) shares tumbled a day after the company launched two new
iPhones. Apple stock closed at $467.71 per share on Sep 11, 2013,
down 5.4% compared to the previous day's closing price.
Apple unveiled iPhone 5S with a 64-bit A7 processor,
fingerprint scanner and a 8-megapixel camera and a cheaper model,
iPhone 5C, specially designed for the low and middle income
consumer markets such as China, India and South Asia.
Prior to the launch, industry observers expected Apple to
price its low-cost smartphone in the range of $400 and $500
(without contract). On the contrary, Apple seems to have followed
its traditional pricing structure as the iPhone 5C is priced $549
(without contract) in the US and around $733 in China.
The investor community and shareholders were disappointed as
the pricing of the so called low-cost smartphone did not match
their expectations. However, it appears that Apple is more
concerned about maintaining a higher gross margin as it has come
down sharply over the last few quarters, instead of gaining
market share in the low cost regions.
Although Apple successfully gained license necessary to run
China Mobile Ltd
), we believe that the comparatively high price of the iPhone 5C
will still keep it out of the reach of low and middle-income
Chinese smartphone users. This will negatively hurt Apple's
market share going forward.
Moreover, we believe that the Asian handset manufacturers who
) Android operating system and have a better supply chain and
significant local presence will use this opportunity to further
lower prices of their devices. This price competition will make
it difficult for Apple to penetrate these markets in a meaningful
We believe that Apple is fast losing its innovative edge. The
company seriously needs to come up with something (Apple TV,
smartwatch) new to regain its lost status. We believe that the
acquisition of Nokia's smartphone business by
) will further intensify competition in the smartphone market and
will be a major headwind for Apple going forward.
Currently, Apple has a Zacks Rank #3 (Hold).
APPLE INC (AAPL): Free Stock Analysis Report
CHINA MOBLE-ADR (CHL): Free Stock Analysis
GOOGLE INC-CL A (GOOG): Free Stock Analysis
MICROSOFT CORP (MSFT): Free Stock Analysis
To read this article on Zacks.com click here.