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Did Apple Make a Mistake By Releasing Two New iPhones?
Nerval's Lobster writes "As noted by CNET, Apple hasn't released data on the number of iPhone 5C units it presold in the device's first 24 hours of availability—a first for the iPhone since 2009. Why is that? Reporter Josh Lowensohn speculates that iPhone 5C sales 'may not be as impressive when stacked up against tallies from previous years,' with one outside analyst suggesting that Apple racked up 1 million iPhone 5C preorders last Friday, or roughly half the 2 million presales scored by the iPhone 5 on its first day of ordering availability last year. However well the iPhone 5C ends up performing on the open market, Apple's decision to launch two iPhones this year—rather than a single 'hero' device—could result in self-cannibalism, as users who would've bought the iPhone 5S instead gravitate toward the cheaper option. Cannibalism is a topic that Apple knows well, as it's been dealing with the iPhone cannibalizing the iPod for the past several years; but a new iPhone eating away at another new iPhone is fresh territory for the company. During earnings calls, Apple CEO Tim Cook likes to argue that cannibalization—whether iPhones feeding off the iPod, or the iPad taking the place of MacBooks—is a good thing, so long as it's Apple products eating other Apple products. But it's far more questionable whether he would welcome the iPhone 5C—almost certainly a low-margin device, despite its current-generation components and plastic body—taking a bite out of the more expensive, and presumably higher-margin iPhone 5S. Margin erosion remains a prime concern of investors and Apple watchers; anything that contributes to that erosion is bound to be viewed unfavorably."
Part of the issue is that this is the "revise the device" year for Apple. Even with their immense cash reserves, it takes a lot of time to design a phone, design its form/function, test it internally, and make sure all is in order for their legal department before it makes it out the door. Then, they have to make sure the ODM/OEM are ready to produce the device in the needed numbers.
Because the 5S/5C are not "groundbreaking", Apple ends up with not as many sales as the year when they have something with a completely new design.
Another part is that the 5C models are cheaper to make, so Apple still turns a tidy profit either through lower priced, but less cost to them models or higher cost, higher overhead offerings. The 5C appears intended to help get a foothold in other markets, but in the US, it will do well against the entry level Android devices or the back-generation iPhones that are sold to keep people on contracts.
As for the "hero" phone, the 5C really isn't aimed that direction. The 5S seems to have made to toss a bone to the enterprise, adding another useful (even though this can be argued) security feature so data on the device has another layer of protection.
Apple made a mistake by not releasing any new iPhones.
Mod me down all you want, it wasn't long ago I was getting modded down for defending Apple and their yearly product releases. I can no longer find any room to defend their smartphone platform.
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It's the oldest sales trick in the book -- you lure people in with promises of a bargain, then try to upsell them to a more expensive product. Movie theater popcorn is the classic example of this (OMG it's 2x the popcorn for only $1 more!) but electronics companies have done this for decades.
There's no -1 for "I don't get it."
The "cheap" 5C still retails for $549-$649. I'm sure Apple has a healthy amount of profit with that figure.
I don't see the 5C as a low end device, instead I see the 5S as a premium model. No one pays over half a grand for a low end phone.
Samsung offers 31 different smartphone models in my local market alone. They range from awful $79 single core handsets intended for the prepaid market through the S4 and Galaxy Note series. Their shotgun approach guarantees that whatever price range a customer is looking, they're likely to at least consider a Samsung. The problem is that they don't make money on the low end, even though they ship millions of units. It's only the top tier handsets that command the large margins.
Apple is a far smaller company that doesn't have its own manufacturing facilities. That fact alone prevents them from participating in the low end of the smartphone market -- by the time they give Foxconn or Pegatron their cut, the margin on a sub-$100 phone would be unacceptable. It would be a make-work project. By eliminating the iPhone 5 from the lineup and replacing it with the 5C, the company seems to be positioning the 5C to gradually slide into the midrange market in a way that doesn't cannibalize sales from the top of the line glass and pixie dust series.I suspect that it will be under a year before the 5C is available for $0 on contract, with a manufacturing cost that's lower than the 4 that it replaces.
Would you rather sell X number of one product or some factor of X (larger than 1) of two products?
Also, when you sell two new products, at the same time, it is not cannibalization, otherwise, the entire effing PC market is full of cannibals. Hell, how many similar products does Samsung have?
It's market segmentation, idiots.
Do these people even have a damned clue?!
http://www.informationweek.com/mobility/smart-phones/foxconn-iphone-5-is-hard-to-make/240009249
If you want a device you can sell for 99 bucks on contract it needs to be easier to make.
Also, when you sell two new products, at the same time, it is not cannibalization [...] It's market segmentation
It might be cannibalization.
