Apple drops as iPhone models reflect shift from pioneer

Apple Inc. (NASDAQ:AAPL) fell the most in almost five months after unveiling two iPhones that were criticized by analysts and reviewers as lacking enough new features or a low enough price to attract a broad range of first-time users.

In a break with the past, when the company introduced one iPhone a year, Apple yesterday unveiled two new models. The iPhone 5C will cost $99 to $199 with a wireless contract and comes in five different colors. A high-end iPhone 5S with fingerprint-security features, a speedier processor and better camera will cost $199 to $399 and be available in three colors. Apple declined as much as 6%, making it the worst performer in the Standard & Poor’s 500 Index.

The devices underscore a shift in the $280 billion smartphone industry, as the novelty of Internet-connected handsets wears off and the gadgets share many of the same basic features. Facing increasing competition from rivals such as Samsung Electronics Co. that offer mobile phones in different designs and prices, Apple Chief Executive Officer Tim Cook is following suit and expanding his company’s own lineup to court more style-conscious customers and users in developing markets.

“We’ve gotten through the first phase of the industry,” said Benedict Evans, a mobile-phone industry analyst at Enders Analysis. “The original vision has been built out. We’re now in a market where Apple is fighting on more equal terms.”

Repackaged iPhone

Apple’s strategy shift includes what is essentially a repackaging of last year’s iPhone 5 in a new polycarbonate casing that comes in blue, pink, green, yellow and white to become the iPhone 5C. The company isn’t pricing the 5C as cheaply as competitors’ handsets, with the phone costing $549 and up without a two-year contract, according to Apple’s U.S. website, showing it’s unwilling to trade its industry-leading profit margins for increased market share.

The shares decreased 5.8% to $465.81 at 10:35 a.m. in New York. Investors had expected a lower price for the iPhone 5C to appeal to more customers in emerging markets like China, according to Brian Blair, an analyst at Wedge Partners Corp. who attended the Apple event.

“Nobody expected it to be this high,” Blair said. “They are clearly saying we aren’t willing to go downstream.”

Even so, Apple is boosting its pool of potential customers. Apple said it was adding Japan’s largest carrier, NTT DoCoMo Inc., and that it would have devices immediately available in China for the first time. The company is near a deal with China Mobile Ltd., the world’s largest carrier, people familiar with the plans have said.

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