Apple sold a record 51 million iPhones in the fourth quarter of 2013, but acknowledged it had underestimated the appeal of the flagship iPhone 5s, making some analysts question the new two-model strategy and arguing that Apple had erred in pricing the iPhone 5c.
For the quarter, iPhone sales were up 7% compared to the year before, when the company sold 47.9 million smartphones. The iPhone also set another record, generating 56.4% of all revenue for the quarter, casting the Cupertino company as even more of a smartphone maker than usual.
During that call, CEO Tim Cook acknowledged that the mix of iPhones sold had included a larger percentage of the top-dollar iPhone 5s than Apple had anticipated.
In September, Apple unveiled two new iPhones for the first time, the top-end iPhone 5s and the middle-tier 5c. The latter was a repackaged iPhone 5 in a colourful plastic case that was priced about €100 less than the 5s.
At the time, most analysts and pundits expressed disappointment that Apple had not priced the iPhone 5c even lower – they had figured Apple would shoot for market share gains, especially in price-sensitive Asia – but some, including Ben Thompson of Stratechery, cast the move as consistent with Apple’s position as a luxury, premium-priced brand.
By the numbers, it seemed that most customers agreed with the analysts who panned the price.
While Apple never splits out iPhone sales by model, the jump in the ASP (average selling price) strongly hints that the mix tilted toward the iPhone 5s. The smartphone’s ASP jumped from $577 in 2013’s third quarter to $637 in the fourth and nearly matched Q4 2012’s $642.
While that was good for Apple’s bottom line – it booked $13.1 billion in net profit, equal to what it recorded in the same quarter the year prior – it made some wonder about the iPhone 5c strategy.
Tuong Nguyen, an analyst with IDC, had been skeptical of the 5c’s pricing strategy last year, and felt vindicated by the fourth-quarter results. “The issue is that the price disparity [between the 5s and 5c] was not enough,” Nguyen said. “In mature markets, why am I gonna bother saving a little bit of money to scale back on the technology?”
The ASP, or average selling price, of the iPhone jumped last quarter, confirming that sales skewed toward the higher-priced flagship iPhone 5s.
The price was apparently not low enough to entice large numbers of customers in emerging markets either, although Cook defended the 5c’s performance. “We saw a significant new-to-iPhone number [of sales]. It’s not a number that we throw out, but we particularly saw that on the 5c, which is what we wanted to see” Cook said.
Some analysts last year predicted that the lower-priced 5c would gain momentum as time goes by since, not surprisingly, those who bought first would be those most enthralled by the latest iPhone, not a rerun of last year’s. “Most consumers who wanted to buy a device on launch weekend were early adopters and enthusiasts,” Sameer Singh, who covers mobile technology at his Tech-Thoughts website, said last September when asked why early sales skewed toward the 5s. “The high-end model would have appealed to them.”
Cook, as is his policy, declined to discuss future products or pricing, but left open the door to changes. “We obviously always look at our results, and conclude what to change moving forward. And if we decide it’s in our best interest to make a change, then we’ll make one,” he said.
Gregg Keizer, Computerworld
@gkeizer gkeizer@computerworld.com
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