Apple (NASDAQ:AAPL) CEO Tim Cook dismissed pundits and analysts who have questioned the price of the company's lower-cost iPhone 5c as too high, arguing that Apple has never been in the business of making low-cost phones.
Apple will sell the 16 GB iPhone 5c for $99 and the 32 GB version for $199 when coupled with a two-year contract. On a no-contract basis, however, the phone will cost $549 for the 16 GB model and $649 for the 32 GB model.
Many analysts had expected the iPhone 5c to retail for $400 to $500 on an unsubsidized basis, and were shocked that the ultimate price was not lower. Many also lamented it as a missed opportunity for Apple to go after customers in emerging markets who have not been able to afford new iPhones.
The iPhone 5c prices are only $100 lower than the higher-end iPhone 5s, which will sell for $199 for the 16 GB model, $299 for the 32 GB model and $399 for the 64 GB model, all with a two-year contract. On an unsubsidized basis, the iPhone 5s will sell for $649 for the 16 GB model, $749 for the 32 GB model and $849 for the 64 GB model.
However, in a new interview with Bloomberg Businessweek, Cook explained Apple's strategy, explaining that the smartphone market has split into a high-end segment a low-end segment.
"There's always a large junk part of the market," he said. "We're not in the junk business." Apple is still focused on the higher end of the market, where customers remain willing to pay a premium for value, he said. "There's a segment of the market that really wants a product that does a lot for them, and I want to compete like crazy for those customers," Cook said. "I'm not going to lose sleep over that other market, because it's just not who we are. Fortunately, both of these markets are so big, and there's so many people that care and want a great experience from their phone or their tablet, that Apple can have a really good business."
To underscore the strategy, which many analysts have said is aimed at keeping Apple's margins high, Cook said: "We never had an objective to sell a low-cost phone. Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost."
In the wide-ranging interview, Cook also touched on Microsoft's (NASDAQ:MSFT) recent decision to pay around $7.2 billion for Nokia's (NYSE:NOK) handset business. He said that it indicated other companies are trying to copy Apple's vertically integrated smartphone model of controlling hardware and software development. "Everybody is trying to adopt Apple's strategy," Cook said. "We're not looking for external validation of our strategy, but I think it does suggest that there's a lot of copying, kind of, on the strategy and that people have recognized that importance."
Cook also rebuked Nokia, which, before the advent of the iPhone, led the world not only in terms of handset shipments overall but smartphone shipments as well. Nokia has tried to turn its smartphone business around on the back of Microsoft's Windows Phone but is no longer among the top five smartphone vendors worldwide. "I think [Nokia] is a reminder to everyone in business that you have to keep innovating and that to not innovate is to die," Cook said.
Analysts are puzzling over how many iPhones will Apple will sell this weekend when the 5s and 5c go on sale. According to AllThingsD, Piper Jaffray analyst Gene Munster expects Apple to sell between 5 and 6 million units this weekend, while BTIG analyst Walter Piecyk says he expects Apple to sell at least 6 million iPhones, owing to the fact that Apple is launching the phones in China alongside other initial markets for the first time.
- see this Bloomberg Businessweek article
- see this The Verge article
- see this AllThingsD article
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