Apple Inc introduced two new iPhones on Tuesday including the "iPhone
5c" that comes in five colors and starts at $99 with a contract, priced
to bring one of the industry's costliest smartphones within reach of the
masses in poorer emerging markets.
Chief Executive Tim Cook kicked
off the event at the company's Cupertino headquarters which also ushered
in the pricier iPhone 5s. Shares in Apple, which had been in negative
territory most of the morning, briefly went positive and were down just
0.5 percent at $503.48.
Cook expects Apple to ship the 700 millionth device - an iPhone or iPad - based on iOS mobile software sometime next month.
The
world's most valuable technology company is trying to beat back rivals
like Samsung Electronics Co Ltd and Huawei Technologies Co Ltd in
markets like India and China, where it is quickly losing ground.
Wall
Street approves of the move to offer a more basic version of the
device, although some investors warned initially that it would reduce
margins and potentially tarnish a brand that has been linked to premium
users since its 2007 inception.
Now they hope a bigger
emerging-market presence can help reverse a 29 percent fall in the
company's share price since it hit a record high of $702.10 a year ago.
The selloff was fueled by fears of slowing growth and a perception that
Apple's ability to innovate and shake up industries was dwindling.
The
new iPhones, coupled with a belief that Apple will announce a deal with
the world's largest carrier in China, have spurred investors to build
bullish share and options positions in the company over the past two
weeks.
Also sparking Apple's upward momentum was hedge fund
billionaire Carl Icahn's revelation last month that he had taken a large
position and was pushing for the company to expand its program of share
buybacks.
He has said the stock may rise to as much as $700 if
Chief Executive Officer Tim Cook pushed for a larger buyback. The shares
were down 0.5 percent at $503.64 in morning trading.
Industry
observers said Apple had not turned out a category-defining electronic
device since late co-founder Steve Jobs made a bet on the iPad in 2010.
Speculation revolves around a smartwatch along the same lines as
Samsung's recently introduced Galaxy Gear, or some sort of TV product.
But
analysts said neither was likely to generate numbers anywhere in the
neighborhood of the iPhone, which supplies half of Apple's revenue and
is the company's highest-margin product.
"Apple needs to
demonstrate in the coming months that it has other product lines which
can start to make up for slowing growth and falling margins in (the)
iPhone and iPad," said Jan Dawson, a chief telecoms analyst for Ovum
Research. "That's a tall order."
More immediately, Apple will get a
boost if it succeeds in enlisting China Mobile Ltd in its iPhone
network. For the first time, the company will host media in Beijing just
nine hours after its Cupertino, California, launch, spurring
speculation it will announce a distribution agreement with the Chinese
carrier.
The world's largest wireless carrier serves more than 740
million users and is perceived as more amenable to carrying the popular
smartphone now that profit and subscriber growth are decelerating. Net
income grew just 2 percent in the quarter that ended in June.
And
smaller rivals China Unicom and China Telecom, which both already sell
Apple's iPhone are making headway against the market leader.
Separately, Japan's largest carrier, NTT DoCoMo, is expected to begin selling it as soon as this fall, other sources said.
One
key question is whether Apple will also sell its cheaper iPhone 5c in
more mature markets like Europe or the United States, heightening the
risk that it will begin cannibalizing sales of the flagship 5s.
Globally,
the market for cheaper smartphones priced around $300 - the iPhone 5
now starts at $649 without a contract - may grow to 900 million units by
2015, Bernstein Research analyst Toni Sacconaghi estimated. Assuming
Apple manages to capture just 10 percent of that market, the 5c would
bring in revenue of $30 billion annually.
"The only real potential
to surprise investors (on Tuesday) seems to be in the scope and
velocity of a new China strategy, and any new features within iOS 7 and
fingerprint scanner technology," said Barclays analyst Ben Reitzes.
"Since
it missed the trend toward larger screened phones and seems poised for
only incremental iPad improvements, we believe that Apple needs to prove
it can innovate in software and services."
© Thomson Reuters 2013
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