Its segmentation if the new lower tier product picks up millions of new buyers who just couldn't afford the high tier one.
But its cannibalization if millions of users who would have bought the high tier one if it was the only one one on offer, but now buy the low tier one because its available and good enough.
The key to segmentation is to make sure nobody who can afford the high end model would be satisfied with the low end one, that they would rationalize spending the extra to stay in the premium product.
Apple has shown time and again that, as far as the public is concerned, they know what they're doing.
But because they don't bring out something as amazing as the iPhone and the iPad were when they were first announced every single month, everything they do do gets panned as "not revolutionary enough," "more proof that without Jobs, Apple is DOOOOMED," etc.
So, in the minds of most of the pundits today, yes, Apple made a mistake by releasing two new iPhones. They also would have made a mistake if they had released one new iPhone, or three, or a smartwatch, or a smart TV, or a bloody time machine. No matter what Apple does, the tech press have to find ways to make it fit the narrative of "Apple is Doomed." That's pretty much all there is to it.
If you read the Macalope column over at MacWorld (and read it with a grain or two of salt, of course, because it's primarily intended to be humorous...but it still cuts deep a lot of the time), you can see him point out a lot of the glaring inconsistencies and habitual methods of trying to twist reality to make Apple's successes sound like failures. (Like the old favourite, "compare Apple's current products to hypothetical future products from its competitors.")
Dan Aris
Fun. Free. Online. RPG. BattleMaster.
Why the worry about self-cannibalism?
I believe it was Jobs that said that if you aim to protect your bread and butter, someone else will just eat you up.
So Apple has absolutely no issue with creating devices that will eat into existing product lines - take the iPod line. You had the original, then the mini, shuffle and nano. Each of which eats into each other's sales somewhat. But you still sell more this way than any other way.
Or the iPhone. It certainly ate into the iPod (group) sales, and the iPod Touch certain ate into iPhone sales (an iPhone without the phone!)
Or the iPad - it's certainly eating into Mac sales, especially lower end - people who would've bought an Air probably bought iPads instead - it does everything they needed it for anyhow.
If you innovate by trying not to compete with yourself, you end up like Kodak, inventor of the digital camera. However, the digital camera concept was not Kodak's focus, which was selling chemicals, so Kodak sat on the technology until other companies started selling them and film and chemical sales bottomed out. They could've transformed from a chemical company to an imaging one - the bulk of their sales would be chemicals, but they'd have a growing business doing all sorts of imaging - from digital cameras to printers and even having photo printers that develop to regular print paper, selling more chemicals.
If the 5C sales eat into the 5S sales - so be it. Each should compete on their own merits, and if the 5C should prove more popular, well, it means the 5S didn't deliver good value for money.
And just like it was said, they both make money. And the end goal is to make money - if you convert a Samsung user to an Apple user, a plus - who cares if they buy a 5S or 5C? It could also be if you didn't have one or the other, the user may have stuck with Samsung. And yes, there will also be users who go from Apple to Samsung.
The last time people thought Apple was making a huge mistake and cannibalizing their own sales was with the iPod nano replacing the iPod mini, and we saw what a *disaster* that was.
Steve Jobs even said that if Apple doesn't cannibalize their own sales, somebody else will. This is such a non-issue that it's laughable.
Ask me how the Heisenberg Principle may or may not have saved my life.
If Apple doesn't cannibalize some of their own phone sales, lower-end Android smartphones will eat those sales. Apple is not as able to command a premium price as formerly.
Apple products are well-made, work well, work well in the Apple ecosystem, and are premium priced. In the early days of the iPhone, Apple successfully sold premium devices to customers who normally don't buy premium, because those customers couldn't get a non-sucky smartphone anywhere else. And buying an Apple smartphone, even at a premium price, still only means a few hundred dollars of extra expense.
But as the premium Android smartphones of yesterday move down and become the budget Android smartphones of today, there is less need to pay a premium to get a nice smartphone. Apple needs to compete on price.
With the 5C, Apple is trying to walk a fine line. They are trying to lower the entry-level price of an iPhone enough to keep sales that would have gone to Android phones, while at the same time they are trying not to take too many sales away from their top-of-the-line iPhone. (IMHO the plastic case is an inspired bit of product segmentation. Whether it's significantly cheaper or not, it serves as a nice differentiator between the bargain iPhone and the premium iPhone.)
I think in the USA, the 5C will serve its purpose pretty well, because most people get subsidized phones and the $100 subsidized price looks attractive. But worldwide, the entry-level phone customers will all be buying Android devices. I don't think there is anything Apple really can do about this. Their choice is either to accept lower profit margins on phones, or else watch as Android solidifies its hold on developing markets. The conservative thing for Apple to do is to keep charging premium margins; if they ever slash their prices it will be very hard ever to change their mind and go back to premium pricing.
lf(1): it's like ls(1) but sorts filenames by extension, tersely
They'll sell them as fast as they can make them and rake in huge profits.
