Was iPhone 5C the Cause of Apple’s Woes? Mum’s the Word

Judging by the comments – or lack thereof – from Apple executives, the company’s mantra for its less-expensive iPhone 5C seems to be: “If you don’t have something nice to say, don’t say anything at all.”

Apple sold 51 million iPhones in the December quarter, good enough for a 7% increase from a year earlier but less than the 55 million units that analysts were predicting. It was a disappointing figure, considering Apple had expanded its iPhone line-up for the first time by offering a high-end iPhone 5S and a more affordable 5C. Tuesday morning, Apple shares were down more than 7% on Wall Street.

Apple executives never directly pointed to the 5C as the culprit, despite repeated analyst questions. Instead, they stayed mum about the 5C while praising the 5S at every turn.

The closest that Apple came to blaming the 5C was when CEO Tim Cook told analysts that the iPhone “did not do well” in North America because the demand “mix was stronger to the 5S.” Later on the call, Cook said consumers flocked to the 5S because of its fingerprint sensor, a feature missing from the 5C.

Separately, in an interview with the Wall Street Journal, Chief Financial Officer Peter Oppenheimer said Apple didn’t have enough supply of the 5S until the end of the quarter, but didn’t mention the 5C in his comments. Nor did Apple break down iPhone sales by model.

One sign of the demand trend: The average selling price of the iPhone proved resilient to the pricing pressure facing other smartphones. It came in at $637 in the December quarter, compared with $577 in the previous quarter and $642 in the year-ago period. The iPhone 5S starts at $649 without a contract, while the iPhone 5C starts at $549 without contract.

The 5C represented a tweak to Apple’s iPhone strategy. In the past, Apple had targeted more price-sensitive consumers by offering its previous generation iPhone at a $100 discount. This time, it offered the 5C, ostensibly a new model but essentially the same hardware as the previous-generation iPhone 5 with a plastic case that comes in five different colors.

Apple said that the 5C was successful in bringing new customers to the iPhone and would have done better with North American iPhone users if carriers had made it easier to upgrade. It also noted that it sold more units of the 5C as its “entry phone” than it had of the iPhone 4S last year, when it was the low-end model.

It didn’t take long before concerns surfaced about how it was selling. After both models launched in September, the 5S was on back order while consumers could buy the 5C immediately. In October, the Journal reported that Apple had reduced orders for the 5C.

In December, Apple supplier Jabil CircuitJBL -1.59%, which produces the plastic cases for the iPhone 5C and the metal exteriors for the 5S, said it had suffered an unanticipated drop in demand from a big customer. Analysts who follow Jabil pointed to Apple and the 5C as the likely reason.