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Fate Of Apple's iPhone 5c In Question

4:51 PM, Jan 29, 2014   |    comments
Apple iPhone 5c
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Alistair Barr, USA TODAY

SAN FRANCISCO - Sales of Apple's iPhone 5c have been so disappointing that the consumer technology giant will likely cut the price of the device soon or even scrap the model altogether, according to analysts.

"They just missed it. Demand has not been good," said Gene Munster, an analyst at Piper Jaffray. "They will discount it and use that as a lever to improve unit growth. I don't think they will get rid of it completely."

Last year, Apple discussed the benefits of launching two phones with some analysts and noted that pricing flexibility was one factor.

"There's more of a difference between the 5c and the 5s, so you can play with price a bit more," Munster said.

Others on Wall Street wonder whether the 5c will survive, especially if Apple brings out larger iPhones later this year.

"I would expect them to cancel the product after the iPhone 6," said Peter Misek, an analyst at Jefferies. "Price cuts are not what Apple does. They build products that they are passionate about and then charge accordingly."

Apple spokesman Steve Dowling declined to comment.

Apple reported disappointing results and lower-than-expected iPhone sales on Monday. CEO Tim Cook told analysts during a conference call that demand for the high-end iPhone 5s was stronger than expected.

The 5s accounted for 59% of total iPhone sales in the fourth quarter, while the iPhone 5c accounted for 27% and the older iPhone 4S made up the rest, according to a survey of 500 Apple customers by Consumer Intelligence Research Partners. The 5c sold less well than the 4S did after Apple released the iPhone 5 in September 2012, CIRP also noted.

Cook did not mention the 5c by name during Monday's conference call, which lasted roughly an hour. One analyst asked about Apple's pricing strategy, particularly on the 5c, which the analyst noted had been criticized for not having enough features for the price.

"If we decide it's in our best interests to make a change then we will make one," Cook said. "We're willing to make any product that's a great product."

The 5s sold better because of unique features like the fingerprint sensor, he added.

Those comments came a few days after the Wall Street Journal reported Apple is planning larger iPhones and will scrap the plastic body design from the 5c for these new models, preferring the aluminum casing from the 5s.

Apple has been under pressure from Wall Street to produce a cheaper iPhone that appeals to more consumers in fast-growing developing markets. Analysts hoped the 5c would be aimed at this market, however Apple priced the device higher than expected, at $549 without at contract.

Most Apple loyalists ended up buying the iPhone 5s, while the relatively high cost of the 5c meant some other consumers favored cheaper smartphones that run on Google's Android operating system.

"It wouldn't shock me if it's replaced. It was an interesting concept but priced incorrectly," said Tavis McCourt, an analyst at Raymond James. "A more fashion conscious phone with colors and plastic should have been lower priced."

The 5c is currently Apple's mid-range iPhone, with the 4S being the entry-level device this year. Munster is tracking the price of unlocked 5c phones and has yet to spot any reductions. However, he and other analysts expect that to change soon.

"If they stick with it, it will be priced a lot differently," McCourt said.

 

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