Apple's New 8GB iPhone 5c Is Not a Game-Changer

Will an 8GB flavor of the iPhone 5c move the needle in the lower end smartphone markets? Probably not.

Mar 22, 2014 at 4:00PM

It was rather surprising to hear Tim Cook admit on the most recent call that the call that reaching supply/demand balance with the 5s took the company more time than had been anticipated. While many had believed that the iPhone 5c was designed to push customers to the higher end iPhone 5s, it seems that Apple (NASDAQ:AAPL) had actually banked on the 5c making up a meaningful portion of the mix. The 5c didn't do as well as expected, due likely to a higher-than-expected price for that feature-set, and a warmer-than-expected reception to the 5s. So, is an 8GB variant of the 5c going to change much?

Probably not
The notion that the since the iPhone 5c 8GB edition is 40 GBP cheaper ($66) than the iPhone 5c 16GB edition that those who couldn't afford the $549 16 GB iPhone 5c will suddenly be willing/able to hop on board the Apple bandwagon is ridiculous. Understand that for what is effectively $480, Apple is selling you a phone with 2012 internals and a meager 8GB of storage. Of course, one could argue that the Apple brand has some real value (and it does), and one could also reasonably point out that if you want the polished, smooth experience of iOS, you can only get it from Apple. But that's not really the point.

Press Photo

Apple's multicolored iPhone 5c family (Source: Apple)

The point is that if you're in an emerging market like India, or if you're somewhere like China, you can get your hands on a fairly decent Android smartphone for $99. Now, you are going to get what you pay for, and such a phone isn't going to have the fast processor (yes, compared to these Chinese phones, the A6 is blazing fast), nor will it have a ton of memory. And, frankly, the included software isn't going to be all that efficient and – yes – the user experience won't come close to that of an iPhone 5c 8GB. But hey, you've got to make sacrifices when the average family income in your country works out to $2,100 per year. Also remember that people need to pay for service on top of the upfront hardware cost.

Look what you can get for $179
Forget for a moment the extremely dirt cheap Chinese phones, and then realize that even if you look at something like a Moto G, which comes with a 4.5" 1280x720 display, a reasonably fast Qualcomm (NASDAQ:QCOM) Snapdragon 400, and is priced at $179 for the 8GB version and $199 for the 16GB version, it quickly becomes obvious that customers can get a pretty darn good user experience for little cost. Is this phone going to break any performance records? Nope, it doesn't even support LTE. Is it going to have the world's slickest UI? Nope. But if you only have $179 to spend, is it an infinitely better choice than a $480 iPhone 5c? Yes.

Motorola Moto G

The Moto G (Source: Motorola via GSMArena)

Foolish bottom line
So, as you can see, the iPhone 5c with half the storage for just shy of $500 isn't likely to dramatically boost sales. Further, the gross margin percentage of these devices is likely to be meaningfully lower than the 16GB flavor as 8GB of NAND flash is only about $3.41 . This isn't a great deal on Apple's part, although since each unit is still gross margin dollar accretive to Apple, the company doesn't really lose – it's just not the panacea that Apple shareholders are looking for. The key is to take more share at the high end against the likes of the Samsung Galaxy Note 3 and the Galaxy S, which is what is likely to happen with the next generation iPhone 6.

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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