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Apple CEO Tim Cook makes an rare admission to a "miscalculation" on product mix

When Apple released its earnings report for fiscal Q1 2014 this afternoon, the company “missed” analysts’ expectations for iPhones sales. Analysts were expecting that Apple would sell 55 million iPhones during the quarter, yet the Cupertino, California-based hardware/software giant only sold 51 million iPhones.
Part of the shortfall in the numbers could come from the fact that Apple misjudged demand for the budget iPhone 5C. During the company’s earnings call this afternoon, Apple CEO Tim Cook admitted, “It was the first time we ever ran that play, and demand percentage turned out to be different than we thought.”

iPhone 5C
In this case, many customers weren’t too impressed with the “new” iPhone 5C and had no problems forking over an extra $100 to step into a more advanced iPhone 5S. "The mix was stronger to the 5S, and it took us some amount of time to build the mix that customers were demanding.”
Apple’s strategy with the iPhone 5C was slightly different than in years past. Before the iPhone 5C, Apple would traditionally introduce a brand new generation of iPhone at the $199 price point (on contract), and simply discount the previous generation model to $99 (on contract).

iPhone 5S
However, with the launch of the iPhone 5S, Apple took things a step further. Apple discontinued the previous generation iPhone 5 and introduced the iPhone 5C, which was essentially the iPhone 5 in a candy-coated plastic shell. Apple hoped that the colorful plastic shell would distract customers from the fact that this was just a warmed over iPhone 5.
In fact, Apple was so confident in its ability to “read” its customers that when the iPhone 5C and iPhone 5S were launched last year, it was the cheaper iPhone 5C that got the most prominent real estate on Apple’s website and the bulk of Apple’s attention in TV spots.

As for why he thinks customers are actually flocking to the iPhone 5S instead, Cook says it’s because of Touch ID. “It's a major feature that has excited people. And I think that, associated with the other things that are unique to the 5S, got the 5S to have a significant amount more attention and a higher mix of sales."

Source: Apple

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Can we stop calling a $550 phone 'budget'?
By stm1185 on 1/27/2014 10:22:16 PM , Rating: 5
The iPhone 5C is not a budget phone. A budget phone sells for under a $100 (Lumia 521). A mid range phone sells for under $400 (Nexus 5). At $550, the iPhone 5C is a high end device!

RE: Can we stop calling a $550 phone 'budget'?
By Acupuncture on 1/27/2014 10:29:23 PM , Rating: 2
Wal-mart was selling the iPhone 5C for free on contract.

RE: Can we stop calling a $550 phone 'budget'?
By lightfoot on 1/27/2014 11:08:34 PM , Rating: 5
And yet it somehow is still overpriced.

By chekk4 on 1/27/2014 11:58:31 PM , Rating: 2
Damn, that made me laugh hard. Thanks for the giggles.

RE: Can we stop calling a $550 phone 'budget'?
By Argon18 on 1/28/14, Rating: -1
RE: Can we stop calling a $550 phone 'budget'?
By Gio6518 on 1/28/2014 10:28:54 AM , Rating: 5
Kind of like the Microsoft Windows that comes "free" on every new computer. "It's still overpriced".

Yup kinda like how you can pay twice as much for a computer that has the exactly same internals, for twice as much because it has mac OS...and realize that most software doesn't work and have to buy virtual Windows anyways.....LOLOLOLOLOL

RE: Can we stop calling a $550 phone 'budget'?
By Argon18 on 1/28/2014 12:20:09 PM , Rating: 2
You won't catch me defending Apple and their world of overpriced closed proprietary crap. But you won't catch me defending Microsoft and their world of closed proprietary crap either.

Clueless fanboys are so easy to spot. It's like you don't even try to hide it. Take off the rosy Redmond goggles and you'll find Apple and Microsoft are two sides of the same broken proprietary coin.

RE: Can we stop calling a $550 phone 'budget'?
By Labotomizer on 1/28/2014 5:54:17 PM , Rating: 1
Microsoft is one of the leading contributors to the Linux kernel. Microsoft has numerous open source projects. Additionally, they in no way, shape or form limit anyone from running anything the could ever want on a Windows system. Nor do they prevent their OS from being loaded on whatever hardware you'd like. Sure, you pay for it. But it's better than dealing with people like you on a forum when you have a problem.

Heck, I'd pay you $200 if you never logged into this site again. And I'd get the better of that deal.

RE: Can we stop calling a $550 phone 'budget'?
By Argon18 on 1/29/2014 12:24:28 PM , Rating: 2
"Microsoft is one of the leading contributors to the Linux kernel."

Lol, what? No they're not. I don't know who is feeding you your information, but time to find some more reliable sources.

" Additionally, they in no way, shape or form limit anyone from running anything the could ever want on a Windows system."

A couple things wrong with this statement. Namely the last two words "Windows System". Microsoft uses closed proprietary protocols, closed proprietary API's, and closed proprietary file formats (Office) to lock you into their ecosystem. They've always done this. Anti-consumer and anti-competitive behavior is what this is called. But you'll continue to take it up the butt and smile like a good Wintard, won't you.

