The Street, as it is known to do, conveniently forgot this. And as expensive as the $549 price point may seem, let's not forget that Apple already has a less expensive version of the iPhone that's selling pretty well. It's called the iPhone 4S. So for Apple to immediately cannibalize a product with decent margins that is still selling well wouldn't make much sense, especially since production costs are already factored in.
Regarding the 5C, though, I can go into all of the details about the phone's features, including the five colors, the A6 chip, better battery life, and host of other stuff. Still, according to some, this wouldn't justify Apple's "better-than-cheap" pricing strategy. It won't make a bit of difference in the minds of analysts -- many of whom have already made up their minds and downgraded the stock. But the assumption of lower-than-expected market share growth is a bit premature, if not entirely exaggerated.
But look, we can't have it both ways.
Apple is being hammered today for attending to margins, yet over the trailing 12 months, the company's "eroding margins" were all you heard about from anyone that wanted to incite fear. Besides, who's to say that Apple can't lower the price of the phones if it so choose? It's easier to justify lowering the price than raising it on finding out that it was set too low.I also believe that Apple's new capital plan, which includes doubling the cash returned to shareholders over the next two years, might have had a lot to do with this pricing decision. Not to mention the buyback program, which jumped to $60 billion, to go along with the 15% dividend increase. Someone's got to pay for all of that. And with the iPhone 5C, I don't blame Apple for dialing in to collect. It's an Apple product. There's always someone to answer. At the time of publication, the author was long AAPL. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV