Apple unveils iPhone 5C, iPhone 5S; aims to extend market reach

By Poornima Gupta and Malathi Nayak

CUPERTINO, California (Reuters) - Apple Inc unveiled on Tuesday an iPhone with a fingerprint scanner to help it stand out in a crowded field of similar smartphones, plus a cheaper plastic model for emerging markets that proved pricier than expected.

The "iPhone 5C" comes in five hues - blue, green, pink, yellow and white - and starts in the United States at $99 with a contract, or $549 without. But an unlocked 5C will go for 4,488 yuan and above in China, more than the average urban resident earns in a month and a price that may disappoint those hoping for a more aggressive assault on the world's largest cellular market.

Apple has been losing ground to Samsung Electronics Co Ltd <005930.KS> and Huawei Technologies Co Ltd in emerging markets such as China, and a more affordable 5C was deemed instrumental to helping it claw back market share.

It also needs to sharply expand its existing distribution. Apple did not on Wednesday address speculation that it is on the verge of signing a distribution pact with China Mobile Ltd <0941.HK>, the country's biggest wireless carrier with more than 740 million subscribers.

But a notice posted on a Chinese government website said regulators had, in an expected move, granted a license to allow the iPhone to use China Mobile's homegrown mobile network, which is different from the standard used by existing iPhone carriers China Telecom Corp <0728.HK> and China Unicom <0762.HK>.

Other details of the two new iPhone models had been telegraphed ahead of time in several media reports, leaving the U.S. launch devoid of major surprises, and Apple shares dropped more than 2 percent on Tuesday to $494.64.

For new iPhones, in detail: click http://link.reuters.com/huh92v

For sales since 2007: click http://link.reuters.com/kud92v

For Apple and China: click http://link.reuters.com/veq99t

For Apple vs Blackberry & Nokia: click http://link.reuters.com/dab55t

The pricier "5S" begins at $199 with a contract and also comes in three colors - gray, silver and gold. It sports a faster processor, a camera that takes bursts of photos and chooses the best, and the fingerprint-scanner that unlocks the phone with a touch.

It also includes a separate chip, called the "M7 Motion co-processor", which can track motion data continuously without heavily draining the battery.

That opens the door to better track sports and fitness-related user activity, now the domain of wearable devices like the wrist-worn Fitbit, and lets developers experiment with apps that make use of those functions.

Carolina Milanesi, an analyst with Gartner, called it "brilliance" on Apple's part, in that it gives them potential exposure to the wearable-devices market without having to actually design and rush out a gadget of their own like a smartwatch.

(SLIGHTLY) CHEAPER MODEL

Apple stock had gained more than 11 percent over the past month, in a typical rally ahead of a big product launch. Tuesday's sell-off also reflected a post-event pattern.

"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."

Foe slideshow on new Apple iPhone: click http://in.reuters.com/news/pictures/slideshow?articleId=INRTX13H3G

The cheaper phone goes on sale online on Friday, while the pricier gadget will be available from September 20. For the first time, it will sell in China at the same time as the United States, a move expected to severely curtail the underground market for smuggled phones in the world's No. 2 economy.

The 5C marks a departure from Apple's focus on purely premium phones, but not as much as some expected.

"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."

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.

Others worry that, at just $100 below the 5S, the cheaper iPhone will begin drawing would-be buyers away from the premium gadget. Apple has said it prefers to cannibalize its own gadgets rather than allowing rivals, such as phones that rely on Google Inc's Android software, to siphon off customers.

Apple would have had to ward off "Android or even Microsoft, picking up some momentum with its new partnership with Nokia. Apple shouldn't leave the entire field to all these guys," said Roger Kay of Endpoint Technologies. "They've put their 'slightly down market but not really enough to change the brand' product into the market."

Longer term, investors 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 sell-off was fueled by fears of slowing growth and a perception that Apple's ability to innovate and shake up industries was dwindling.

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.

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."