Lets put it another way: "Apple in no way shape or form limits anyone from running any Apple software on an Apple system". See what I did there?

" Nor do they prevent their OS from being loaded on whatever hardware you'd like."

Wrong again. You probably haven't heard of the TPM trusted platform module, or the UEFI encryption keys that lock your hardware to your OS. On top of that, when you're stuck using a Windows OS, you're stuck using only the hardware that the OS supports - Try using your graphics card from 2003 on a Windows 8 PC. It probably won't work due to driver incompatibility. Linux doesn't have this problem.

"Sure, you pay for it. But it's better than dealing with people like you on a forum when you have a problem."

I'm not sure what your point is here, aside from being a troll comment. Whether you choose Microsoft or Apple or Linux, all three have paid support options, and all three have internet forum support options.

"Heck, I'd pay you $200 if you never logged into this site again. And I'd get the better of that deal. "

Don't shoot the messenger. I only speak the truth. You've got to remove those Redmond Wintard goggles if you want to see clearly.

By Cheesew1z69 on 1/29/2014 3:28:03 PM , Rating: 2
aside from being a troll comment.
Oh, the irony is getting deep in here...

By Sahrin on 1/28/2014 10:51:29 AM , Rating: 2 Some people are not so good with the math, it seems.

By Gnarr on 1/28/2014 5:39:14 AM , Rating: 2
When you're paying $50 a month for two years, it's not exactly free...

By Strunf on 1/28/2014 7:41:29 AM , Rating: 4
Free in my dictionary means you don't pay anything and there's no strings attached, if you are to have a contract then it's not free anymore.

RE: Can we stop calling a $550 phone 'budget'?
By Flunk on 1/28/2014 9:07:44 AM , Rating: 2
Forget the fake "on contract" prices. If you do the math you always end up overpaying for devices if you buy like that.

RE: Can we stop calling a $550 phone 'budget'?
By cfaalm on 1/28/2014 10:26:22 AM , Rating: 2
Well, not always. But it doesn't hurt to do the math before pulling the trigger.

RE: Can we stop calling a $550 phone 'budget'?
By Dorkyman on 1/28/2014 12:44:21 PM , Rating: 2
No, pretty much always. Only in the USA do people (sheeple?) "pay" only $100 for a $600 phone, then ignore the fact that they wind up paying $1,500+ extra over the next two years than if they had just bought a new ($600) or year-old ($200) phone and just paid for usage.

We switched all three of our smartphones over to Ting from Sprint a few months back; monthly bill is half what it once was.

By Rukkian on 1/28/2014 4:02:49 PM , Rating: 2
While I agree with you in principle, if the only service that has reliable, fast service where you live and work charges the same whether you pay for your phone outright, or get it on contract, then there is a difference.

Sprint and Tmobile suck where I live, and ATT, Verizon, and USCC are all pretty much the same price, although ATT seems to be starting to respond to TMobile's changes.

By alpha754293 on 1/29/2014 9:33:06 AM , Rating: 2
Canada too.

I've ran the analysis before and I figured out that if I buy the device outright and then go to a $35/month plan (no data), the payoff period between that and putting it on a contract for a $85/month plan is like 11 or 12 months.

And over the course of 4 years, I end up SAVING over $1000 because I don't have to pay as much for the monthly plan.

By Denithor on 1/28/2014 10:28:03 AM , Rating: 2
...which is, of course, exactly why the phone companies offer these "deals" to begin with.

By carage on 1/29/2014 11:48:30 AM , Rating: 2
When you have an overpriced multi-year contract attached it distorts the whole math.

RE: Can we stop calling a $550 phone 'budget'?
By inteli722 on 1/27/2014 11:02:23 PM , Rating: 2
People only really talk about on-contract prices. besides, at $550 off contract, the iPhone 5C is a mid-end device. High-end is $700-800+ (see iPhone 5S, Galaxy S4, Galaxy Note, etc)

By piroroadkill on 1/28/2014 5:44:04 AM , Rating: 5
Mid-end? What the hell? How can it be the end of the scale if it's in the middle?

You mean "mid-range"...

By Old_Fogie_Late_Bloomer on 1/28/2014 6:22:10 AM , Rating: 2
I literally just went from contracts and high-end Android smartphones to pay-as-you-go and a Lumia 620, so my perspective may be skewed, but I think that if Apple doesn't get a phone into $300-$400 territory new and off-contract, they're going to get their butts handed to them in the long run. I'm aware that they want to project a "premium" image, but there's a not-so-fine line between premium and niche...

By Flunk on 1/28/2014 9:12:15 AM , Rating: 5
At $550 it's priced over the high-end Nexus 5 ($350). The Moto G is mid-end and that's $180. If you're not subsidizing the price with an overpriced contract both iPhones look like terrible purchases.

By marvdmartian on 1/28/2014 7:48:36 AM , Rating: 3
Tim Cook got it wrong. He thought people wanted a cheaper iPhone, as in, "less features for less money".

What they REALLY wanted was the same iPhone, that didn't cost a fortune. Once again, Apple fails to understand people!

"Young lady, in this house we obey the laws of thermodynamics!" -- Homer Simpson

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