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This was expected to be the lower-end version, the cheap or budget phone -- whatever you want to call it -- that was supposed not only to compete more effectively with
Samsung's(SSNLF) device dominance, but also to steal share from
Google's(GOOG - Get Report) Android.
On Tuesday, however, at the company's long-awaited Sept. 10 event, the Street learned that Apple's new phones were -- in fact -- just dialing for profits. By listing the iPhone 5C at an unsubsidized price of $549, which is (at least) $150 more than analysts expected, it's clear that Apple has no interest in sacrificing margins for market share.
And given that the stock is down more than 5% following the announcement, it's safe to say the Street hung up on the optimism.
[Read: <a target="blank" data-add-tracking="true" href="http://www.thestreet.com/story/12030731/1/iphone-5cs-impact-is-massively-underestimated.html"><em>iPhone 5C's Impact Is Massively Underestimated</em></a>]
Now, to be perfectly honest, going the cheap route was never something that I supported. I made this known
here. I can't say that I expected this sort of overreaction, either.
But let's have some perspective. Admittedly, as an Apple shareholder, I don't believe that the event -- in its entirety -- lived up to its billing, particularly since
China Mobile(CHL), the world's largest carrier with over 740 million subscribers, didn't make the agenda.
Even so, I believe Apple understands its current market position. To that end, it's more than ridiculous that we, on the outside looking in, feel that we have more of an urgency to get Apple to decide between market share or margin. It was not a "flip of a coin" decision.
I'm not disagreeing that the 5C is still premium priced. But for a premium brand, this was a calculated move -- one that, I believe, signals that other product launches are certainly on the way.
Besides, Apple had sent signals during the third-quarter conference call that the phones would have been on the high end of the price range. This was why management issued guidance that was lowered by as much as 5%. This -- according to my calculations -- implied that revenue would be flat on a quarter-over-quarter basis. Essentially, I believe Apple would have guided fourth-quarter revenues higher if it had anticipated robust sales on a cheaper price-point phone.