Is the iPhone 5C the New Surface RT?

Apple (NASDAQ: AAPL  ) shares have been reeling since introducing the iPhone 5C on Tuesday, but now it's time to see if consumers feel the same way.

Apple will begin taking preorders for the 5C -- not the more full-featured 5S -- at midnight.

It's an unusual move, but it's somewhat similar to what Microsoft (NASDAQ: MSFT  ) did last year by starting to sell the scaled-back Surface RT ahead of the Surface Pro tablet.

Sure, the gap was a couple of months between Surface releases. It's just a week on the new iPhones. We're also only talking about preorders here, since both devices will be available at retailers a week from Friday. However, Apple's plan in putting out a slightly cheaper and less robust mobile device that may miss its mark as an entry-level product seems eerily similar. 

Microsoft thought it would be able to penetrate the growing market share of Google's (NASDAQ: GOOGL  ) Android with the Surface RT, but it wasn't cheap enough at $500. Apple is also hoping to win back market share from Google's open-source platform, but its device -- starting at an unlocked price of $550 -- is also not cheap enough. A few analysts even downgraded Apple on Wednesday after digesting the price points and coming to the same conclusion.

Now, unlike the Surface RT, the 5C won't be a colossal flop. Apple has shown that there is a market for phones selling $100 less than the latest model, at least through wireless carriers willing to subsidize most of the cost. Verizon (NYSE: VZ  ) reported a few quarters ago that it was selling as many iPhone 4 and iPhone 4S handsets -- at $200 and $100 less, respectively, than the iPhone 5 -- so there's certainly something to be said for $199 vs. $99 under a two-year contract.

In fact, it could even be less, with reports that Wal-Mart (NYSE: WMT  ) is already gearing up to sell the iPhone 5C for as little as $79 with a two-year contract.

However, the 5C will be dead in the water with the overseas carriers and the domestic prepaid operators that were hoping for a cheaper way to get their customers into the iOS ecosystem.

Microsoft's gamble in overpricing the Surface RT didn't pay off. It eventually slashed the price to $349 this summer, but it was too late. The brand is toast, and it isn't a surprise to see that Microsoft will strip the RT from its moniker when the Surface 2 is rolled out later this month. By the same token, it won't be a surprise if lackluster sales of the 5C force Apple into more aggressive pricing in a few months, only if its iPhone 5S also fails to gain market share.

Microsoft and Apple think they have something to protect with the out-of-touch initial pricing for entry-level devices. Microsoft didn't want to burn other manufacturers that were embracing RT, but when they all but cleared the room, it was an easy call to go for broke. Apple's the only one making iOS gadgets, so it doesn't have to worry about that. Apple is merely protecting the integrity of the iPhone 5S. If the 5C is too cheap, it would cannibalize sales of the 5S. However, maybe something's wrong if Apple feels that a year of innovation isn't enough to command more than a $100 premium to last year's technology in a plastic shell. 

The 5C will sell millions and likely tens of millions, but that won't be enough to make it the success that many were envisioning as they bid up shares of Apple this summer. The 5C may be this year's Surface RT.

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Read/Post Comments (34) | Recommend This Article (5)

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  • Report this Comment On September 12, 2013, at 8:39 PM, djtetsu wrote:

    Your anti-Apple articles are pretty much all off..

    "Now, unlike the Surface RT, the 5C won't be a colossal flop." .. then let's stop the analogy shall we?

  • Report this Comment On September 12, 2013, at 9:09 PM, adamwins76 wrote:

    There's a lot of negative reporting this week about one of the best brands in the entire world, sitting on $150 billion in cash by the way -- and probably one of the most undervalued stocks going. If the C had been cheaper analysts would have complained about margins. Apple comes out with a plan that protects its margins and offers consumers a better contract-entry price and analysts downgrade the stock because the C isn't cheap enough?! Friggin idiots and day traders!

