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Apple dips toes into lower-priced waters with colorful $99 iPhone 5C

Gregg Keizer | Sept. 11, 2013
Apple CEO Tim Cook and other executives today unveiled the iPhone 5S and the plastic-backed iPhone 5C, the first time in the six-year history of the iconic smartphone that the company has gone with a two-tier strategy.

Those prices were considerably higher than most analysts' expectations. They had assumed Apple would sell the iPhone 5C at dramatically lower prices -- the lowest estimates were around $300 unsubsidized by a contract -- to battle even cheaper Android smartphones in major markets like China and India, where the Google mobile OS has been trumping iOS in sales volume and market share.

Turned out Apple didn't want to play that game.

"So, optimisation of the existing strategy. Not a new pricing strategy," tweeted Benedict Evans, an analyst with U.K.-based Ender Analysis.

"Apple isn't interested in giving away its technology," said Carolina Milanesi of Gartner in an interview. "They are staying true to their core [on the 5C and its pricing] "Maybe we will see another, less expensive device later, but clearly Apple felt it wasn't the right time to do that."

The five colors of the new iPhone 5C are seen on screen at Apple's media event in Cupertino, Calif. (Photo: Stephen Lam/Reuters)

In Apple's pricing structure, the 5C substitutes for the iPhone 5, which if the firm had fallen back on last year's model, would have been priced at $99 with a two-year contract, or $550 without.

Of course, it is a new iPhone, not last year's, which is what Apple has been selling at that price. Milanesi was convinced that would boost sales, but wasn't ready to predict by how much. "I do think that [the newness] makes a difference," she said. "Here you have the colors, so it becomes more about the variety. I think this was a smart move as well."

Milanesi characterized Apple's iPhone 5C pricing and specification decisions as resulting in higher-than-anticipated prices, but with hardware that was better than expected.

Still, some were clearly disappointed in Apple's refusal to go lower.

"This won't move the needle in emerging markets," said Gottheil, one of a crowd of analysts who had bet Apple would be more interested in gaining back some market share than in high profit margins. "It appears they were afraid lower prices would cannibalize the iPhone 5S in the subsidized markets."

Philip Schiller, head of Apple marketing, took the stage to introduce both the iPhone 5C and the 5S, the latter the company's newest flagship. "It's the most forward-thinking phone we've ever created," said Schiller of the iPhone 5S. "It's the most forward-thinking phone anyone's ever made."

As expected, Apple stuck with the "S" designation for the follow-up to 2012's iPhone 5, which sported a new design.

On the outside, the iPhone 5S looks almost identical to the iPhone 5, although it comes in a new gold-tinted "champagne" color as well as something Schiller called "space gray."


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