment of the market. The phone also allowed them to have something on the shelves while the 5s was sold out. Everything about it seems like an outstanding success to me.
- marze 13y ago
  Very well put. It will be the first or second best selling phone in history and will have great margins for Apple. From their point of view, an excellent move. The best indicator of the excellence of the Apple phone products, in my view, is that the iPhone 4 is still being sold. It came out 3 1/2 years ago, and is still good enough to be sold today. Are any competing smart phones from mid-2010 still being sold today?
  - objclxt 13y ago
    I don't think Apple are still selling the iPhone 4...perhaps there is some inventory that's still available in certain markets, but if you go to an Apple Store it's the 4S, 5C, and 5S.
    - marze 13y ago
      Well, it appears to be for sale here: http://www.virginmobileusa.com/shop/cell-phones/iPhone4-8GB-phone/features/ http://www.virginmobileusa.com/shop/cell-phones/iPhone4-8GB-... And, I've heard it remains for sale in China.
      - 13y ago
deleted 13y ago
[deleted]
- objclxt 13y ago
  The opening weekend sales for the new iPhones exceeded even the most bullish analyst estimates by a million. I'm not totally sure I'd call this a 'downward spiral'. The fact no analyst came close to predicting the launch sales should be an indicator as to how accurate they can be (...not very).
  - deleted 13y ago
    [deleted]
  - gte910h 13y ago
    The opening weekend sales revenue was higher than the cost blackberry sold for (the entire company) the week after.
arbutus 13y ago
It's not supposed to sell like the 5S, it's supposed to sell like the 4S did when the 5 launched.
- vvhn 13y ago
  Not really. there is a much greater marketing push behind the 5c so the expectation seemed to have been more than the ones for " last years model"
YOSPOS 13y ago
Apple's market share for iPhones and iPads are going to crush the competition after the numbers for the holiday quarter come out.
- dingaling 13y ago
  Yes, analysts are predicting that Apple will take 100% of the iPhone and iPad market. In reality, iOS market share in Europe is around 18% compared to 70% for Android; China is similar. In the USA it's 35-50. I can see why Mozilla and Jolla are chasing the developing World markets; the market positions in the mature markets are pretty static now and are unlikely to fluctuate much. Anecdotally, people upgrade their phone on longer periods now ( three or four years ).
  - RealCasually 13y ago
    3 to 4 years? I know you said anecdotally, but that seems absurd with the carrier cycle at 2 years.
    - Geee 13y ago
      Right after you have paid your phone you will want to buy a new one? Not all people have the money to spend $500-$1000 every two years, if your old phone is still fine.
  - deleted 13y ago
    [deleted]
  - GhostSteve 13y ago
    Actually iOS market share in the US was 40%. Apple's share actually grew, in a quarter before new iPhones and iPads. Anroid declined in the same quarter. Android has more or less peaked in the US while Apple has continued to grow. The massive growth Android got from people going from feature phones to mostly low-end Android phones is over. Apple's market share will spike in the holiday quarter and will continue to incrementally increase their installed base. In 2-3 years Apple and Android will have a more or less equal installed base. http://thenextweb.com/mobile/2013/10/04/comscore-apple-takes-40-7-share-as-top-us-smartphone-maker-samsung-gains-too-android-back-to-losing-share/ http://thenextweb.com/mobile/2013/10/04/comscore-apple-takes... https://twitter.com/asymco/status/386207186801917952 https://twitter.com/asymco/status/386207186801917952
jpalomaki 13y ago
According to WSJ [1] they have cut down the orders on 5c and increased orders on 5s. There could be some psychology involved here. It's not hard to imagine some people making the decision to go for iPhone based on price of 5c but then actually ending up spending the few extra bucks to get the better model. [1] http://online.wsj.com/news/article_email/SB10001424052702304864504579138761727258256-lMyQjAxMTAzMDEwNjExNDYyWj http://online.wsj.com/news/article_email/SB10001424052702304...
gte910h 13y ago
The point of the 5c is to make the 5s seem premium. It's also a higher profit phone than the 5 would have been even at this point, so if people happen to buy it, they make marginally more per unit.

