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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."
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.
The narrative around Apple has certainly shifted, and this is having a tremendous impact on how people view what Apple is doing. Especially hear on Slashdot, people seem anxious for any sign that Apple is failing. That said, I would argue that the iPhone 5s is just as "groundbreaking" as any phone that's been released in the last few years. The inclusion of a 64-bit processor and the fingerprint reader are sure to be huge selling points, even if most people don't understand what 64-bit means or why it's advantageous.
I agree with you, and disagree with the summary, in stating that the iPhone 5c is almost certainly not a low-margin device. In fact, the very existence of the iPhone 5c seems to be a response to the lower margins Apple has had in selling devices that are one and two years old. The iPhone 5c is an iPhone 5 in lower-cost packaging. This serves to increase Apple's margins. People here like to give Apple a hard time, but the reality is that the iPhone 5 remains not only a usable phone, but a phone that provide a tremendous customer experience. Instead of keeping the iPhone 5 in the lineup and selling it as one of their "cheap" phones (as Apple has done with the releases of their last two flagship phones), they designed a cheaper to manufacture version that has all of the same benefits.
It is true that selling two "new" phones instead of one this year will likely decrease the number of sales for either device individually. That said, I expect that next Monday (after the iPhone 5s has actually gone on sale) there will be a press release indicating that combined sales (and pre-orders) of these two new phones exceeds the initial sale of the iPhone 5. (I'm also prepared to eat crow if I'm wrong.)
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?!
The problem is that the iPhone 5 wasn't particularly exciting or new either. After the iPhone 5 was basically a year behind the competition when it was released people expected Apple to do more this time around to catch up, but instead they just did an incremental update.
The other issue this time around is that the 5C isn't cheap enough. It was supposed to open up China, but it's way too expensive to compete. I suppose Apple are hoping that their name will make it desirable.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
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.
even if most people don't understand what 64-bit means or why it's advantageous.
Heck, I know what it means and still don't understand why it's supposed to be advantageous.
You mean listening.
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.
I know all the pundits believe that the 5C was supposed to open up China, but that doesn't mean it is what Apple intended. As pointed out elsewhere in this thread, this is just the same strategy of taking last year's hot phone and bumping it down to the peons -- but ensuring they maintain their margin. about 20% of the cost to build the 5 was in the machining and assembly, not to mention the press they got on how easily scratched anodized aluminum was. So instead of a Iphone 5 with an aluminum back that's $100 less than last year's price, you have the 5c which probably adds $20-30 back into the margin for Apple and avoids some of those pesky customer complaints.
Apple (even if currently reviled) is not stupid. If they want to compete on the low end in China, it won't be with the 5c at twice the price of a HTC android. Maybe it'll be a 4c at a slight premium to HTC with a similarly high margin.
You haven't heard Siri until you've heard her in 64-bit through your Grados!
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
The inclusion of a 64-bit processor and the fingerprint reader are sure to be huge selling points, even if most people don't understand what 64-bit means or why it's advantageous.
That's exactly why consumers don't care about it. In the past iPhone features have had a very visual and immediate "wow" factor that people can see the utility of straight away. App Store, 3G, Siri, Apple Maps (lol), widescreen, retina displays and so forth.
Instead of keeping the iPhone 5 in the lineup and selling it as one of their "cheap" phones (as Apple has done with the releases of their last two flagship phones), they designed a cheaper to manufacture version that has all of the same benefits.
Yes, but they seem to have missed their target. The point of the 5C was to break into markets where the 5S is too expensive to gain big market share. For years Apple fans were saying Apple didn't care about these markets and there was no money in cheap(er) phone, but actually they wanted in and just couldn't come up with a suitable product. It needed to be current generation (i.e. have a 5 in the name) to remain desirable but also be affordable, and it seems that most analysts think that it's too expensive.
Like it or not Android is offering very strong competition, and even on fairly low end hardware is now smooth and provides an excellent user experience. I recently installed Cyanogen on an old Galaxy S (~1GHz single core CPU, 512MB RAM) and it's a very nice phone. The reality is you can buy a pretty good dual core, 1GB RAM, large HD screen phone in China for a fraction of what Apple wants to charge and it's as good as the iPhone in most respects to most ordinary people.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
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
The point of the 5C was to break into markets where the 5S is too expensive to gain big market share.
According to who? That's what pundits wanted and assumed but it should now be obvious that it's not what Apple wanted. For the time being, they're still happy with their premium device strategy. You only have to look as far back as the iPod and iPod mini to see what they're doing.
It should be noted the iPhone 4 is still being sold in China.
The point of the 5C was to break into markets where the 5S is too expensive to gain big market share. For years Apple fans were saying Apple didn't care about these markets and there was no money in cheap(er) phone, but actually they wanted in and just couldn't come up with a suitable product. It needed to be current generation (i.e. have a 5 in the name) to remain desirable but also be affordable, and it seems that most analysts think that it's too expensive.
No, that was the rumored point of the 5C - back before it was announced, when everyone assumed the C stood for "cheap," or "China." Now it is clear that wasn't it - it's the same price as the iPhone 5 would otherwise have been at this point, and internally it contains all the iPhone 5's hardware. As the poster you responded to clearly explained, the only significant change here was that it's cheaper to manufacture, allowing Apple to make a better profit off essentially the same year-old phone they would have been selling anyway.
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.
How this keeps getting trotted out as fact every time there is a story about these phones I'll never know. And of all places, here on slashdot where people should know better.
There are many other reasons why a 64 bit architecture is helpful. You may not know of them, but they exist. Many of them apply to game development, which was a big push if you watched the initial product announcement.
Culture is more than commerce
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.
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.
Revisionist history my ass. You didn't counter a single fact in my or the grandparent's post. Apple has always made the previous model available $100 less than the current model; that's exactly what they have done again here, except they gave it a "pretty" (and cheaper to manufacture) body. They never claimed it was supposed to be a dirt cheap phone for China; that was rumor and speculation (now, that may be a good idea or it may not, but that's an entirely separate argument). How can you simultaneously say "the rumors [that the phone was supposed to be cheap] were pretty much true" and then say they "missed this target by making it expensive"?