  • Report this Comment On September 12, 2013, at 9:19 PM, marv08 wrote:

    "Sure, the gap was a couple of months between Surface releases. It's just a week on the new iPhones."

    First make a completely invalid comparison, and then try to look less foolish by pulling some relativity stunt? Oh boy.

    "The brand is toast, and it isn't a surprise to see that Microsoft will strip the RT from its moniker when the Surface 2 is rolled out later this month."

    Because naming an OS that has no windows and doesn't run 99% of Windows applications "Windows RT" wasn't confusing enough, we now give it a name that even hides that it is running a different OS altogether. Brilliant! That will show them.

    "Microsoft and Apple think they have something to protect with the out-of-touch initial pricing for entry-level devices."

    Listen, it is simple math, I promise. If the Surface RT would have been priced too high, then MS would have smaller or no margins now, but they actually wrote of $900m on the price reduction... which indicates that their actual cost was not all that far from the selling price. You can't write off missing profit, only actual losses.

    "Microsoft didn't want to burn other manufacturers that were embracing RT, ..."

    Haha. Good one. If they care about their ODMs, don't make own hardware. The other apologist favourite is: "The Surface was only intended as a sample to show others how to build sophisticated RT devices". Which is why absolutely nobody even attempted to build a similar device... Listen, Monkey Boy really thought that this device will be a runaway hit, and that the price is right (that is, after all, why they made too many). They were wrong on all accounts. This can happen to almost everybody. No problem, and no reason to invent silly excuses either.

    "The 5C will sell millions and likely tens of millions, ... The 5C may be this year's Surface RT."

    Come on, there is one little contradiction here. Can you spot it?

    If I remove all odd comparisons from this article, it basically says "pffffffft". "Pffffffft", really?

  • Report this Comment On September 12, 2013, at 9:19 PM, DanManners wrote:

    Adamwin76 go to Yahoo and post all your antisemtic remarks as usual. If you go to Apple yahoo you will see this guy post under 1000's of aliases and his nasty remarks. He talks to himself as no sane person would be on there with him.

  • Report this Comment On September 12, 2013, at 9:25 PM, marv08 wrote:

    @DanManners: Well, he did not post anything antisemitic here, and if you think there is something wrong with his statement... I would like to hear it. What he does elsewhere... not so much.

  • Report this Comment On September 12, 2013, at 9:34 PM, bugnuts wrote:

    Another dumb Munarriz column. Really dumb.

  • Report this Comment On September 12, 2013, at 9:44 PM, Cuftbll wrote:

    Idk but its all the kids are talking about on the way home tonight from football practice. Hmmmm..Almost makes you think Apple was creating a phone for the 10-18 age group or something with a lower entry cost. Weird!!!!

    And almost sounds like an awesome Christmas gift. Wow!

  • Report this Comment On September 12, 2013, at 10:11 PM, Henry3Dogg wrote:

    "Is the iPhone 5C the New Surface RT?"

    Let's see. It took Microsoft 6 months to sell 10% of their initial production run.

    My money says the 5C is sold out within the first few days.

    And the 5S within the first few hours.

  • Report this Comment On September 12, 2013, at 10:42 PM, st0815 wrote:

    "Carrier subsidy" is a funny term.

    It's just an opportunity for the carrier to loan customers money for a phone purchase - with a rather high interest rate.

  • Report this Comment On September 12, 2013, at 10:49 PM, Mega wrote:

    The 5c will be an enormous success. I wonder if Rick will admit when he is wrong.

  • Report this Comment On September 12, 2013, at 10:53 PM, Mega wrote:

    "Microsoft didn't want to burn other manufacturers that were embracing RT"

    "However, the 5C will be dead in the water with the overseas carriers and the domestic prepaid operators that were hoping for a cheaper way to get their customers into the iOS ecosystem."

    marv08, yep the cluelessness in this article is amazing.

  • Report this Comment On September 12, 2013, at 10:55 PM, Plimeter wrote:

    Dumb article. Both versions of the surface are a joke. Comparing anything Apple makes to the Surface is like comparing a Porsche to a lada.