26 points by tod222 13y ago

Of course sales are poor...we are so used to paying a premium for the cool factor, and for quality (debatable), why would we go for plastic? It's largely (if not completely) a case of perception here. I just got off the phone with Apple because I need a new laptop. After tallying up a 15" Mac Book Pro with Retina Display, 3-year Apple Care, and a few other necessary extras, I'll be paying about $3k out the door. I wince as I write this but it's worth every penny for me...if I'm at Apple and I'm already being gouged, why not just get the best thing they have?

jasonlmk 13y ago
Comes down to how inelastic I am at that price point as well. Personally, if I'm going to pay $739 for a 5c here in Australia, I might as well fork out an extra $130 to 'future proof' myself with the 5s. I get the feeling that Apple still needs to get the price of the 5c right.

gfodor 13y ago

Of course, the catch here is that the 5C is not a "new iPhone" in the traditional sense. The 5S is the "new iPhone." The 5C is taking the place of the 5 in this cycle. If the 5C's numbers look better relative to the last analogous period, the sales of the 4 when the 4S was released, then this was a win for Apple (on a revenue basis.)

film42 13y ago
Exactly! The 5C wan not about making a new phone, it was about cutting costs of the old 5 so they could hit their market goal of $99 with 2/yr contract.

batiudrami 13y ago

The price difference between the 5C and the 5S appears even more minimal in countries where the phone payments are split across the life of the contract, rather than being upfront as in the US. For instance, on the same plan with the same inclusions in Australia, the 5C is $64 a month, and the 5S is $69. From my perspective, there is no chance I would go for the 5C, and I think for it to be a successful device it needed to be $200 cheaper than the 5S (unsubsidised/retail), and really be a midrange device. But then, I've been wrong about Apple products in the past, so who knows.

tadfisher 13y ago
The system most common in the US is a subsidy on the purchase of the phone, which for most people ends up working in a similar fashion. This is part of why the traditional phone contract here is much more expensive than the equivalent service in other countries, as phone subsidies make up a large portion of per-subscriber costs. As most subscribers purchase subsidized devices, this system ends up working much like the system you described, but with a key difference: the up-front cost can be easily manipulated to serve the needs of carriers and manufacturers. At AT&T, the 4S is 0$ up front, the 5C is $99, and the 5S is $199, and that is the price the customer will see and reason about more than the monthly fee. This effectively creates a market for the 5C. Things are getting complicated now that T-Mobile has introduced their à-la carte pricing scheme, where the service sold is decoupled from the cost of the device (whether paid in installments or up front). There you see a much less stark difference in the up-front costs between iPhones, and I'm curious about the sales numbers there.
- oneeyedpigeon 13y ago
  I find the use of the term "subsidy" hilarious in this context. You DO realise the phone companies just sting you through your monthly bill, and you end up paying MORE for the phone, right? That's an interest-charging loan you're getting, not a subsidy.
  - nolite 13y ago
    Poster does most certainly, but most Americans don't

InclinedPlane 13y ago

There's a lot of money in the low-end of the market, especially in the near future. Over the next decade or so the developing world is going to add on trillions of dollars in GDP. That's going to bring a lot of people to the table who will be able to afford a low-end smartphone or tablet, and for many of those people it will be their first computing device. Due to sheer volume alone there is a ton of money in that market. And that's in addition to the low-end of the market in existing developed countries, which is already huge. However, the 5c isn't in that market. It's a $550 phone. It's only seemingly "cheap" because the usurious financing that most cell companies use enables them to offer a low down payment amount. Look at it in two ways. When you lock yourself into a 2 year contract you're going to be paying about $1k for whatever device you upgrade to. The difference between $100 and $200 up front is trivial in comparison to this. So paying $1100 for a $550 phone versus $1200 for a $650 phone is, well, stupid. Even more so when you consider the performance and quality differences between the 5c and 5s. That's at the high-end, for people who can afford expensive plans and expensive phones. At the low-end the 5c isn't competitive either. If you comparison shop un-subsidized phones on prepaid services you see that you can get LTE android devices in the $200 to $300 range, a Galaxy S3 is only $350. With an S3 and a $35/mo plan (virgin mobile) someone will be saving a minimum of $500 and closer to $1000, for comparable service, over 2 years compared to buying a subsidized 5c from verizon or AT&T. Even more if they opt for a truly low-cost phone (which can be as cheap as $150 unsubsidized for LTE capable devices, and essentially free if you don't care about LTE). So it doesn't compete on the low-end because it's too expensive and it doesn't compete on the high-end (where its price puts it) because it's missing stuff. No wonder no one is buying it.

alwaysinshade 13y ago
> No wonder no one is buying it. "Months of rumors about order cuts and so forth, so let me take a moment to comment on these. No comment on any particular rumor. I suggest its good to question the accuracy of any kind of rumor about build plans. Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant to our business. The supply chain is very complex and we have multiple sources for things. Yields can vary, supplier performance can vary. There is an inordinate long list of things that can make any single data point not a great proxy for what is going on." - Tim Cook, Q1 conference call, regarding rumors that demand for the iPhone 5 was waning. Q3 results? 31.2 million iPhones sold. Analysts aren't very good at predicting things when they're using isolated data points from the supply chain.

