Apple shares hit on iPhone disappointment

Shares slid 5.5% to US$467.25 in morning trade in New York, a day after Apple unveiled two new iPhones, fielding a slick new top-end model along with one aimed at budget-conscious smartphone users around the world.

Analysts said the new devices were unlikely to be a hit in emerging markets and that Apple failed to bring down prices enough to attract many new customers.

While the new iPhone 5C is being offered to US customers at US$99 with a subsidised carrier contract, the unsubsidised price is US$549 in the United States and more than US$700 in China.

"So much for the low end," said Credit Suisse analyst Kulbinder Garcha in a research note. "We are disappointed with Apple's decision to remain a premium priced smartphone vendor."

Garcha said that the new top-line iPhone 5S was lacking real innovation and that the lower-cost version may hurt sales of the premium product.

"The iPhone 5s has a new apps processor, improved camera functionality and new motion sensor functionality. However, these are not game-changers and are more evolutionary than revolutionary," the analyst said.

Plastic iPhone

"The iPhone 5c is essentially a multi-colored, plastic iPhone 5 and could cannibalise higher end sales and account for over 50% of unit mix over time bringing lower gross profit dollars," Garcha added.

Walter Piecyk at BTIG Research said Apple is not doing enough to target the customers buying phones without a carrier subsidy, which is common in many places around the world.

"The pricing on the iPhone 5c is simply not low enough to adequately address the significant global growth opportunity that we believe exists with unsubsidised prepaid customers that have not yet bought a smartphone," Piecyk said in a note to clients.

"To be clear, Apple never indicated that it was their intention to attack this market with the iPhone 5C and the global opportunity is still in its early stages. However, we believe Apple is foregoing a valuable and relatively easy way to return to earnings growth. The real question is whether Apple plans to ever go after these markets or rather just remain a high-end phone manufacturer," Piecyk said.

Bank of America/Merrill Lynch analysts downgraded their outlook for Apple to "neutral," over disappointment on the new handsets while Bank of America analyst Scott Craig cited the lack of a cheap iPhone will limit penetration in emerging markets.

He also expressed dismay that Apple did not, as expected, announce an agreement with China Mobile, which has about 700m subscribers.

Apple said it will begin taking orders on Friday (13 September) and the two devices will go on sale in the United States, Australia, Britain, China, France, Germany, Japan and Singapore the following week.

The iPhone 5C is part of Apple's bid to counter the flood of low-cost smartphones from rivals, most of which use the Google Android operating system.

Source: AFP via I-Net Bridge