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  • Analyst Sees Apple's iPhone 5C Pricing as Right Move for Holiday Sales


    According to one prominent analyst, investors should ignore supply chain noise about the iPhone 5C and trust that Apple made the right move in maintaining its margins. Maynard Um of Wells Fargo Securities believes Apple’s pricing strategy with the iPhone 5C, making it the company’s mid-range phone with a $99 on-contract price, will pay off in the long run. He noted that last year’s mid-range smartphone, the iPhone 4S, saw its sales ramp up heading into November and December, as more casual buyers showed interest during the holiday shopping season.

    Some market watchers, Apple should have priced the iPhone 5C more aggressively in an attempt to take market share away from low-end smartphones running Google’s Android platform. Um on the other hand believes that doing so would have been too risky of a move. If Apple had taken lower margins and hoped for unit volumes to offset, there would have been “no guarantee of price elasticity driving volumes,” according to Um. In addition, a cheaper iPhone 5C may have potentially resulted in even greater margin pressures as Apple transitioned to its next models in 2014. Um mentioned the following regarding he matter:

    We believe the certainty was the right choice and would not necessarily discount demand yet.
    The comments were made in response to several reports from both The Wall Street Journal and Reuters, which cited sources indicating that Apple was cutting orders for the iPhone 5C. It was being speculated that changes in the supply chain could signal “weaker-than-expected consumer demand,” but later clarified to say that any apparent reductions “may not be all bad.”

    Ironically, Apple CEO, Tim Cook, warned analysts earlier this year stating that reading too much into the supply chain data can be a critical mistake. He said the following regarding the matter:

    The supply chain is very complex, and we obviously have multiple sources for things. Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant for our business.
    As for the series of discounts that many third-party resellers offered for the iPhone 5C, Um noted that this is a typical strategy that third-party resellers try to take advantage of. He doesn’t see the discounts on newly released models as concrete evidence of soft demand for the iPhone 5C. He said the following regarding the matter:

    As has been the case in the industry for years, third-party resellers derive profits from carrier 'finder's fees,' which can amount to $250 depending on a number of factors, including whether it's a new contract or an upgrade. Thus, a price 'drop' is not necessarily a reflection of materially weak demand, but, rather, a business model strategy to drive volumes.
    Wells Fargo Securities continues to maintain its “outperform” rating for AAPL stock with a share valuation range between $525 and $575.

    Source: Wells Fargo Securities via AppleInsider
    This article was originally published in forum thread: Analyst Sees Apple's iPhone 5C Pricing as Right Move for Holiday Sales started by Akshay Masand View original post
    Comments 7 Comments
    1. dsg's Avatar
      dsg -
      no
    1. Feanor64's Avatar
      Feanor64 -
      Lol
    1. ThuD Muffin's Avatar
      ThuD Muffin -
      The 5c will do well. From what I've seen, the younger crowd seems to absolutely love it. When holiday shopping season comes around not only will many get the phone, but parents will also be happy paying only $99.

      Apple knew what they were doing with this phone. Kids are all about color color color...
    1. WHUDS's Avatar
      WHUDS -
      I do not get, years past APPLE would of just keep on producing the 5 and sell it for $99 new contract and upgrade but this posed the 4s vs 4 problem they had before, the 5 and 5s would just about look the same and the cost to make a 5 would still be a factor.

      So APple went to redesign of the 5 to 5c, cheaper to make and some improvements plus now in colors. Colors is something that ANdroid users were saying they could get but Iphone was lacking. If the diehard Apple Fanboy says "Color does not matter" Then why the gold 5s?

      5c has a polycarbonate case not really (Plastic) as some love to post. The phone feels good and is as fast as my 5 ( my wife has a 5c) at $45 (Walmart) its a steal for a great Iphone. Apple made a mistake of not introducing at this price point IMHO
    1. Bluprint's Avatar
      Bluprint -
      Um no
    1. Mrteacup's Avatar
      Mrteacup -
      Poor people who get the 5c as a present..
    1. WHUDS's Avatar
      WHUDS -
      Quote Originally Posted by Mrteacup View Post
      Poor people who get the 5c as a present..
      Nothing to do with income for most of its status, for my wife and I 5c is good enough as the 4 was for 3 years