Apple shares fell more than 5% as investors worried that its latest iPhone models may not help it increase its share in emerging markets.
Apple launched two models on Tuesday, the iPhone 5S and a cheaper iPhone 5C.
But the basic 5C model, with 16 gigabytes of storage, has been priced at $740, which analysts said was still expensive for emerging markets.
Apple has found it tough to boost its share those markets against competition from firms such as Samsung and Huawei.
“Investors were put off that Apple’s price point didn’t go low enough to attract a new market,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
“It doesn’t have the same range in price that Apple’s competitors have,” he added.
Apple shares fell more than 5 percent as investors worried that its latest iPhone models may not help it increase its share in emerging markets
Apple shares closed at $467.7 on Wednesday, down by 5.4%.
The company has enjoyed tremendous success in developed markets with its iPhone models.
However, Apple has not been able to repeat that in emerging economies such as China and India, not least because its products are relatively more expensive.
One of the key reasons has been that unlike the developed markets, many mobile carriers do not subsidize phones in these countries.
That makes low-cost phones a much more affordable option for consumers. Many had hoped that Apple would launch a low-end phone to try to lure those buyers.
“The pricing on the iPhone 5C is simply not low enough to adequately address the significant global growth opportunity that we believe exists with unsubsidized prepaid customers that have not yet bought a smartphone,” said Walter Piecyk, an analyst with BTIG Research.
“We believe Apple is foregoing a valuable and relatively easy way to return to earnings growth.
“The real question is whether Apple plans to ever go after these markets or rather just remain a high-end phone maker.”
Investors had also been hoping for an announcement of a deal with China Mobile, the world’s biggest phone company with nearly 700 million subscribers – who could be potential customers of Apple’s phones.
Analysts said that the lack of any announcement also hurt investor sentiment.
Asha, the budget smartphone line from Nokia, is outselling its premium handset offering, the Windows-run Lumia, by over two to one.
Nokia’s quarterly results, published on Thursday, revealed the total number of both Asha and Lumia devices sold in the last three months of 2012 was 14 million. Only 4.4 million were Lumias.
There have also been rumors that Apple may offer a lower-priced iPhone model.
Reports that a senior Apple executive denied this have been withdrawn.
“We forecast that by 2016, 31% of the global overall handset market will be low-end smartphone,” said Ian Fogg, principal analyst at IHS.
“An entry-level smartphone is very different from a high-end smartphone,” he said.
“Smaller, cheaper devices have processors from two or three years ago, they have small screens with low resolution, and weaker cameras. They can all do email and the web but gaming and browsing is a much better experience on the higher end phones.”
Asha, the budget smartphone line from Nokia, is outselling its premium handset offering, the Windows-run Lumia, by over two to one
However, the difference in cost to the consumer is significant.
“Apple still play out at the premium end of the market,” said Ian Fogg.
“Can they remain profitable and successful being in a small part of the handset market or do they need to be a bigger player to get the economies of scale right?”
“Apple makes high quality products, it doesn’t make cheap products,” he added.
“That doesn’t rule out Apple creating a cheaper iPhone that still has high quality components. Look at the iPod range – they started with a premium price product, then they added the mini, the nano, the shuffle – they went to a range of products hitting different price points.”
Ian Fogg pointed out that there are currently variations of the iPhone 4, 4S and 5 available at different prices.
“Their strategy has been to reuse previous generation model rather than build a new model,” he said.
“Apple, I’m sure, is evaluating that strategy. Is it better to use a tried and trusted design that they know how to manufacture and that the consumer understands, or is it better to design a new model that hits that price point?”
At the Consumer Electronics Show in Las Vegas this month, Chinese phone manufacturer ZTE announced plans to launch a lower-end smartphone running on Mozilla’s Firefox operating software in Europe this year.
“I think Apple should be more aggressive with its smartphone range,” said Ian Fogg.
“I think the strategy they have had of reusing previous year’s models has been quite smart, but there is also an opportunity to design a new product that hits that low price point.”