In Defense of Apple's iPhone Updates: Three Positive Comments

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Wow, investors in Apple ( AAPL ) stock sure are a wussy bunch all of a sudden.

Monday's world-shattering news was, literally, no news. That is, there was no word from Cupertino on the number of online pre-orders received over the weekend from US consumers for the newly-announced iPhone 5C.

Also, there was one tidbit of possible news. That is, the Wall Street Journal reported that China Telecom ( CHA ) appeared to be offering a smaller subsidy for the iPhone 5S than for the previous model.

Result: Apple stock dropped another 3.07%, to $447.06 at the market close, making it the worst-performing stock of the day on the S&P 500 (INDEXSP:.INX).

That brings the stock's total losses to about 10% since last week's announcement of two new phone models, the lower-priced 5C and the 5S. The latter is not available for pre-orders in the US until Friday.

Apparently, investors got in a tizzy because Apple has publicized its pre-orders for every introduction since the first iPhone in 2009, and every succeeding announcement reported a total sellout and a doubling of orders from the previous model.

So, no news is bad news, maybe. Or, possibly, the company finally anticipated demand accurately. Even more likely, the company expects, and even hopes, the cheaper 5C model will sell only moderately in the US, since it is counting on the usual huge sales for the more expensive iPhone 5S, beginning this Friday.

The low-end model, after all, is supposed to be aimed at emerging markets, where consumers are far more price-sensitive than in the US. And that might take the sting out of the report from China saying that the expensive model could get a less-generous subsidy than its predecessor.

Since 2007, it has seemed that Apple could do no wrong, in the eyes of investors. And now, suddenly, it can do no right.

Worse, that attitude has now spread beyond the personal tech and financial media and is moving into the public consciousness. For proof, see this compilation of late-night jokes, online satires, and plain insults about Apple's latest product announcements, from Investors.com.

But Apple has its defenders, on both the 5C and the 5S. Here are three major points they're making.

1. There's Room at the Top for Apple

The iPhone 5C is apparently Apple's take on a lower-priced, entry-level product for emerging markets. But at $549 in the US, and as much as $733 in China, critics say it misses the affordability boat.

Analysts generally cite about $400 as the upper limit for emerging market consumers.

Writing in The Guardian , Jean-Louis Gassee , a partner at Allegis Capital, argues that those who are demanding a low-priced product from Apple don't understanding the company or its customers.

When BMW (ETR:BMW) resurrected the Mini Cooper brand, Gassee says, it wasn't trying to compete with the Tata ( TTM ) Nano.

The tiny Tata Nano, made in India, has been a huge success with people trading up -- from a motorbike. At about $3,000, it's the world's cheapest car model.

Plenty of other products can be purchased in a wide range of prices. Gassee makes the point that consumer technology has room for a luxury brand, but somehow has gotten stuck in a race to the bottom, price-wise.

2. Apple Isn't Totally Oblivious to Price

Among the harshest of Apple's current critics is Henry Blodget, who writes at BusinessInsider.com that he's a loyal customer and shareholder but thinks that Apple "is letting its obsession with short-term profits blind it to the current realities in the mobile industry."

He'll be glad to hear this news: Apple will leave its pricing to distributors in India unchanged at 2012 levels, despite the 14% plunge in the value of the rupee so far this year.

According to the report in Bloomberg News, Samsung (OTCMKTS:SSNLF), currently the largest phone brand in India, has raised its prices.

India is the world's fastest growing smartphone market.

3. The iPhone Is Practically Free Here

What a country!

For all the talk of the high cost of the iPhone 5C and the iPhone 5S, a flurry of new offers makes it clear that most Americans will be able to get one practically free or very cheap.

"Practically free or very cheap," meaning, well, not really. They can trade in an old iPhone, or swap another brand for an iPhone, or dump their current carrier, in order to get a new iPhone for very little up front, along with a new two-year contract with the carrier.

The best deals for consumers might be for leftover Apple 5 models. Although discontinued, they have virtually the same specs as the new 5C model.

But in all of the above cases, no matter how good a deal the consumer gets, Apple gets its full price.

And that's a pretty positive comment about Apple.


Related stories:

Apple Inc. in Russia: iPhone Sales Under Threat as Antitrust Case Hits Major Retailer

Nokia's Camera Phone, Samsung's Outdoor Handset Point to a Fragmented Market

Apple Is the Least Worst, and That's Why It's the Best



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Technology

Referenced Stocks: AAPL , CHA , SSNLF , TTM

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