rebel 13y ago

The move seems so logical by Apple, although I've yet to really see any journalist comprehend it. Apple has lowered their cost to produce a product they were going to offer anyway (they always sell last years model at the same discount), while at the same time, visually differentiating it from the high end product. One would have to assume this has pushed more purchasers up-market to the newer device, while also attracting new customers who don't care about specs and are more concerned about the colors/fun factor. So Apple has not only gained a higher profit margin, they presumably have improved their device yield by making a simpler phone to produce. On top of all that, they have a product to appeal to a different segment of the market. The phone also allowed them to have something on the shelves while the 5s was sold out. Everything about it seems like an outstanding success to me.

marze 13y ago
Very well put. It will be the first or second best selling phone in history and will have great margins for Apple. From their point of view, an excellent move. The best indicator of the excellence of the Apple phone products, in my view, is that the iPhone 4 is still being sold. It came out 3 1/2 years ago, and is still good enough to be sold today. Are any competing smart phones from mid-2010 still being sold today?
- objclxt 13y ago
  I don't think Apple are still selling the iPhone 4...perhaps there is some inventory that's still available in certain markets, but if you go to an Apple Store it's the 4S, 5C, and 5S.
  - marze 13y ago
    Well, it appears to be for sale here: http://www.virginmobileusa.com/shop/cell-phones/iPhone4-8GB-phone/features/ http://www.virginmobileusa.com/shop/cell-phones/iPhone4-8GB-... And, I've heard it remains for sale in China.
    - 13y ago

deleted 13y ago

[deleted]

objclxt 13y ago
The opening weekend sales for the new iPhones exceeded even the most bullish analyst estimates by a million. I'm not totally sure I'd call this a 'downward spiral'. The fact no analyst came close to predicting the launch sales should be an indicator as to how accurate they can be (...not very).
- deleted 13y ago
  [deleted]
- gte910h 13y ago
  The opening weekend sales revenue was higher than the cost blackberry sold for (the entire company) the week after.

arbutus 13y ago

It's not supposed to sell like the 5S, it's supposed to sell like the 4S did when the 5 launched.

vvhn 13y ago
Not really. there is a much greater marketing push behind the 5c so the expectation seemed to have been more than the ones for " last years model"

YOSPOS 13y ago

Apple's market share for iPhones and iPads are going to crush the competition after the numbers for the holiday quarter come out.

dingaling 13y ago
Yes, analysts are predicting that Apple will take 100% of the iPhone and iPad market. In reality, iOS market share in Europe is around 18% compared to 70% for Android; China is similar. In the USA it's 35-50. I can see why Mozilla and Jolla are chasing the developing World markets; the market positions in the mature markets are pretty static now and are unlikely to fluctuate much. Anecdotally, people upgrade their phone on longer periods now ( three or four years ).
- RealCasually 13y ago
  3 to 4 years? I know you said anecdotally, but that seems absurd with the carrier cycle at 2 years.
  - Geee 13y ago
    Right after you have paid your phone you will want to buy a new one? Not all people have the money to spend $500-$1000 every two years, if your old phone is still fine.
- deleted 13y ago
  [deleted]
- GhostSteve 13y ago
  Actually iOS market share in the US was 40%. Apple's share actually grew, in a quarter before new iPhones and iPads. Anroid declined in the same quarter. Android has more or less peaked in the US while Apple has continued to grow. The massive growth Android got from people going from feature phones to mostly low-end Android phones is over. Apple's market share will spike in the holiday quarter and will continue to incrementally increase their installed base. In 2-3 years Apple and Android will have a more or less equal installed base. http://thenextweb.com/mobile/2013/10/04/comscore-apple-takes-40-7-share-as-top-us-smartphone-maker-samsung-gains-too-android-back-to-losing-share/ http://thenextweb.com/mobile/2013/10/04/comscore-apple-takes... https://twitter.com/asymco/status/386207186801917952 https://twitter.com/asymco/status/386207186801917952

jpalomaki 13y ago

According to WSJ [1] they have cut down the orders on 5c and increased orders on 5s. There could be some psychology involved here. It's not hard to imagine some people making the decision to go for iPhone based on price of 5c but then actually ending up spending the few extra bucks to get the better model. [1] http://online.wsj.com/news/article_email/SB10001424052702304864504579138761727258256-lMyQjAxMTAzMDEwNjExNDYyWj http://online.wsj.com/news/article_email/SB10001424052702304...

gte910h 13y ago

The point of the 5c is to make the 5s seem premium. It's also a higher profit phone than the 5 would have been even at this point, so if people happen to buy it, they make marginally more per unit.