According to reports, Apple is cutting its orders for the lower-cost iPhone 5c. Why might this be good news for Apple?
It looks like Apple is cutting orders of its new, low-cost iPhone 5c. So why may that actually be good news for Apple?
Two major suppliers of the iPhone 5c say Apple has reduced their fourth-quarter orders for the multicolored smartphone. Priced at $99 to $199 when purchased with a plan ($549 to $649 unlocked), the iPhone 5c was released last month as a cheaper alternative to the iPhone 5s, which can sell for up to $849.
While margins for the 5c are believed to be less than that of the 5s, the 5c was to open the door (and wallets) for the more price-conscious and budget-restrained consumer. And, it wouldn't hurt to boost sales in China. Apple ranks seventh in China with a 5% share of the smartphone market. That's way behind Samsung's first place lead of 18%.
But, something happened: Consumers much preferred the more expensive 5s to the cheaper 5c. Some estimates have the 5s outselling the 5c between two-to-one and three-to-one. Even in China, the 5s may have gained more traction than expected, in part because the 5c sells at just a minor discount to the premium 5s. Brain White of Cantor Fitzgerald recently wrote:
"Our contact believes the iPhone 5C has potential, and consumers 'love' (especially the younger crowd) the new color scheme; however, we were told the price point needs to come down to a range of US$325-$405 to find meaningful volume levels in China."
Apple's orientation as a premium brand was further reinforced yesterday when it hired Angela Ahrendts, the CEO of Burberry, to oversee operations at its 400-plus retail locations. Ahrendts was credited with building the Burberry brand and was compensated accordingly; the American was the highest-paid CEO in Britain, taking home $27 million in 2013.
(Read more: Apple's new retail chief is no stranger to tech)
Apple's stock is down 23% compared to last year. However, with customers saying they want to pay more for Apple's higher-end products and with a new retail chief who knows the luxury market, are better times ahead for Apple?
Roberto Friedlander, Head of Equity Trading at Brean Capital, looks at the fundamentals of Apple. On the charts is Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson.
Are Apple's best days yet to come? Watch the video above to see Friedlander and Ross analyze what's next for Apple.
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