The reaction to
) iPhone 5S and 5C unveiling this Tuesday was ambivalent at best.
The high-end 5S is predictably beautiful and packed to the brim
with smart updates to its functionality, but it doesn't quite have
the transcendent appeal of previous models like the 4 or 4S, which
used features like Facetime and Siri to get people talking.
But the real talk of the town is the 5C, which has just about
everyone scratching their heads, as it was rumored to be a
low-price device, possibly targeting emerging markets like China.
On Apple's China website, the iPhone 5C is listed at a starting
price of 4,488 RMB, or $733.
Keep in mind that Peking University said that the average annual
income for a family in China was just $2,100 last year. In urban
areas, that number rises to just $2,600. There are a lot of
millionaires in China, but there are a lot of poor people, too.
Now did Apple shoot itself in the foot here?
Should it have headed straight for the bargain bin with a
I've done a lot of thinking about this, and as an investor and
buyer of Apple products, I want to scream, "No!"
Think about what's going on in the smartphone market. Apple's path
may not be perfect, but it's the least worst strategy in the
industry by a long shot.
) Android market is absolutely booming from a units perspective,
but it's also kind of a mess. In Q2, Android had 79.5% market
share, up from 69.1% the year before, fueled by 73.5% growth.
The rest of the industry grew by an anemic 1.7% as
), Linux, and Symbian fell off the map, offsetting growth in Apple
) Windows Phone models.
But how are Google Android phone makers doing?
as I wrote back in August
(TPE:2498) both reported lower-than-expected earnings in July.
Samsung's stock is down 20% year-to-date, while HTC is down a
Samsung is seeing profit pressures due to increased costs for new
product launches, R&D, and retail channel investments. In its
earnings presentation, it also said that it expects "competition to
HTC is not only seeing its sales slide, but it also has collapsing
profit margins and may actually post a loss in Q3.
And year-to-date, Motorola has actually posted an operating loss of
$397 million for Google.
These companies are suffering because there are far too many
high-end Google Android phones on the market, and the high-end
Android market itself is coming under assault from the low end.
When everyone has access to the same hardware components, the same
software (in this case, Android), and the same contract
manufacturers, what you get is a whole lot of phones that look an
awful lot alike.
And that's why Android is not working for anyone except Google
itself and the folks making money on the physical component and
software/app sides -- the
(FB) of the world.
Who else is out there?
BlackBerry is exploring a sale -- the latest
is that it may be taken private -- after a disappointing quarterly
earnings report and ongoing market share shrinkage, while the
(NOK) marriage will be lucky if it results in 5% market share by
Apple's the least worst -- and according to my math, that means
it's the best.
Apple is not growing the way it once was, but it has one thing none
of its competitors does: a premium brand name earned over decades
of making high-priced, innovative products. That reputation didn't
start with the iPhone, and it can't end with it, either.
If Apple enters an idiotic pricing war with Samsung, then it will
be sacrificing not only current profit margins, but future ones as
In the event Apple turns into a discount brand, how's it going to
charge premium prices for whatever product class comes after the
Now to be fair, Apple may be at the end of its rope; maybe it's
getting to the point of exhaustion in terms of adding new customers
to the family.
Who really knows?
But one thing's for certain: If Apple changes its course and starts
competing on price, then losing is not a possibility; it's a
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Disclosure: Minyanville Studios, a division of Minyanville
Media, has a business relationship with BlackBerry.