Kind of the whole point.
Timing... for developers.
You want to get your 64-bit processor out the door so that people who make apps that might benefit from more than 4gb of memory can start to write their apps for 64-bit BEFORE you actually start shipping phones with more than 4gb of memory. This allows them time to convert to 64-bit without being rushed into it. It also gives your OS developers time to get the 64-bit OS out the door. If the 64-bit OS isn't ready when you ship the product, you release with a 32-bit OS and you just don't advertise the 64-bit feature. (Or you say "64-bit ready" or something like that and promise the next OS release will bring 64-bit to existing phones.
In short, as a consumer, you don't care... yet. You want the 64-bit in a year or two when you have 8 gigs of memory in your phone. In order to have applications for that 8-gig phone, you want Apple to release a 64-bit phone now, so that developers will be ready with 64-bit applications to put on that 8-gig phone.
The other aspect here is that most architectures tend to clean things up when they move to 64-bit, and ARM is no exception. Some of those architectural changes that come with 64-bit will be more valuable sooner, and could translate to performance boosts right now on some applications that switch to the 64-bit architecture.
The 5S is aimed at the corporate and tech head market. The 5C is aimed at the "teens" and lower end market. Its long term strategy too, these phones will probe still being sold new in 2 years time like the 4S still is. So they need devices that teens will still want in 2 years (how about a new range of colours?) As for canibalising: its competing with itself - sometimes a good thing. Consumers think they have a choice, the 5C or the 5S. They will fail to realise that there are plenty of other options out there too, Samsung, HTC, Nokia, Sony, etc.
The 5S is aimed at the corporate and tech head market. The 5C is aimed at the "teens"
Bullshit. They are both squarely aimed at the consumer market, and that is exactly the right thing to do. Steve Balmer famously laughed of the iPhone as not suitable for the business market, his recent replacement thinks perhaps he should have thought differently.
Except Apples profits are falling
IIRC (I don't have the figures in front of me), it is their profit growth that is falling, not their profits themselves.
Dan Aris
Last two quarters
http://www.apple.com/pr/library/2013/07/23Apple-Reports-Third-Quarter-Results.html
"The Company posted quarterly revenue of $35.3 billion and quarterly net profit of $6.9 billion, or $7.47 per diluted share. These results compare to revenue of $35 billion and net profit of $8.8 billion"
http://www.apple.com/pr/library/2013/04/23Apple-Reports-Second-Quarter-Results.html
"The Company posted quarterly revenue of $43.6 billion and quarterly net profit of $9.5 billion, or $10.09 per diluted share. These results compare to revenue of $39.2 billion and net profit of $11.6 billion,"
Is your screen size too small to do a search before posting false information. Profits are simply falling YonY and by quarter from apples own financial statements.
Only point I am trying to make is that Apple didn't initially diversify. They sold one iPod.
Eventually when that played out, they started producing other ipods starting with the nano, then color nanos and their clip on thingies.
This time Apple has been selling one iPhone initially, now they are selling a parsed down version that is colorful.
I think eventually they will producing a wider variety to remain a player in the markets they can glean a profit from.
Maybe that will be in smaller clip on phone devices, maybe that will be in larger phablets.
This just seems similar to me to what they did with the roadmap of the iPod.
I wasn't even thinking of the marketshare aspect really.
I disagree Apple is sacrificing market share for profits any more than they have always done. Apple has been getting the bulk of profits from the phone market up until Samsung was a good match for them. Apple still gets 45% of the worldwide PC profits despite having only a 5% share.
Apple seems to be operating like Apple has forever and yet people seem to find that this approach is somehow flawed, as if Apple will magically disappear at some point when their phones make up some smaller percentage of the market.
Yeah, because Apple never had a history of introducing lower-end colored models into their lineup.
iPod. iMac.
when I'm going to be paying for a carrier contract anyway
Because the math has changed recently and pre-pay is now cheaper than post-pay, unless you have some special use case. The only network where you can use your "free" 5C is on Sprint.
But once you are on Sprint, you are stuck with a 2-year contract at $80/month (let's pretend there's not a bunch of extra fees and taxes for the moment). That gets you unlimited talk, text, and data on Sprint's network. Or you could do Boost on Sprint's network for $55/month initially, with $5 reductions every 6 months until you get to $40/month.
Sprint: $0 + 24x$80 = $1920
Boost: $549 + 6x$55 + 6x$50 + 6x$45 + 6x$40 = $1689
So you are paying an extra $231 for the post-pay on the same network, all just to get a "free" phone. And with pre-pay, you can walk away at any time and just sell the phone on eBay.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.