Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL), Microsoft Corporation (MSFT), Google Inc (GOOG): Is the iPhone 5C the New Surface RT?

Apple Inc. (NASDAQ:AAPL) shares have been reeling since introducing the iPhone 5C on Tuesday, but now it’s time to see if consumers feel the same way.

Apple Inc. (NASDAQ:AAPL) will begin taking preorders for the 5C — not the more full-featured 5S — at midnight.

It’s an unusual move, but it’s somewhat similar to what Microsoft Corporation (NASDAQ:MSFT) did last year by starting to sell the scaled-back Surface RT ahead of the Surface Pro tablet.

Apple Inc. (NASDAQ:AAPL)

Sure, the gap was a couple of months between Surface releases. It’s just a week on the new iPhones. We’re also only talking about preorders here, since both devices will be available at retailers a week from Friday. However, Apple Inc. (NASDAQ:AAPL)’s plan in putting out a slightly cheaper and less robust mobile device that may miss its mark as an entry-level product seems eerily similar.

Microsoft Corporation (NASDAQ:MSFT) thought it would be able to penetrate the growing market share of Google Inc (NASDAQ:GOOG)‘s Android with the Surface RT, but it wasn’t cheap enough at $500. Apple Inc. (NASDAQ:AAPL) is also hoping to win back market share from Google Inc (NASDAQ:GOOG)’s open-source platform, but its device — starting at an unlocked price of $550 — is also not cheap enough. A few analysts even downgraded Apple on Wednesday after digesting the price points and coming to the same conclusion.

Now, unlike the Surface RT, the 5C won’t be a colossal flop. Apple Inc. (NASDAQ:AAPL) has shown that there is a market for phones selling $100 less than the latest model, at least through wireless carriers willing to subsidize most of the cost. Verizon Communications Inc. (NYSE:VZ) reported a few quarters ago that it was selling as many iPhone 4 and iPhone 4S handsets — at $200 and $100 less, respectively, than the iPhone 5 — so there’s certainly something to be said for $199 vs. $99 under a two-year contract.

In fact, it could even be less, with reports that Wal-Mart Stores, Inc. (NYSE:WMT) is already gearing up to sell the iPhone 5C for as little as $79 with a two-year contract.

However, the 5C will be dead in the water with the overseas carriers and the domestic prepaid operators that were hoping for a cheaper way to get their customers into the iOS ecosystem.

Microsoft Corporation (NASDAQ:MSFT)’s gamble in overpricing the Surface RT didn’t pay off. It eventually slashed the price to $349 this summer, but it was too late. The brand is toast, and it isn’t a surprise to see that Microsoft will strip the RT from its moniker when the Surface 2 is rolled out later this month. By the same token, it won’t be a surprise if lackluster sales of the 5C force Apple into more aggressive pricing in a few months, only if its iPhone 5S also fails to gain market share.

Microsoft Corporation (NASDAQ:MSFT) and Apple think they have something to protect with the out-of-touch initial pricing for entry-level devices. Microsoft Corporation (NASDAQ:MSFT) didn’t want to burn other manufacturers that were embracing RT, but when they all but cleared the room, it was an easy call to go for broke. Apple’s the only one making iOS gadgets, so it doesn’t have to worry about that. Apple is merely protecting the integrity of the iPhone 5S. If the 5C is too cheap, it would cannibalize sales of the 5S. However, maybe something’s wrong if Apple feels that a year of innovation isn’t enough to command more than a $100 premium to last year’s technology in a plastic shell.

The 5C will sell millions and likely tens of millions, but that won’t be enough to make it the success that many were envisioning as they bid up shares of Apple this summer. The 5C may be this year’s Surface RT.

The article Is the iPhone 5C the New Surface RT? originally appeared on and is written by Rick Munarriz.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. It also owns shares of Microsoft. 

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.