Apple Could Have the Same Problem Steve Jobs Warned About 30 Years Ago
Apple’s (AAPL) cheaper iPhone experiment seems to be failing.
The Wall Street Journal reports that Apple is slashing fourth-quarter orders of its lower-priced iPhone 5C model because of weak demand. Last month the maker of the iPhone and iPad debuted its 5C model to mixed reviews. The 5C, which has a plastic body and comes in four different colors, was supposed to help Apple expand its global market share and appeal to consumers who cannot afford Apple’s more expensive 5S model.
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But Apple made a huge mistake on the 5C argues Yahoo Finance technology reporter Aaron Pressman. The 5C does not include many of the cool new features in the 5S, such as the fingerprint sensor and updated camera, and yet it costs just $100 less for American consumers than the 5S. In other countries smartphone users have to pay the full price of the iPhone; in China for example, users pay $800 for the 5S and $750 for the 5C.
Apple could also be experiencing a moment of déjà vu, notes Pressman. In the 1990s, when sales of Macintosh computers were slipping, Steve Jobs later admitted that his company had focused too much on profits when it should have been fixated on market share. Apple is miscalculating again, Pressman says.
“They have to go back to the drawing board on what they’re doing at the low end,” he explains.
The 5C may not be a big winner with consumers but better-than-expected sales of the 5S model could actually give a boost to Apple for the next few quarters. Apple has increased fourth-quarter orders for the 5S, according to executives at Apple supplier Hon Hai.
Apple’s phones are clearly not competitive in the low-cost smartphone universe and that could be alright with Apple executives, says Pressman.
“They’re still winning from the 5C even if it’s not selling well because they have more capacity to make the most profitable [iPhone],” he adds.
Apple sold 9 million 5S and 5C models in their opening weekend, beating analysts' estimates of 6 million to 7 million. The Cupertino, Calif. company reports third-quarter earnings on Oct. 28.
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