By Poornima GuptaCUPERTINO, California Tue Sep 10, 2013 7:03pm EDT1 of 9. Phil Schiller, senior vice...

1. Apple's two new iPhones target high, low-end markets
By Poornima Gupta
CUPERTINO, California Tue Sep 10, 2013 7:03pm EDT
1 of 9. Phil Schiller, senior vice president of worldwide marketing for Apple Inc, talks about the
pricing of the new iPhone 5C at Apple Inc's media event in Cupertino, California September 10,
2013.
Credit: Reuters/Stephen Lam
CUPERTINO, California (Reuters) - Apple Inc unveiled a high-end iPhone with a fingerprint scanner
as it tries to stand out in a crowded market, and a cheaper, colorful plastic model for emerging
markets that proved pricier than expected.
Apple did not disclose pricing in China, its largest market, or whether it had sealed a long-awaited
distribution agreement with China Mobile Ltd, although pricing is likely to be released at a Beijing
media event scheduled for later on Wednesday.
Details of the two models, the 5S and the 5C, had been telegraphed ahead of time in several media
reports, leaving the launch devoid of major surprises, and Apple shares dropped more than 2
percent.
The "iPhone 5C" comes in five colors -- blue, green, pink, yellow and white -- and starts at $99 with a
contract. U.S. phones are also available for $549 without a contract, a higher-than-expected price
that is important because many emerging markets sell such so-called 'unlocked' phones. Actual
prices in emerging markets have not been disclosed.

2. "Previously we thought the 5C would be a lower-end phone to address emerging markets like China
and India," said Gene Munster, analyst with Piper Jaffray, adding that based on the price it appears
that Apple "still plays in the higher end of the market."
The pricier "5S" begins at $199 with a contract and also comes in three colors - gray, silver and gold
- and sports expected improvements in processor speed, an improved camera along with a
fingerprint-scanner that can unlock the phone with just a touch.
Apart from a more powerful processor than in the 5C, it embraces other cutting-edge features such
as a dedicated "M7 Motion co-processor" chip, which can track motion data continuously without
heavily draining the battery. The chip opens the door for the iPhone to better track sports and
fitness-related user activity.
"For me this is an Apple brilliance where you see them going after the wearable device in a way that
makes sense to them today, which is by not adding a device that is not ready from a design
perspective," said Carolina Milanesi, an analyst with Gartner, who added that this chip will help
Apple learn from consumers and help prepare the developers for any eventual Apple entry into the
space.
Apple stock had gained more than 11 percent over the past month, in a rally that typically happens
ahead of a big product launch.
"We are just seeing an aspect of device numbing or resistance, meaning it takes more and more to
thrill and excite the consumer," said Jonathan Kanterman, an independent alternative investment
consultant.
"Are you going to go out and upgrade to the new 5S if you just bought a new iPhone within the past
year? Probably not."
BLUE, GREEN AND GOLD
The cheaper phone goes on sale online on Friday, while the pricier gadget can be pre-ordered on
September 20. For the first time, it will sell in China at the same time as in the United States, a
move expected to severely curtail the underground market for smuggled phones in the world's No. 2
economy.
The broader color palette and lower price for Apple's flagship product mark a departure from its
reliance on a premium brand and familiar black and white gadgets. The world's most valuable tech
company is trying to beat back rivals Samsung Electronics Co Ltd and Huawei Technologies Co Ltd
in markets including India and China, where it is quickly losing ground.
"It means Apple will hold on to margins but clearly they are not going after the very low-end of the
market, which will disappoint some investors," said Shannon Cross of Cross Research. "This is their
first foray into multiple colors and the plastic back. Keep in mind by next year they would have
probably have discounted this down, so I think there's still opportunity."
"As expected, iOS7 improvements are largely incremental. Nothing transformational, but iOS7
wasn't expected to be," DoubleLine portfolio manager Brendt Stallings told Reuters.
"We didn't expect iOS7 to be revolutionary and I don't think consensus did either. Look for 64-bit
iPad in the near future," said Stallings, whose DoubleLine bought Apple shares at around $405.

3. CEO Tim Cook told an expectant crowd at the company's Cupertino headquarters he expects Apple
to ship the 700 millionth device - an iPhone or iPad - based on iOS mobile software sometime next
month.
Wall Street approves of his 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. (Reuters Insider video: The big money betting on Apple link.reuters.com/seg92v)
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.
A NEW ERA
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.
Since the first touch-screen iPhone hit the market in 2007, software features have become easier to
replicate and improvements in speed, weight, display size and resolution have become routine. The
explosion of me-too products is already hurting profit margins and nibbling at Apple and Samsung's
market share.
"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 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.

4. Separately, Japan's largest carrier, NTT DoCoMo, will sell the new iPhone.
(Additional reporting by Jennifer Ablan in New York and Malathi Nayak in San Francisco; Editing by
Edwin Chan, Tim Dobbyn and Ken Wills)
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