Apple Upgrades $399 iPad, Sells Cheaper iPhone 5C Overseas

Apple Inc. AAPL +0.88% tweaked its entry-level iPad and iPhone lineup, as rival offerings that run Google Inc. GOOG +1.62% 's Android operating system gain momentum among the most price-sensitive consumers.
The company refreshed its least expensive 9.7-inch tablet, swapping out the 2011 iPad 2 model for the fourth-generation version with a more powerful processor, faster wireless connectivity and a sharper display. Apple kept the price unchanged at $399 for the Wi-Fi version and at $529 for the Wi-Fi and cellular model.
The consumer-electronics giant also introduced a less expensive version of its iPhone 5C, the low-end version of its smartphone, with 8 gigabytes of memory—half the amount of its previous cheapest model. The new phone was launched Tuesday in the U.K., France, Germany, Australia and China. It won't be introduced in the U.S.
In China, the new iPhone 5C will sell for 4,088 yuan ($660) without a contract, versus 4,488 yuan for the 16-gigabyte model. In the U.K., the cheapest model will sell for £429 ($711), versus £469 for the 16-gigabyte iPhone 5C, without a contract.
The new products are hitting the market as competitors chip away at Apple's market share from the low-end, especially in smartphones. For example, a large percentage of China's smartphones sell for less than $200—making even the entry-level 5C more expensive than most phones on the market.
Android's market share for smartphones reached 79% in 2013, up from 69% a year earlier, according to market-research firm International Data Corp. By comparison, Apple's share of the market fell to 15.2% in 2013 from 18.7%.
Apple hopes to breathe new life into the 5C, which marks a change in its iPhone strategy. In the past, Apple targeted more price-sensitive consumers by offering its previous generation iPhone at a $100 discount. This time, it is offering 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.
While Apple doesn't break out sales for its various models, analysts cited the 5C as the reason iPhone sales came up short of expectations in the quarter ended December. According to analytics firm Mixpanel, the high-end iPhone 5S accounts for three times as much traffic on iPhone apps as the 5C. That doesn't necessarily mean that the 5S has outsold the 5C by 3 to 1, but it does suggest that there are significantly more 5S models in the market.
Apple also is updating the iPad as growth in tablet sales is expected to slow. IDC earlier this month cut its 2014 forecast for global tablet shipments. It now expects growth of 19% this year to 260.9 million units world-wide, down from 52% in 2013. Consumer purchases are expected to slow, IDC said, as fewer users feel compelled to upgrade the same way they did in the past.
Apple's iOS operating system dominated the tablet market for years, but it was overtaken in 2013 by Android. Apple's iOS made up 36% of world-wide tablet sales last year, according to market researcher Gartner Inc., compared with a 62% market share held by Android.
In January, Apple said it sold 26 million iPads in its latest quarter, its most ever, compared with 22.9 million in the year-earlier period.

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