iPhone Sales Test Apple Strategy - Wall Street Journal

Apple has asked its suppliers to manufacture more of the new gold-colored iPhone 5S due to high demand, the constraints of which may greatly affect sales numbers. WSJ's Ian Sherr reports from the Chestnut Street Apple Store in San Francisco. Apple Inc.'s latest iPhones hit stores world-wide Friday with initial demand heavily tilted toward the more expensive model, particularly the gold-colored device. The launch is a further test of Apple's smartphone strategy, which is under attack on both the high and low ends. Strong demand for the latest versions would help allay concerns about the company's position in the smartphone market. Analysts expect Apple to sell at least as many iPhones over its launch weekend as it did last year, particularly because it is offering the devices to the Chinese market as part of the initial round of launches for the first time. Apple's latest iPhones hit store shelves world-wide, with demand heavily tilted toward the more expensive model gold-colored model. Ian Sherr reports from a San Francisco iPhone store, and Charles Passy explains the psychology behind why we wait in line for phones. Photo: AP. Apple began sales of its latest iPhones on Friday, hoping for a strong demand to allay concern about the company's position in the smartphone market. WSJ's Dipti Kapadia reports from the store opening in London's Covent Garden via #WorldStream. Photo: AP Apple last week unveiled two new iPhone models but didn't stray far from its traditional form factors and pricing. The lineup going on sale Friday includes the new flagship iPhone 5S, which includes a faster processor, a better camera and a new fingerprint scanner. A second, less expensive model called the iPhone 5C repackages much of the technology from last year's device in a new colorful plastic case. It was the flagship phone that appeared to be selling best, especially the gold-colored version. Demand for the gold 5S was so strong in China and Hong Kong that Apple already has asked its suppliers to increase production of that model, people familiar with the matter said. An Apple spokeswoman declined to comment. In New York, many in line wanted the gold iPhone but were frustrated as news quickly circulated that it already had sold out. Michael Dabbraccio, behind about 50 people in line, learned there were no gold phones left after Apple employees took orders from people in front of him. "The fact they don't have gold is very, very frustrating," Mr. Dabbraccio said. The 29-year-old construction worker said he waited in line for about 20 hours specifically for the gold phone. He said he probably wasn't going to buy anything. Similar experiences occurred in Frankfurt and London, where those waiting in line were told shortly after stores opened that the silver and gold versions of the high-end phone had sold out, leaving just the black version. An Apple spokesman at London's Covent Garden store said only that demand has been high. In Beijing, 25-year-old Lian Jiyu said he wanted the 5S over the 5C because the 5S is the first phone to be offered in gold. "I don't care what's inside the device," said Mr. Lian, who works at a local TV station. "Chinese people like gold." More on the iPhone The iPhone 5S and iOS 7 are available on Friday, and Walt Mossberg has his review of them. He says all the new features help the iPhone continue to be the top smart phone on the market, despite one downside. Find out what it is. (Photo: Apple, Inc.) iPhone Rollout Draw Crowds in Asia, Europe What the iPhone 5S Reviews Say iPhone Sellers Push to Thwart Thieves Digits: In Hong Kong, It's All About the Gold Digits: European Flock to Stores Washington Wire: Power Outage in Bethesda Walt Mossberg Reviews the iPhone 5S Enthusiasm for the lower-priced 5C, however, wasn't as apparent. "I think the 5C is still pretty highly priced considering it's supposedly the low-budget version," said Aaron Taylor, a 29-year-old IT consultant who lives in Sydney. "The 5C is basically the iPhone 5 with plastic around it." Others weren't enticed by the 5C's variety of looks. "I don't like the colors," said Rowan Baluta, a 19-year-old college student in New York who arrived at 10:30 p.m. Thursday to be 25th person in line. Some analysts and investors were hoping Apple would introduce more variety into the pricing of its phones. In the U.S., Apple priced the 5S at $199 with a two-year contract, or $649 without; the 5C costs $99 and $549, respectively. Since the announcements last week, Apple's stock price has fallen nearly 7% through Thursday's close. The Waiting Game Laurent Fievet/Agence France-Presse/Getty Images Meanwhile, the carnival atmosphere that has surrounded iPhone launches in years past continued. In London's Covent Garden, Apple employees handed out pastries and bottled water to those close to the front of the line, which stretched through the square and then snaked around the block. "It's an American show," said Alexander Kurz, 35, who had lined up in Frankfurt, where Apple employees—as they traditionally do at significant product launches world-wide—clapped and cheered when the opened the doors. Many customers had camped out all night, leaving some streets trash strewn. "It's like Disneyland for us out here. We're not used to it." The concern among some Apple watchers is that the lineup will do little to help the company further compete against phones running Google Inc.'s Android operating system, which became the world's most widely used software in 2011, according to research firm Gartner. The software powered nearly 77% of the smartphones sold during the first half of this year. Apple's chief rival is Samsung Electronics Co., which sold 71.3 million smartphones in the second quarter—more than twice Apple's 31.9 million phones sold over the same period, Gartner said. Smartphone Comparison Compare features and specifications for Apple's iPhone 5S, Google's Motorola Moto X, the Samsung Galaxy S 4 and more. The South Korean technology giant has increasingly set its sights on the American market, holding lavish launch events and ramping up advertising. At the same time, Samsung and other competitors have taken share from Apple in countries like China, where Samsung smartphones can be purchased for less than $100. Apple executives have said they intend to focus on the high end of the market. "There's so many people that care and want a great experience from their phone or their tablet, that Apple can have a really good business," Apple Chief Executive Tim Cook said in an interview with Bloomberg Businessweek magazine published on Thursday. Sales are expected to be strong this weekend. Gene Munster, an analyst at Piper Jaffray, said he sees Apple selling as many as 6 million units over the weekend, surpassing Apple's previous record of 5 million units last year. Some analysts believe the iPhone 5S will have constrained supplies during its launch, particularly because they believe the fingerprint sensor is harder to manufacture efficiently. Ming-Chi Kuo, an analyst for KGI Securities in Taiwan, said in August he expected Apple would produce 5.2 million units of the iPhone 5S and nearly 8.5 million units of the iPhone 5C during this launch quarter. But by the end of December, he predicts Apple will ship 28 million units of the iPhone 5S and 18.7 million units of the iPhone 5C. All told, the analyst estimates that total iPhone shipments will top 35 million units in the third quarter—a 30% increase over the same time last year—and rise to 55 million in the fourth quarter. The company said it would be selling iPhones in 100 countries and more than 270 mobile carriers by the end of the year. Further weighing on the company are concerns it has lost its competitive edge. Eddie Rivera, an airline worker from Fort Lauderdale, Fla., said he and his wife used to be fans of Apple's iPhone, having bought multiple models over the years regardless of whether or not they needed them. "We just felt we needed to have the latest one, that's how strong we felt about it," he said. After hearing about the iPhone 5S and iPhone 5C, he said neither is innovative enough to spur him to buy. "We will pass on this one and start researching Samsung's selections of phones." —Ross Kelly and James Glynn in Sydney, Lorraine Luk and Juro Osawa in Hong Kong, Wayne Ma and Yun-Hee Kim in Beijing, Miho Inada and Mayumi Negishi in Tokyo, Simon Zekaria and Dipti Kapandia in London, Ryan Knutson and Thomas Gryta in New York, Christopher Lawton in Frankfurt and Inti Landauro in Paris contributed to this article. Write to Ian Sherr at ian.sherr@wsj.com via Technology - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNGHvbaa1p9OTDwVi3Ef65wXIJuN1g&url=http://online.wsj.com/article/SB10001424127887324492604579086982824900624.html

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