On Tuesday, Apple announced two new iPhones: the much-awaited and highly-leaked 5s and 5c. The 5s looks like a very nice upgrade to last year's iPhone 5: faster CPU, better camera, fingerprint scanner, and a bigger battery in the same form factor with a new gold color option - all at the standard $199 on-contract price. However, many industry observers were more curious about the long-rumored iPhone 5c.
Wall Street was not happy
Wall Street was hoping the 5c could compete with mid-tier Android smartphones in both developed markets and important developing markets like China. The price was speculated to be around $400 off-contract and free with a contract. Apple's announcement was a complete dud: $99 on contract, $550 off contract - the same exact price we would have seen if Apple continued selling last year's iPhone 5 instead. In response to the announcement, Apple's stock price dropped $12.81 (2.5%) from its high at the start of the announcement through the rest of the day, and then opened up the next day down another $27.63 (5.6%) over a period when both the Dow and NASDAQ were up.
5c = 5 + colorful plastic
Essentially, the 5c has the same guts and specs of the iPhone 5 in a new plastic shell with slightly longer battery life. I think this tells us two things: the iPhone 5's margins were too low for Apple to lower the price, and Apple may have sacrificed launching new iPads this year to instead launch the 5c.
Who is the iPhone 5c for?
So who is this thing for? Apple is keeping the 4s in the lineup and offering it for free with a contract. So the 5c isn't going to shake up the low-end up the iPhone lineup. At $550 off-contract it's also not going to be price-competitive with mid-tier Android phones in countries where consumers typically pay the full price for their phones. I suppose the colors are nice, but you could have simply bought a case.
Don't underestimate the amount of time, money, engineers, and other resources it takes Apple to refresh an iPhone, even if it uses most of the same internal components as the previous year's model. These are resources that could have been spent elsewhere, such as on refreshing the iPad lineup.
I think the 5c is for Apple. They dressed it up in a different package to try to appeal to a broader audience and in typical Apple fashion talked up the magical technology behind the plastic package. But really, this phone is for Apple. It's to help improve the margins of the iPhone line. If they end up not releasing any new iPads this year, it will probably have been worth it from a financial standpoint because so much of Apple's revenue and profits come from the iPhone line. However, if they are able to turn out two new iPhones and refreshed iPads all in the same year, then we should expect to see lots of new products from Apple in the future.