    My prediction...Apple sells 10-million new iPhones during the first week. It'll take Microsoft 5 years to sell 10-million Surfaces!

  • Report this Comment On September 13, 2013, at 12:11 AM, peto3 wrote:

    Ricky, please, I'm begging you - LOSE THE FREAK'N NUMBER ...

  • Report this Comment On September 13, 2013, at 12:27 AM, gowhitestripes wrote:

    How in the world is this guy even allowed to write articles... he should be thrown off this site. This is a ridiculous and absurd comparison.

    You're comparing the iPhone 5 (aka 5C with color) which has sold 10's of millions!!!!!!!

    Are you kidding me?

    The Surface RT was a HUUUGE MASSSIVE FLOP that caused MSFT to write down $900 mm off earnings.

    Who would ever let you write on this site again?

    YOU RUIN THE CREDIBILITY OF FOOL.COM

  • Report this Comment On September 13, 2013, at 1:02 AM, Jaybones21 wrote:

    When your in the spotlight like Apple is your damed if ya do damed if ya dont. Alot of greed and jeliousy causing apples stock to rise and fall. Everybody who wants to be the best will hate whos best untill they see them fall. Only prob is the 5C is a perfect example of the fight Apple is giving. They knew investors or whoever else wanted that 300-400 price. But that would change Apples image. Apple is fully aware of that so thumbs up to Apple on the new phones!!

  • Report this Comment On September 13, 2013, at 1:14 AM, Jaybones21 wrote:

    When you are in first place like Apple is. Everyone who isnt will hate them. They will hate them till they fall. So when the investors and whoever else wanted a 300-400 price tag on the 5c and Apple didnt give it to them, well thumbs up to Apple on the new iPhone. Apple knew that a cheap phone like that would change their image. Maybe the investors need to jump on Ferrari and Porsche and demand a cheap car see how well that plays out.

  • Report this Comment On September 13, 2013, at 1:50 AM, vv234 wrote:

    Apple fanboys, please be a bit nice to the author:

    his comparison of IPhone 5c to Surface RT might not be a perfect apple to apple comparison but in a relative term

    (relative to Apple's other products) it may turn out to be true.

    It's too early to declare victory for 5C. Let's wait for a couple of months.

  • Report this Comment On September 13, 2013, at 3:16 AM, kevins71 wrote:

    First off, the iPhone 5C is not a scaled down iPhone. It's an iPhone 5 in a plastic case, and with a better front facing camera. That's it.

    So, if people like this author would think of it in terms of it being a "better" iPhone 5, not a scaled down version, and it's only $99.00. It makes complete sense.

    Now, unlike MS products, people actually want to buy Apple products, so comparing it to any MS product is being naive and a very misinformed blogger to say the least.

  • Report this Comment On September 13, 2013, at 4:22 AM, flybywire54 wrote:

    I have a Nokia 720 , better battery life (one of the best ) , probably better camera and comes in blue , red , yellow . I don't need 1 million apps , 200,000 good enough , I only use 20. Well built too and cost less then half the Iphone 5C , no contract .

  • Report this Comment On September 13, 2013, at 8:03 AM, fauxscot wrote:

    Are you smoking crack?

    Of course it's not. The question is just nonsense. You take a major credibility hit.

    Can you really not see the difference?

  • Report this Comment On September 13, 2013, at 9:26 AM, drax7 wrote:

    In my view the iPhone c should be priced like the iPad mini. Same price point. Basically the same hardware and software, the price should be equivalent.

  • Report this Comment On September 13, 2013, at 11:07 AM, bobbydig wrote:

    Again, MF is off the mark, to the point of writing things that are totally misleading to it readers. Anyone who follows their advise is a plain fool.

    Apple makes great products and does not want to end up like DELL. Sell cheap, dies quickly.

