iPhone 5S, 5C pricing strategy to boost earnings


While Apple has seen a major increase in competition in the smartphone market over the last couple of years it hasn’t stopped the company selling their handsets in the truck load, but there are claims that Apple will adjust its pricing strategy to boost earnings for the iPhone 5S and 5C.

Respected Piper Jaffray analyst Gene Munster believes that the iPhone 5S and budget iPhone 5C will be announced in September, which is a date that has been mentioned before, while any new iPad announcement won’t come until October.

Then in 2014 a larger sized iPhone is being tipped along with the much rumoured iWatch device around the middle of the year. Munster believes that 70% of fiscal 2014 iPhone sales will come from owners upgrading their device from an older version of the iPhone.

It is felt that if Apple can price the iPhone 5C to get a large enough margin without taking too much away from the iPhone 5S, its earnings should not just stabilize but in fact go higher. The analyst feels that the budget iPhone model will only achieve a gross margin of 15%, and cannibalize sales from other models by 25%.

The situation will depend on which countries and carriers stock the cheaper device and what features it will be missing compared to other models. Munster is going on the assumption that 80% to 90% of iPhone users will upgrade to another iPhone once their two year contract is up.

Going on the 125 million iPhone’s that were sold during the Apple’s financial year of 2012 he estimates that 106 million units will be purchased by existing users, and with an overall total of 152 million being sold Munster feels that 70% of the fiscal 2014 iPhone sales are already sorted.

Time will tell though and it has to be remembered that a budget iPhone model hasn’t been officially confirmed even though evidence is mounting such a device is in existence.

Do you expect to see a budget iPhone model next month?

Source: Forbes.

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