(Additional reporting by Jennifer Ablan in NEW YORK and Paul Carsten in BEIJING; Writing by Edwin Chan; Editing by Tim Dobbyn, Ken Wills and Alex Richardson)

Matches

MORE TOP STORIES TODAY

Bowling worries for Super Kings

Bowling worries for Super Kings

After failing to defend a mammoth 205 against Kings XI Punjab, Chennai have a lot to think about. More »

Punjab pull off another big chase

Punjab pull off another big chase

GAME 7, SHARJAH—Maxwell, Miller, Pujara chase down Rajasthan's 192. More »

T20 test for Cheteshwar Pujara

T20 test for Cheteshwar Pujara

The class act from Saurashtra may have to rethink his approach to the mannerless format. More »

Special meeting to replace Srinivasan

Special meeting to replace Srinivasan

The BCCI is likely to convene a special general body meeting (SGM) in May to replace N Srinivasan on the board's disciplinary committee. More »

Shastri in proposed IPL probe panel

Shastri in proposed IPL probe panel

Some members stressed on the need for proposing names with an "impeccable record and clean image". More »

Roach escapes injury after car crash

Roach escapes injury after car crash

The West Indies fast bowler lost control of his BMW sedan due to slippery road conditions in his native Barbados on Saturday. More »

[INTERVIEW] Lankan veterans grateful for 'unwavering' fans

[INTERVIEW] Lankan veterans grateful for 'unwavering' fans

Mahela Jayawardene and Kumar Sangakkara go over their World T20 win, and feel grateful to have fans whose support remains unwavering in victory and de… More »

Need to improve fielding: Ashwin

Need to improve fielding: Ashwin

[T20 Newsline] Lacklustre Super Kings, fast-improving Sanju Samson and other news from IPL-7. More »

Repose faith in Indian coaches

Repose faith in Indian coaches

All of them cost plenty of dollars which I feel is unnecessary for a two- month tournament, says former cricketer Yajurvindra Singh. More »

Cook relieved after period in limbo

Cook relieved after period in limbo

The England captain is looking forward to a fresh start after a dispiriting Ashes defeat last year. More »

Chaos threatens to engulf SL again

Chaos threatens to engulf SL again

As Lanka's head coach decides to jump ship, euphoria over winning an ICC tournament has dissipated into fuistration. More »

Jayasuriya unhappy at Farbrace conduct

Jayasuriya unhappy at Farbrace conduct

Sri Lanka's chief selector is upset at news of head coach Paul Farbrace's possible move to England. More »

Panel can help clean mess: Raghavan

Panel can help clean mess: Raghavan

The former CBI Director is one of three candidates proposed by the BCCI to head the enquiry into the IPL betting and spot-fixing scandal. More »

Have nothing to prove to anybody — Sehwag

Have nothing to prove to anybody — Sehwag

The Nawab of Najafgarh says a good run in IPL could help his chances of a comeback on India's tour to England in June. More »

Duminy steals first win for Delhi

Duminy steals first win for Delhi

Furious fifties by Duminy and Dinesh Karthik end a long losing streak for the Daredevils. More »

Five things England must do to bounce back

Five things England must do to bounce back

England have appointed a new head coach in Peter Moores. More »

AB, Parthiv seal Bangalore's second win

AB, Parthiv seal Bangalore's second win

Royal Challengers overcame a stutter to cruise to the small target they were set by Mumbai Indians. More »

‘Felt like helpless minority’

‘Felt like helpless minority’

Former BCCI treasurer Ajay Shirke says emotions got the better of Srinivasan and he tried to oversimplify things by calling Meiyappan an “enthusiast.” More »

Royal test for Kings

Royal test for Kings

Preview — Clash of philosophies between Australia-centric teams More »

No way back for Pietersen: ECB

No way back for Pietersen: ECB

Kevin Pietersen's hopes of reviving his international career appeared to end Saturday when ECB managing director Paul Downton said there was 'no way back'… More »

The world record that nearly wasn't

The world record that nearly wasn't

Twenty years ago this week, Brian Lara became Test cricket's highest scorer, but he almost didn't make it. More »

Srinivasan can attend BCCI meeting

Srinivasan can attend BCCI meeting

His status as president of TNCA makes him eligible to attend the Working Committee meeting on Sunday. More »

Maxwell carves his parallel universe

Maxwell carves his parallel universe

Glenn Maxwell seems to project an icy disdain when at the crease. Match situations rarely faze him and the bubble in which he plays excludes everyone … More »

Moores gets second stint as coach

Moores gets second stint as coach

In a two-year spell from 2007 to 2009, the 51-year-old Moores led England in seven Test series. More »