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TheStreet Open House

Can Apple's New iPhone Answer Margin Calls?

I won't deny that Apple's operating leverage has lacked flair in its first three reporting periods of the year. But I don't think the company demonstrated underlying struggles in operation -- at least not to the extent they were exaggerated by the Street.

Now with a cheaper iPhone, which is said to come in various colors, I believe Apple is saying "to hell with your margins." The company is now going after market share -- something that Apple has never before cared about.

But is it the right strategy? It's worked for Samsung. But absent strong profitability, I'm not convinced Samsung's investors have benefited, when compared to shareholders of Apple. The idea that Apple may join Samsung doesn't sit well with me.

Again, I'm not saying that Apple won't be profitable. I just don't have enough information to get excited about this launch -- at least not from an investor's point of view. As a consumer, I applaud the decision. But until details are shared about production cost of the 5C and at what price point the phone will be sold, we can only speculate the effects on Apple's margins.

And with details about plastic casings and downgraded features, logic suggests the price can't be too high. I don't know much more than that.

But what I do know is that the iPhone is still Apple's best-selling product. And if rumors are true that Apple will finally land the world's largest carrier in China Mobile (CHL) and NTT DoCoMo (DCM - Get Report), it will be only a matter of time before Apple reemerge as a solid growth company, while shedding the hybrid/mature giant persona that it resembles today.

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SYM TRADE IT LAST %CHG
SSNLF $1,200.00 0.00%
AAPL $124.44 0.86%
CHL $64.69 -0.66%
DCM $17.97 -0.88%
GOOG $555.17 -0.65%

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