  • Report this Comment On September 13, 2013, at 12:13 PM, capsman727 wrote:

    After working on a New iPhone for the past year, the only thing Apple has managed to innovate is a way to dispose of all the old iPhone 5 hardware inventory.

    They took the 5 hardware and put it in a 5c (cheap) plastics case.

    Then took the 5 case added an 'S' and tweaked the hardware, oh and a new color too.. adding dye to a mix is indeed innovative and creative.. or as Apple would repeat 'impressive'

    Not this time, like many others, I'll pass this year.

  • Report this Comment On September 13, 2013, at 12:21 PM, capsman727 wrote:

    So if the iPhone 5c is a cheaper version at $99 with 2-year contract, and the iPhone 5 now sells for $99 with a two-year contract, Apple expects people to choose the more cheaply made phone because its colorful?

    Either they have little respect for their consumer intellect, or they are right ..and 'their' consumers do have little intellect.

  • Report this Comment On September 13, 2013, at 12:57 PM, makelvin wrote:

    Perhaps the title of this article should be "Is Rick Munarriz the new Village Idi*t?"

  • Report this Comment On September 13, 2013, at 1:37 PM, GameBot wrote:

    Here is the deal children the market has "voted Nope the price for this phone is too dam high"

    For those who think apple does not lower prices, just look how they have been keeping the price of high volume laptops closer to the competition.

  • Report this Comment On September 13, 2013, at 2:00 PM, DanManners wrote:

    Misek put a price target at 425 and he has not been wrong yet. The stock is a major slide now and if next week is as bad as this one, we should be below 400 very soon. The 5s has supply constraints like last year. I predicted that as Cook is so inept. Cook is a bears dream. His favorite movie is the Producers. No wonder. It is guaranteed to be a flop. The only bigger flop is Doug Kass who gets everything wrong. While Kass is down on Apple he said the Surface was going to destroy Apple earlier this year. Was he wrong on that. He also has been shorting the market all the way up. Of course at some point he will be right. With Link and Cramer hitting home runs, Kass is outmatched with those two heavyweights.

    Apple will soon be back where we started from. IT always ends up lower and we will see that happen now. Cook needs to quit but after giving Al Gore tens of millions of dollars, I doubt they will fire him. It will be hard to see the stock below $ 400 and Cook saying he feels our pain and over promising and undelivering. The good news is he has looked at a larger phone and maybe it will come out after the iTV in 2050. Or later. And they will of course have supply constraints as they always do.

    No big phone. No iTV. No iWatch. No OMG product. No nothing but minor refreshes and really only one new phone as the i5 was just put in a new cheaper shell. Samsung comes out with so many phones, TVs, Appliances etc etc and Apple has trouble delivering one measly new phone. The 5c is not new. Apple should license Android if it cant deliver. Their map app hopefully doesnt show the Brooklyn Bridge under water and Australian exit ramps off cliffs.

    Cook is a loser and I don't care what anyone says. He is destroying Apple.. I would rather have Scully or Rocco Penejo from the Street.com. Down down down we go. We sit at 466 and we will go lower. That is 47 points from the recent high. A drop of almost 10%. Cook will make sure it will go much lower when they report iPhone5s sales. I feel all your pain. Wait until Cook has to start apologizing for many problems that are certain to occur. Misek knows this and he was too generous in his new price target. Soon the targets will be under 400 and lower.

    But according to Cramer this downtrend is due to tax selling. That was a laugh. Wow. Brian White though is still optimistic. He lowered is price target but in a year or so he will have a target of $ 111. Gene Munster is the real loser here with his 99% certainty China Mobile deal was going to be Wednesday. He once said own Apple into earnings that were a big miss and the stock dropped hugely. He is one analyst never to listen too.

    The bear analysts have been right so far so as much as you hate to hear it, you have to listen. Apple down below $ 400 is a more comfortable place to invest. Though this time it won't ever recover. I think we have see the last of Apple over $ 500 in our life time. Move over Microsoft as you now have company. I wonder who will buy Apple as MSFT bought Nokia?

