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Cook admits Apple blew the call on the iPhone 5C

Gregg Keizer | Jan. 28, 2014
Apple sold a record 51 million iPhones in the fourth quarter of 2013, but acknowledged it underestimated the appeal of the flagship iPhone 5S, making some analysts question the company's two-model strategy.

She scoffed at Cook's explanation that TouchID, the new fingerprint reader available only in the iPhone 5S, had been the primary reason why sales tilted to the pricier phone.

Tuong Nguyen, an analyst with IDC, had been skeptical of the 5C's pricing strategy last year, and felt vindicated by the fourth-quarter results. "The issue is that the price disparity [between the 5S and 5C] was not enough," Nguyen said. "In mature markets, why am I gonna bother saving a little bit of money to scale back on the technology?"

The ASP, or average selling price, of the iPhone jumped last quarter, confirming that sales skewed toward the higher-priced flagship iPhone 5S. (Data: Apple.)

The price was apparently not low enough to entice large numbers of customers in emerging markets either, although Cook defended the 5C's performance. "We saw a significant new-to-iPhone number [of sales]. It's not a number that we throw out, but we particularly saw that on the 5C, which is what we wanted to see" Cook said.

To be fair, some analysts last year predicted that the lower-priced 5C would gain momentum as time goes by since, not surprisingly, those who bought first would be those most enthralled by the latest iPhone, not a rerun of last year's. "Most consumers who wanted to buy a device on launch weekend were early adopters and enthusiasts," Sameer Singh, who covers mobile technology at his Tech-Thoughts website, said last September when asked why early sales skewed toward the 5S. "The high-end model would have appealed to them."

And Ben Bajarin of Creative Solutions didn't buy the idea that pricing was the only problem, citing other factors, including longer stretches between phone upgrades as carriers got tougher with their subsidies, which may have caused price-sensitive customers to defer purchases more than those who were willing to pay whatever it took to have the newest, shiniest device.

"Maybe this validates the strategy that Apple had before, when they brought out a new iPhone and sold last year's model for less," said Bajarin. "Maybe that's what they go back to."

Bajarin also speculated that the iPhone 5C got caught in a no-man's land between the flagship and 2011's iPhone 4S, which carriers with subsidies gave away with a two-year contract. "Maybe people want the [most expensive] iPhone or free, and the 5C got stuck in the middle," Bajarin said.

None of the analysts queried Monday thought Apple would abandon the iPhone 5C immediately.

"Clearly, they have a strategy, and they'll tweak that strategy," said Milanesi, who added that any moves would probably not happen until Apple rollls out its next-generation iPhone.

"I think that the next time they bring up a less-expensive iPhone, they'll use a bigger price separation between that and the newest," said Gottheil.


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