Apple's iPhone 5c Sales May Be Faring Well After All

iPhone 5c. Source: Apple.

After Apple (NASDAQ: AAPL  ) reported 9 million iPhone shipments during the launch weekend in September, the Street rallied around a new concern: Were Apple's lower-cost iPhone 5c phones actually making it into consumers' hands, or were many just sitting on retailers' shelves? Some new data from Canaccord Genuity suggests the concern may be overblown.

Though Apple's new iPhones didn't go on sale until Sept. 20, both the iPhone 5s and the iPhone 5c placed among the top three sellers at the four largest U.S. wireless carriers in during the month of September, according to Canaccord Genuity.

Carrier

Top 3 Smartphones in September

AT&T

1. iPhone 5s

2. iPhone 5c

3. Galaxy S4

Verizon

1. iPhone 5s

2. Galaxy S4

3. iPhone 5c

Sprint

1. iPhone 5s

2. iPhone 5c

3. Galaxy S4

T-Mobile

1. iPhone 5s

2. Galaxy S4

3. iPhone 5c

Source: Data from Canaccord Genuity via AppleInsider.

So what explains the price cuts?
After Apple launched the iPhone 5c, there were several indications that the lower-cost model wasn't doing as well as the company had hoped. First of all, while Apple quickly had to push back iPhone 5s shipment dates on its website, possibly as the model sold out, the company didn't have to do the same for the iPhone 5c. Then, Localytics introduced another layer of concern, estimating that the iPhone 5s was significantly outselling the iPhone 5c in the U.S. by a factor of about 3.4. Internationally, the analytics firm said usage stats suggested the iPhone 5s could be outselling the 5c by a factor of 3.7.

iPhone 5c special offer by RadioShack. Source: RadioShack website.

The sales concerns continued when Best Buy introduced an aggressive discount on the iPhone 5c, giving customers a $50 gift card with a purchase of the phone with a two-year plan. RadioShack initiated the same promotion, and Wal-Mart followed suit by dropping the price of the iPhone 5c on contract to $45 through the holidays.

The price cuts were a surprise, as Apple's new iPhone models typically sell for full price for at least a month before their prices are cut so significantly. Though price cuts soon after a new tech product hits the market usually signal weak demand, this isn't always the case with smartphones, according to All Things D's Ina Fried:

Promotions on phones, even relatively new ones, are not uncommon as retailers such as Best Buy and Amazon trade some of their profit margins in exchange for a higher share of sales for a hot new product. Retailers also can get incentives for signing up new customers -- money which can also be used to fund various promotions. Best Buy, for example, is also running a special right now giving $50 off various Samsung Galaxy phones, including some models of the Galaxy S4.

Maybe there's nothing to worry about Apple's iPhone 5c sales after all. Maybe, for once, Apple has simply managed to successfully ramp up production on the new iPhone models earlier than usual. In fact, Best Buy's promotion for the iPhone 5c, which was scheduled to end yesterday, appears to have not been extended.

The dynamics have certainly changed this year with Apple launching two new iPhone models instead of one. But Canaccord's data suggests that Apple's announcement of more than 9 million iPhone shipments during the launch weekend (compared to 5 million last year) may truly be indicative of demand.

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Apple has a history of cranking out revolutionary products... and then creatively destroying them with something better. Read about the future of Apple in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2013, at 6:56 PM, aeosfool wrote:

    Two indications which should have made it obvious that the initial supply of 5c's would be plentiful is WAl Mart announced it was discounting it before they even put it up for sale; so, duh, their sale was not based on demand at all. Other retailers are not going to stand by and let Wal Mart get all the business...especially with a product that has been shipped in great quantities.

    Also, before they has a clue what sales would be, Apple allowed a week of pre-sales for the 5c and not the 5s. For the stupid analysts out there, this was an indication the 5c was likely produced in quantities necessary to meet even very robust demand.

    In any case, I'm willing to bet my house that Apple sold more 5c's this year than they sold of the 4s's last year, and that's why Apple did what they did this year.

  • Report this Comment On October 08, 2013, at 7:14 PM, 0gre wrote:

    Title should be 'Analysts Overthink the Obvious Again'.

    Apple announced what sales were, they have always been a company that tells it straight. They even announced earnings were going to be on the high end, confirming sales were as good as they hoped they might be. I'm trying to figure out a scenario where Apple could increase their earnings estimates and have disappointing iPhone sales at the same time... Not sure there is one that makes sense.

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