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Apple Pares Down iPhone 5C Orders Due to Poor Sales

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This is why the stock dropped after Apple announced its "cheap" pricing.

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The cheap iPhone is neither cheap, nor seen as the real iPhone. Discuss.

Apple (NASDAQ:AAPL) has reduced orders for the iPhone 5C from its assemblers in Asia, according to the Wall Street Journal's Ian Sherr. It turns out that customers are not buying the conspicuously cheaper handset.

As we saw on Monday, the iPhone 5S is indeed an incredible feat of industrial design, but it is also a high-end aspirational product. This is why the flagship iPhone is outselling the "cheaper" 5C two to one. It should be clear now that the 5C's pricing was far off the mark.

Apple is one of just two companies that makes profits in the smartphone industry -- 60% of the market's profits, actually. Especially in the cheaper segments of mature markets like the US, Samsung (OTCMKTS:SSNLF) and other handset makers employing Google's (NASDAQ:GOOG) Android platform outsell Apple at a lower margin. This is even more pronounced in emerging markets countries where analysts expect the most pronounced growth in the smartphone market. In India, the iPhone was priced so far out of most people's reach that even the Microsoft (NASDAQ:MSFT) Windows Phone outsells Apple there.

Apple investors were understandably scared that the high-end market is already saturated with iOS devices, and that Apple will miss out on growth, especially in countries where mobile carriers don't usually subsidize the cost of a phone. When Apple revealed that its notion of "affordable" is still not so cheap, the stock fell about 3%.

The newest batch of phones also went on sale in China and the US simultaneously. But customers in China still aren't biting. The iPhone remains a luxury product for the nouveau riche. The gold iPhone 5S was the popular one there, especially with the tuhao jin (which means "gold of the uncouth wealthy" or "like Elvis, you have money and no idea how to spend it with class").

So Apple is cutting orders by about one-fifth or one-third, according to the Wall Street Journal; one supplier said that orders were cut in half. The assembly plants in China are even cancelling plans to hire more employees. The article also said that Wal-Mart (NYSE:WMT) and China Telecom (NYSE:CHA) are already starting to discount it. And unlike the 5S, consumers have no trouble getting a 5C without any delay.

I should point out that the 5C was very well-reviewed. It's a nice phone, but it's not as nice as the "real" iPhone. Apple just missed the sweet spot on pricing. However, it hasn't even been two months since Apple bifurcated its phone customers. Early adopters won't settle for the colorful, but less spec-heavy phone. But when holiday season rolls around, that might change.

Twitter: @vincent_trivett
No positions in stocks mentioned.
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