A clear hierarchy
In removing the iPhone 5 and replacing it with the 5C, Apple has clearly identified a hierarchy among its iPhone product line. The iPhone 4S, at $0 with a two-year contract, is available in black and white, with a smaller display. The plastic-backed 5C is available in five different colors. Then there’s the Touch ID-equipped 5S, available in silver, space gray, and gold. In line with their pricing, the 5S has the best chip (A7) and the 4S has the worst (A5), with the 5C right smack in the middle (A6).
Source: Apple website.
Notably, Apple’s premium-priced iPhone and its mid-priced iPhone, for the first time, are both new smartphones. The combined value proposition for the two phones likely has a broader audience than it would if the mid-priced iPhone were an older iPhone 5. With the iPhone 5 gone, Apple can attract consumers unwilling to pay up for a 5S with a new, mid-priced 5C that has its own uniqueness.
Are the new iPhones game changers?
Even with a clearer hierarchy combined with fresh new designs in both its premium- and mid-priced iPhones, will the value proposition attract enough new customers to positively impact Apple’s bottom line? After all, some analysts expected an unsubsidized price tag as low as $400 for the iPhone 5C — $549 is considerably higher.
Is $549 a low-enough price point to attract a large number of new customers in the important Chinese market?
With no surprises and a more expensive iPhone 5C than many analysts anticipated, we would be getting ahead of ourselves if we expect Apple’s revenue and earnings to soar on iPhone sales alone over the next year.
Fortunately, Apple’s conservative valuation at today’s prices doesn’t call for meaningful EPS growth. On that note, a solid, fresh value proposition without any groundbreaking surprises or impressively low prices is likely enough to continue to reward Apple investors over the long haul.
The article Are Apple’s New iPhones Enough? originally appeared on Fool.com and is written by Daniel Sparks.
Fool contributor Daniel Sparks owns shares of Apple. The Motley Fool recommends and owns shares of Apple.
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