Comments on Apple’s Debut of the new iPhone 5C and iPhone 5S

On September 10, 2013 Apple formally debuted two new smart phones, the iPhone 5S and the iPhone 5C. I was particularly interested in learning more about the iPhone 5C. My interest stemmed from a conviction any further sales growth for Apple, Google, Microsoft, etc. will have to be forthcoming from emerging markets. But emerging markets lack the buying power of the Americas and Western Europe markets, so the pricing of these phones will have to be substantially lower than the pricing of comparable smart phones sold in the Americas and Western Europe.

Apple substantially disappointed me with their announcement. If the performance of their stock since announcement can be taken as any indicator of how the broader investment community has reacted to their announcement, I’m not alone in my opinion. (September 25, 2013 update: The nice bump we’ve seen in Apple’s price, since these products launched, in my opinion, must be entirely attributed to their ability to use these new products to persuade existing customers to buy yet another iPhone. Of course, they are also cannibalizing competitors in the upscale markets, but I still stand by my take on their likely failure to increase penetration in emerging markets with these new phones.).

The iPhone 5C purported to be Apple’s solution for the emerging markets. But with a price tag of $400.00 USDs, for retail customers buying the smart phone without a service contract, the product fails to represent the promising pricing strategy Apple needed to increase sales in emerging markets.

When I put the disappointing iPhone 5C together with an equally disappointing iPhone 5S, I can only conclude Apple has little path upwards from here, and, in all likelihood, some way to diminish over time.

For the record, what’s disappointing about the iPhone 5S is my opinion on the negligible additional value the new speedier processor and the fingerprint sensor for device authentication and online purchases are likely to deliver to average customers. Most device speed is a function of networks, anyways. Competitive smart phones are already equipped with very fast processors, so I don’t think the iPhone 5S will magnetize a substantial amount of buying interest based on its significantly faster processor. But the importance of the status factor of one upping your buddies with a new high end iPhone cannot be dismissed, at least for now.

On the question of the fingertip authentication system, I think this is an old technology. Perhaps Apple should be commended for porting it over to a small, smart mobile device driven by a touch screen, but I can remember lots of problems with the fingertip reader for my HP laptop, and can’t help to think there will be more of the same with this system. (September 25, 2013 update: Hackers claim to have broken this authentication system already.).

Of course Google and Microsoft will likely benefit from the less than earth shaking response I think Apple will get for these new products, over time.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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