Apple Launches Cheaper Version of 5c - Analyst Blog

Reportedly, Apple AAPL has rolled out a cheaper version of its plastic-backed iPhone in Australia, China, Brazil and some European nations including the likes of Britain and France. However, the price of this cheaper iPhone 5c will vary from one country to another. This iPhone has a low storage capacity of 8 GB compared with 16 GB in the original iPhone 5c.

This move has been initiated by Apple to fend off competition. However, the lower priced version still costs more than low-cost smartphones running on Google's GOOG Android operating system. The move will put pressure on iPhone's average selling price, thereby adversely affecting Apple's gross margin in the near term.

The original iPhone 5c was released alongside the highly sophisticated iPhone 5s but it failed to capture the attention of the market. Though it was designed to cater to the mid-range market, it proved to be expensive compared to the other phones in the segment.

There were also rumors that Apple would finally discontinue its entry-level iPhone 4s. However, as per Verge, Apple will continue selling the iPhone 4s alongside the 5c line-up going forward.

Moreover, Apple will soon offer an upgraded version of the iPad 4 tablet, replacing the mid-range iPad 2. The iPad 4 was discontinued in Oct, 2013 following the announcement of the flagship iPad Air, thus leaving the iPad 2 as the cheaper, entry-level device. However, now Apple is bringing back the iPad 4 at a reduced price.

As per the reports of market research firm Gartner, tablets based on Apple's iOS platform held 36% share of the market in 2013, trailing behind those based on Android, which occupied 62% share.

We believe that Apple's continuous efforts to extend its footprint into various new spheres will boost growth and profitability going forward. Further, increasing distribution in emerging markets has become a priority for Apple to boost growth. In Jan 2014, China Mobile, the world's largest mobile carrier, started selling the iPhone.

Apple's loyal customer base, international expansion and a solid cash position are expected to aid long-term growth. However, increasing competition from the likes of Google, Hewlett-Packard HPQ and Microsoft MSFT in most of its major product segments, higher operating expenses and increasing legal complexities are headwinds.

Currently, Apple has a Zacks Rank #3 (Hold).