Apple Inc. (NASDAQ:AAPL)’s iPhone 5S is greatly outselling the slightly less expensive iPhone 5C, leading some to speculate that this means the high end of the smartphone market isn’t as saturated as many have though. In fact, the 5S is so much more popular than the 5C that it’s outselling the less expensive handset by more than two to one, according to data from Consumer Intelligence Research Partners (via All Things D).
Updates on Apple’s iPhone sales
The data shows that 64 percent of all the iPhones sold toward the end of September were the iPhone 5S, while just 27 percent were the iPhone 5C. The iPhone 4C made up the last 9 percent. So far this suggests that cannibalization worries regarding the iPhone 5S have been mostly avoided. This was a major concern for Apple Inc. (NASDAQ:AAPL) and investors in this cycle because this is the first time the company released two handsets at the same time.
Interestingly enough, the iPhone 4S remains fairly popular, and the numbers show that the iPhone 5C’s performance is similar to that of the iPhone 4S after the iPhone 5 launched. Last year after the iPhone 5 was launched, the iPhone 4S made up 23 percent right after the iPhone 5 launch. In other words, even though the 5C is new and has a more colorful design, it isn’t selling much better than the iPhone 4S did when it was surpassed by the iPhone 5 last year.
How long will the iPhone 5S remain popular?
Also since the iPhone 4S remains somewhat popular, this is taking small bites out of the popularity of the two new handsets. The iPhone 5S took 64 percent of new iPhone purchases this year, while the iPhone 5 took 68 percent of new iPhone purchases around launch time last year.
So will the iPhone 5S continue to outsell the 5C? CIRP co-founder Josh Lowitz told All Things Do that gradually the less expensive phones have gained share compared to the flagship handset as the early rush for the new device wore off. He believes that the iPhone 5C will begin making up more and more iPhone purchases over the next several months.
iPhone 5C estimates cut by KGI
In light of this data, KGI Securities analyst Ming-Chi Kuo revised his estimates for iPhone 5C sales downward for the third and fourth quarters. He cut them to 11.4 million units for the third quarter and 10.4 million units in the fourth quarter, according to his latest research note.
He said his research shows that retailers are actually cutting the price of the iPhone 5C just so they can move the handset. Best Buy Co., Inc. (NYSE:BBY) and Wal-Mart Stores, Inc. (NYSE:WMT) have both slashed the subsidized price of the handset to $50 or even less on some areas.
Apple’s gross margins, new products to drive shares
One of the biggest problems analysts initially had with Apple Inc. (NASDAQ:AAPL)’s launch of the 5C was its price, which wasn’t as low as they would have liked. A few more optimistic analysts, however, pointed out that gross margins on the handset would be better than previously expected since the price was higher. Unfortunately if Apple is forced to slash the price of the 5C, then gross margins will be under pressure after all, according to Jefferies analyst Peter Misek.
He believes that 5C sales will miss consensus expectations for the fiscal 2014 year and also that sales of the 5S will taper off more quickly than Wall Street expects. However, he continues to look toward better gross margins and new products to serve as catalysis for Apple Inc. (NASDAQ:AAPL) going forward.