Apple Inc. (NASDAQ:AAPL) surprised many investors with its new iPhone pricing, and there are speculations over what could be the strategic results of the pricing. Apple Inc. (NASDAQ:AAPL) will be challenged by low-priced Asian smartphone makers, which will in turn pressurize revenue growth and margin pressure. However, Apple has long created a trend of profits, s0 impacting its growth won’t be that simple, believe analysts Steven Milunovich and Peter Christiansen from UBS.
To provide a clear view of the pricing, analysts have offered a bear and bull case scenario for Apple.
Bear case: Low-priced products from rivals may overtake
In a bear case scenario, Apple’s success will be checked by Asian competitors. Apple Inc. (NASDAQ:AAPL) is hardly focused on the sub $500 smartphone market, which is the hottest segment in the emerging economies, as of now. Growth is declining even for over $300 market and is expected to fall as much as single digit in 2015. Saturation in the high-end segment is a concern for Apple to continue its growth.
According to a survey from ChinaDaily.com, just 2.9 percent of respondents out of 35,000 prefer the iPhone 5C at $549 level. Chinese consumers think that the price is very high, and the new phones lack significant innovation. Smartphones are already approaching the “good enough,” phase. According to analysts, when technology meets the user’s need, there are possibilities that premium products may face competition from low-end gadgets. A good example c0uld be Xiaomi smartphones in China, which are priced at $330, but has leveled the share of Apple Inc. (NASDAQ:AAPL) in the country.
Apple, in order to counter the low-priced smartphone, should unveil some budget phones, but to do this a team should part itself from Apple and altogether form a new company or brand, which is not possible in the near term.
Bull case: pricing reflects commitment from Apple
On the contrary, the bull case might be more intriguing than the bear one, as trends suggest that Apple has been benefiting from its unconventional approach.
Apple Inc. (NASDAQ:AAPL) is primarily focused on great products and the same is reflected in snatching the ground from Samsung. Apple came up with polycarbonate casing for its iPhone 5C, which now looks like an advanced technology phone for high-end consumers, while giving Apple high margin. Features like 64-bit architecture, Touch ID fingerprint authentication, and improved cameras proves the innovation mettle of the company. Apple might be throwing some hint of its future product with these features.
iOS7 might be underrated currently, but in comparison to iOS 6 it has significant differences by comparing it to the changes in 5S vs 5. If iOS 7 hits success, it can compel some Android users to switch to the Apple ecosystem. Apple, also, might sell at least 5 million iPhone unit in 2014 after signing a deal with NTT DoCoMo.
Apple Inc. (NASDAQ:AAPL) wants to convey that it will not put its quality at stake to reduce the price.