Apple gives signs that failed on cheap iPhone strategy

Apple Inc. 's efforts to expand its customer base with a cheaper version of the iPhone do not seem to be getting the expected results.
The technology giant has reduced orders of the iPhone 5 c to Asian companies that hire for its manufacture, according to people apprised of the situation. At the same time, retailers and mobile operators come touting a lukewarm demand for the smartphone, which has led some to reduce prices.
The fact that the 5 c may have fallen short of the expectations of Apple may not be all bad, especially if it means consumers are buying more of the 5S, the most advanced and expensive version of the iPhone which was released along with the 5 c last month and that, in the United States, costs $ 100 more. Apple iPhone orders increased 5S for the current quarter, said two executives from Taiwanese manufacturer Hon Hai Precision Industry Co. 2317.TW + 1.76%
But it may be a sign that Apple misjudged its strategy to introduce for the first time two new models of phones simultaneously.
Apple did not return requests for comment.
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Gervais Pellissier, CEO of French Orange telephone SA, says that the 5 c is not selling as well as expected because it's too expensive, and the iPhone 4S, oldest, continues to be an attractive option, and cheaper. Pellissier says 5 c is selling "a lot less" than the 5S model.
Similarly, officials from various shops of electronics retailer Best Buy Co. throughout the Eastern United States have reported that they're with large stocks of 5 c, but much less units of 5S. An official assessed that the 5S is surpassing his brother cheaper in sales on the basis of three to one.
Apple put its new phones for sale on 18 September, amid increasing challenges on both ends of the market, the sophisticated and the basics, presented by strong competitors as the South Korean Samsung Electronics Co. in the sophisticated, Samsung presented last month the Galaxy Note 3, a big-screen smartphone on sale in the us for $ 700 or more. The most popular track, Samsung offers smartphones in China for less than $ 100.
Investors had been pressing Apple to react to competition offering a smartphone cheaper to attract new buyers, especially in China and other fast-growing emerging markets. Some analysts judged that Apple could offer a device with retail price around $ 350.
But Apple has chosen a different path. The 5 c is basically the iPhone 5, launched last year, with the difference that comes in five different colors. It is sold in the us for $ 549, but can be purchased for $ 99 with a two-year contract with a service provider.
When the two models were offered for sale, consumers ' attention focused mainly on iPhone 5S, which offered a better camera, a motion sensor technology and a fingerprint sensor. The demand for gold model was especially high in the beginning, leading Apple to increase orders.
Today the Apple online stores in the u.s. and China promise to deliver the iPhone 5 c within 12:0 am. But iPhone orders 5S takes two to three weeks.
This month, Apple reported to their two-party manufacturers from Taiwan, Pegatron Corp. and Hon Hai, which would reduce the commissions from the iPhone 5 c for the current quarter, said people apprised of the situation.
The Pegatron, which assembles two thirds iPhones 5 c, according to analysts, received information that the orders would be cut in less than 20%, said a person familiar with subject. For Hon Hai, the cut would be about 30%, according to two people familiar with matter. An Executive of Hon Hai, also known as Foxconn, said it stopped hiring more workers due to reduced demand. Last month, an Executive said that Hon Hai would strengthen the team, anticipating strong orders for the iPhone 5 c.
A supplier of components was warned that orders for parts of the iPhone 5 c would be cut into 50%, said a person familiar with subject.
The reduction in orders may indicate a weak demand, or else that Apple wanted to ensure an adequate stock of 5 c, so that potential buyers, which probably would be migrating from rival devices, don't need a Apple store empty-handed. As this could worsen with the option of various colors, retailers have large stocks of each.
Still, the signs are weak demand around the world. China Telecom has decided to lower the price of the iPhone 5 c of 16 gigabytes in 700 Yuan ($ 115) to 3,788 Yuan. Wal-Mart Stores Inc. also began offering the 5 c per US $ 79 with a two-year contract, a $ 20 discount.
"Naturally, it is not clear what is ' success ', but it is clear that price reductions on the part of retailers isn't a success, especially for Apple, and especially so quickly," said Rajeev Chand, Managing Director of investment bank Rutberg & Co.