Apple iPhone 5s Sales Beat 5c - InformationWeek
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09:57 AM

Apple iPhone 5s Sales Beat 5c

Apple's iPhone 5s is outselling the 5c by a wide margin. One analyst wonders where Apple will find new customers.

iPhone 5c, 5s: 10 Smart Design Choices
iPhone 5c, 5s: 10 Smart Design Choices
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Analysts are weighing in on sales of Apple's new iPhones, and the news isn't much of a surprise: The high-end 5s is outselling the 5c. Further, some believe Apple is prepared to slash orders for the 5c amidst weaker-than-expected demand. What's going on with Apple's smartphones?

Data from Consumer Intelligence Research Partners (CIRP) shows that Apple's iPhone 5s accounted for 64% of total iPhone sales at the end of September. The iPhone 5c accounted for 27% of sales, and the iPhone 4S comprised 9% of sales. That means the 5s is outselling the 5c by a factor of greater than two-to-one. When purchased on contract, the least expensive iPhone 5s retails for $199, the 5c for $99 and the 4S is now free.

Looking at data from last year paints an interesting picture of these three devices. The iPhone 5, which was discontinued this year, managed to account for 68% of all iPhone sales during its first month of availability. That's a bit better than the 5s out of the gate. Further, the 5c is doing only marginally better than the 4S did last year as Apple's $99 device. This could evolve in the months ahead.

"Over time, the lower-priced phones have tended to gain share versus the flagship phone, after the initial rush of dedicated upgraders to the newest device," said CIRP in a statement provided to AllThingsD. "So we expect that the 5c will account for a higher percent of total U.S. iPhone sales in the coming months, but the design changes may alter that dynamic. The iPhone 5c may appeal to different buyers than the legacy 4S did last year, or the new 5s will this year."

[ Want to see what Apple has planned for the tablet market? See Apple To Debut New iPads Oct. 22. ]

At least one analyst isn't so bullish on the 5c's chances. KGI Securities analyst Ming-Chi Kuo said in a note recently released to investors that he expects 33% fewer sales of the 5c than he originally predicted. Kuo didn't provide a rationale for his changed prediction, but Kuo has a good track record.

The 5c, which is readily available from Apple, has already been discounted by $50 by retailers such as Walmart and Target. Discounts so early in a device's life generally point to weak demand.

A third analyst is worried about not only the 5c, but the 5s as well. Sanford Bernstein analyst Toni Sacconaghi believes it will be harder and harder for Apple to find new iPhone buyers.

"Barring a signed contract with China Mobile or an iPhone priced to sell to the developing world, there is a slim margin of error that Apple will attract sufficient first-time iPhone buyers going forward to meet consensus forecasts for [fiscal year 2014 and 2015]," wrote Sacconaghi to investors. In other words, he doesn't think the iPhone 5c, which is made of plastic, is cheap enough for the most important growth area in the smartphone market.

"It is imperative that Apple look to address the lower end of the smartphone market, where we see five times the number of first-time smartphone buyers over the next two years," continued Sacconaghi. "Even though there may be 100 million to 150 million new high-end smartphone users annually over the next two years, there will be about 500 million new low-end smartphone users annually over the next two years, or about four times the new user total addressable market."

Apple will report its third-quarter results Oct. 28. The company said it sold more than 9 million iPhones the first weekend of availability. The iPhone 5s and 5c were available for only 10 days of the 90-day period.

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Shane M. O'Neill
Shane M. O'Neill,
User Rank: Author
10/14/2013 | 9:28:20 PM
re: Apple iPhone 5s Sales Beat 5c
Is the perception that 5C is good but just second-rate? Apple buyers only want the best available!
Thomas Claburn
Thomas Claburn,
User Rank: Author
10/14/2013 | 9:06:01 PM
re: Apple iPhone 5s Sales Beat 5c
I still can't tell who is the target market for the iPhone 5C.
User Rank: Ninja
10/14/2013 | 8:02:59 PM
re: Apple iPhone 5s Sales Beat 5c
$200 verses $100 over a 24 month contract is only $4.17 per month more. No wonder the 5c is not the performer Apple expected. The 5c needs to be free while the 4s or 5 go away.
User Rank: Strategist
10/14/2013 | 5:04:29 PM
re: Apple iPhone 5s Sales Beat 5c
This isn't a surprise. Once the "high-end" market gets saturated, there won't be much left to sell to. The differential between the 5s and the 5c wasn't enough to lure new buyers of the iPhone, but I think that Apple was hoping to appeal to a different demographic as evidenced by the commercials extolling the colorful aspect of the iPhone - as if this is its only redeeming quality; "If you are a colorful person, here is a colorful phone for you!" This is pretty weak marketing since anyone with a smartphone that wanted to add some personality to their phones would do so with any of the thousands of choices for cases on the market today. Apple didn't want to sell a "cheap" phone but that may be exactly what they need to do if they want to better compete with Android-based phones. However, the 5c doesn't exactly fit the bill and anyone who's been paying attention knows that this "new" phone has only incremental benefits over its predecessor.
Apple may be able to put up decent sales in the market space they are looking to dominate in, but they won't stand a chance in the lower-end of the spectrum and a $99 iPhone 5c won't get them there. Investors should pressure Apple to come up with a different solution or get used to the status quo.
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