    Tim Cook please step down. Last point. If Elron Musk was made the new CEO of Apple, would you feel different about Apple's chances of improving? I would. The problem is Cook. He is awful. Not having a screen size larger than 4 inches this late in the game is an insult to the shareholders and your customers. But Cook doesn't worry about shareholders. He is self employed in his mind. Cook needs to get canned today. He has destroyed Apple.

  • Report this Comment On September 13, 2013, at 2:32 PM, 512ke wrote:

    How is it going to be a flop?

    The iPhone 5 is already hugely gigantically successful.

    The 5C improves upon the 5 in the following areas: hardware, software, price, style, and advertising.

    You don't need to be an analyst to predict confidently that he 5C is going to be a huge success.

    Forgive me f

    Duh.

  • Report this Comment On September 13, 2013, at 2:34 PM, 512ke wrote:

    Sorry got cut off. Forgive me for saying this but. Duh.

    Foreseeing that the 5C will be a hit is a no brainer.

  • Report this Comment On September 13, 2013, at 4:32 PM, Cuftbll wrote:

    Funny how analysts are now saying they may have missed the popularity of the 5C would be with all the colors to what they call 'normal' people, which to them is consumers.

    You idiots!!!! Apple actually knows what they are doing! The phone wasn't built for emerging markets!!! 1 million 5Cs and counting on day 1.

  • Report this Comment On September 13, 2013, at 4:35 PM, Cuftbll wrote:

    Just wait until the 10-18 year old crowd starts making their Christmas lists. I wonder if there will be any 5Cs on those lists. Me think so. Genius. Pure genius.

  • Report this Comment On September 13, 2013, at 5:06 PM, coolerkid wrote:

    The iPhone 5C is what the iPhone 4S was last year, which was a really well selling phone. Instead of customers having the option for a $99 iPhone 5 this year, they get a new model. This gives the customer the feeling that they are buying something new, and not last year's model. And for people who buy the 5S, it looks like a much more high end product than the 5C, as opposed to had they still offered the 5. Had they made a super cheap 5C analysts would have complained about margins and cannibalization. Yeah it can't take on the China market in a huge way, but the market is so large that they only need to capture a tiny amount to show growth.

    The majority of those cheap Android phones run older versions of Android OS or a custom version, which they'll never be able to upgrade, and can't even run a lot of the newer apps properly, they're basically touch screen feature phones. Had Apple made something that cheap, it wouldn't really be able to offer the full experience of the current Apple ecosystem.

    Comparing the 5C against the Surface is the dumbest comparison I've heard. The 5C will be as if not slightly more popular than the 4S was last year, probably not a lot more, but surely not any less.

    Don't get me wrong, there are many areas where I believe Apple is slipping up, but saying these products are duds, or will fail makes no sense. They'll do perfectly fine, and with the new carriers Apple brought on they will show growth over last year, which will make Wall St pour money into the stock again. Apple is working to refine and perfect the experience, the others are trying to cram in every feature and technology they can, which is now approaching bloatware.

  • Report this Comment On September 13, 2013, at 5:19 PM, chavavk wrote:

    If the price difference between 5C and 5S is only $100, why anyone should buy 5C when the full two years contract price is $2200($80/month) for 5C vs $2300 for feature rich high end iPhone 5S.

    I feel pricing policy for iphone 5C is strategic flaw committed by apple. And unfortunately C tag makes people believe it is cheap phone when it is not really so . It looks like Apple has introduced a product only to revert very soon.

    Wise people buy only iPhone 5S and definitely not 5C, cheaper on technical front.

  • Report this Comment On September 14, 2013, at 10:21 AM, fauxscot wrote:

    HTC and most of the other Android outfits have responded to Apple by cutting staff and/or going to a profit-free model of enterprise:

    To wit:

    http://www.theverge.com/2013/9/13/4728670/layoffs-hit-htc-am...

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