The iPhone 5C Crushes Apple's (AAPL) Hope of a Quick Rally
Apple (AAPL) investors were not too pleased last week after the company's introduction of the iPhone 5C. Shares of the tech giant, one of the most watched stocks in the market, dropped more than 6% in the days following the announcement, which also included an updated version of the iPhone, the iPhone 5S. Daily Chart
The main problem with the plastic iPhone 5C, which comes in five colors and prompted many industry watchers to draw comparisons with Nokia's (NOK
) Lumia series, is its pricing strategy.
The unsubsidized price of the iPhone 5C comes in at $549 to $649, only slightly lower than the iPhone 5S. This definitely wasn't the low-cost iPhone to dominate emerging markets that analysts had been expecting. Nokia's Lumia 520, which only costs $99 unsubsidized, is currently making strong gains in the lower-end market and is the most popular Microsoft (MSFT
) Windows phone worldwide. There is also a looming fear of the iPhone 5C cannibalizing sales of its all-important iPhone 5S -- which occurred last year with the release of the iPad Mini. Before that, the iPod Nano and Shuffle cannibalized the iPod, followed by the iPhone cannibalizing the iPod. Last year, combined sales of the iPhone and the iPad accounted for over three-fourths of Apple's top line. Therefore, Apple hasn't been diversifying away from these two product lines -- rather, it is fragmenting them further as they are shrinking. To put the problem into perspective, Apple's share of the smartphone market declined from 18.8% to 14.2% between the second quarters of 2012 and 2013, respectively, according to a recent report by Gartner. Samsung's share rose from 29.7% to 31.7% during the same period. In tablets, the numbers are even bleaker. The iPad's market share plunged from 60.0% to 32.4% during that time. The problem is obvious -- the market is being fragmented by too many Android competitors, with even Microsoft's Windows Phone regaining a small niche market share. That lost market share translated to anemic 0.9% year-on-year revenue growth and a 21.8% decline in earnings last quarter. Therefore, Apple is splitting up its market as it is shrinking, and many analysts had hoped for a much cheaper smartphone to capitalize on emerging markets like India, where Nokia (soon to be Microsoft's handset division) still enjoys a strong foothold with its Asha and lower-end Lumia brands. That's why many fans of the company and the stock have been pushing for a new area of growth outside phones and tablets -- such as smart televisions or smart watches. However, neither product has been announced yet, and the public continues to speculate if Apple is truly out of ideas, with nothing left up its sleeve. Other News About AAPL iPhone 5S: Apple's Golden Ticket?
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Published on Sep 16, 2013
By Leo Sun