U.S. Markets closed

Once More With Feeling: iPhone 5C Isn’t a Cheap iPhone to Get More Market Share

Aaron Pressman
The Exchange
new iphones

Before Apple (AAPL) officially unveiled the iPhone 5C in September, back when there were just rumors of a 5C, almost everyone thought the point of the plastic-coated phone was to gain market shares with a low, low price.

But when Apple formally introduced the device, which wrapped a multi-colored shell around the internals of last year’s iPhone 5, the price wasn’t low at all. At $99 with a two-year contract, or $549 off-contract, the 5C carried the exact same price as the mid-tier iPhone 4S the year before.

There was no price cut, no lower entry point, no model to win fans among pay-as-you-go and emerging market phone owners. There was just a plastic-cased iPhone in the middle instead of a metal-cased phone in the middle.

And yet, with Apple scheduled to releases its quarterly earnings today, legions of articles are setting up the results as a test of the iPhone 5C’s ability to expand market share among more price conscious shoppers.

Talk about setting up your kid to fail.

The iPhone 5C, by all measures available, is in fact doing just what Apple wanted. It has slightly expanded the proportion of iPhone fans opting for the middle tier and allowed Apple to devote all of its limited supplies of carefully crafted, aluminum outer cases to the higher end iPhone 5S.

The point of the 5C is to ease supply limitations on the higher model and likely boost profit margins on the middle range offering. It’s not a cheap phone aimed at emerging markets. And Apple has already surprised skeptics once over the new iPhones, reporting first weekend sales of 9 million, considerably more than analysts predicted.

Analysts expect Apple sold about 33 million iPhones in the just completed quarter along with roughly 15 million iPads. Similar to the past quarters, Wall Street also expects Apple show a slight gain in revenue from the same quarter last year along with a noticeable decline in profit.

Apple shares have been on upswing lately, especially after the company sold a lot more iPhones than expected in the April to June quarter. Shares of Apple gained 20% over the past three months, though they are still down about 1% for the year.