Apple’s colourful iPhone 5C is not exactly setting the world aflame, says Brian White at Cantor Fitzgerald in a new note.
White is travelling Asia, and reporting on all the bits of gossip he hears. White’s reports should not be taken definitive reports, but rather scuttlebutt passed along to an analyst. It’s interesting reading because it adds to the overall story surrounding Apple.
He met with sources at a Chinese carrier who told him, “demand for the iPhone 5C was less enthusiastic, as the price point isn’t resonating well with customers in China.”
In China, the 5C costs over $US700 off contract, which is a bit steep compared to solid Android phones that sell at half that price.
“Our contact believes the iPhone 5C has potential, and consumers ‘love’ (especially the younger crowd) the new colour 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,” says White, adding, “The negative comments around pricing and the positive comments around the colour scheme have been consistent during our trip over the past week.”
White isn’t the only one that’s hearing bad news from Asia on the 5C.
Jefferies analyst Peter Misek reported on Monday, “We think it is likely that the 5C misses consensus FY14 expectations and 5s sales taper off faster than the Street expects … Apple might respond to lackluster 5c sales by cutting price to drive higher units and keep momentum going.”
And, following the weekend of the launch of the 5C Apple analyst Gene Munster said that a lot of 5Cs were sitting at stores unsold.
One more indication the 5C isn’t doing all that well: Best Buy, Walmart, and Radio Shack all cut the price in half to $US50 on a two-year contract.
Both Misek and White hinted that Apple might end up cutting back on orders for the 5C if sales don’t pick up.
Before Apple announced the 5C, everyone expected the phone to be cheaper so Apple could grab market share points. It isn’t cheap, so these reports may just be part of a gradual resetting of expectations.
Consumers are really enthusiastic about the 5S, which is only a $US100 more than the 5C. If you’re buying a phone, and likely to have it for two or three years, it makes sense to pay the slight premium.
In the grand scheme of things, lackluster 5C sales might not mean much. As long as the 5S continues to sell, Apple should be fine. The 5C is really just a replacement for the iPhone 5. And it will probably outsell the iPhone 5.
Plus, Apple has some wiggle room with the 5C. It can always cut prices if it thinks sales are lacking. It’s much easier to lower prices than raise them, so starting high and testing market demand isn’t all that bad.