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Is the iPhone 5C the New Surface RT?

Rick Munarriz
September 12, 2013

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: GOOG) 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