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The great 'iPhone 5C is a failure' freakout

John Cox | March 19, 2014
The iPhone 5C is six months old in March. It's been declared a disaster, a dud, a fiasco and a flop. The reports of its death have been greatly exaggerated. Here's why.

To hear the iOSphere explain it, the iPhone 5c launched six months ago - is the worst Apple disappointment, disaster, dud, failure, fiasco, flop, and mistake since the Lisa PC, the Newton, Macintosh Portable, Powerbook Duo, the Copeland OS and seven other of Apple's biggest failures ...combined.

Yet according to one estimate, in the first full quarter of the 5s/5c availability, the 5c seems to account for just under 20 percent of the estimated $32 billion in iPhone revenues for that period, or about $6 billion dollars. If iPhone 5c was a company, $6 billion in revenues would put it at about number 430 on the Fortune 500 list

Nearly all of these fiasco formulations are based on an almost complete absence of reliable data (or on unsubstantiated rumor) and on an almost willful misunderstanding and misinterpreting of comments by Apple executives. As we'll see, comments by Apple CEO Tim Cook at the January earnings call were almost universally misinterpreted as an admission that Apple had overestimated demand for the 5c. What he actually said was the Apple had under-estimated demand for the 5s.

The pricing for the 5c clearly positions it in the role of the year-old discounted iPhone models, creating a lower-priced alternative to each year's new flagship. But its polycarbonate packaging and its technology features blending hardware from iPhone 5 and 5s - proclaim it as a brand in its own right, the first extension, or segmentation of the iPhone.

What little evidence there is hints and no more -- that in this, the six month anniversary of the 5c's availability, Apple's strategy for the 5c is working. The 5c seems to doing roughly as well as the discounted older iPhone models have done in the past to create a less expensive iPhone option for buyers, especially for those who are less affluent than iPhone 5s buyers, and those coming to the iPhone for the first time. But until there's more data, the verdict on the 5c is still out. Even if the jury is all in.

"Extraordinary claims require extraordinary evidence," says Horace Dediu, an independent consultant and founder of Asymco, an "evolving experiment in collaborative and peer reviewed analysis" as the website phrases it. "The claim that a product is a flop in view of overall growth and rising pricing should be backed with some strong evidence."

Overall growth and rising average selling price is what Apple reported in January 2014: record iPhone unit sales and revenues. Executives said during the earnings call that Apple sold more iPhone 5s units than forecast. That was confirmed as the average selling price (ASP) for iPhone edged upward, pulled by the $100-higher price of the 5s compared to the 5c. Apple doesn't break down sales of its tablets and smartphones: it reports unit sales for "iPads" and for "iPhones."

 

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