Is the iPhone SE a sur­prise hit for Ap­ple?

Af­ter Ap­ple’s lat­est quar­terly earn­ings call, we got a hint it has a sur­pris­ing hit prod­uct on its hands.

iPad&iPhone user - - CONTENTS - Ja­son Snell

The thing about Ap­ple’s fi­nan­cial re­sults is that they lag a month be­hind re­al­ity, so the hottest just-re­leased new prod­ucts of­ten have lit­tle or no im­pact in the first quar­terly re­port af­ter their re­lease. All of the prod­ucts Ap­ple in­tro­duced on 21 March be­gan ship­ping on 31 March, while

Ap­ple’s fis­cal se­cond quar­ter ended 26 March. So if you’re look­ing for a sign that the 9.7in iPad Pro or the iPhone SE is do­ing well in the num­bers, you won’t find them.

But it’s not all about the num­bers. Some­times it’s about the fore­cast for next quar­ter, tid­bits of in­for­ma­tion that Ap­ple ex­ec­u­tives let out in in­ter­views or dur­ing their quar­terly con­fer­ence call with an­a­lysts. And on Tues­day we got a hint that Ap­ple has a sur­pris­ing hit prod­uct on its hands: the iPhone SE.

A big au­di­ence for a small phone

The idea that the iPhone SE might sell well isn’t un­rea­son­able. Though the tech in­dus­try has fallen over it­self to pro­mote a big­ger-is-bet­ter mantra about smart­phones, not ev­ery­one wants to use a phone the size of the iPhone 6s or 6s Plus. When Ap­ple an­nounced the iPhone SE, Ap­ple’s Greg Joswiak dropped the tid­bit that Ap­ple had sold 30 mil­lion 4in iPhones in the pre­vi­ous year.

That’s roughly 13 per­cent of the to­tal num­ber of iPhones sold dur­ing that pe­riod, but con­sider: The iPhone 5s was long in the tooth for that en­tire pe­riod, and over­shad­owed first by the iPhone 6 and 6 Plus and, later, by the 6s and 6s Plus. And yet, de­spite all of that, the 4in iPhone man­aged to grab 13 per­cent of to­tal iPhone share.

At £359, iPhone SE has the low­est start­ing price of any new iPhone ever. That’s sure to make it an ap­peal­ing prod­uct. And then toss in the fact that some un­known por­tion of the iPhone buy­ing pub­lic ei­ther held on to their iPhone 5, 5c or 5s be­cause they just didn’t want a larger iPhone, and an­other

por­tion bought an iPhone 6 be­cause it was the new iPhone, but dis­cov­ered that they pre­ferred the size of their pre­vi­ous phone. So the stage was set. There was a good case to be made that the iPhone SE would sell well, maybe even com­pris­ing 20 per­cent of the to­tal num­ber of iPhones sold. Pretty good prospects for the lit­tle guy, right?

They didn’t ex­pect it

I sus­pect, though, that in­side Ap­ple there was some scep­ti­cism about the iPhone SE’s po­ten­tial au­di­ence. Per­haps peo­ple at Ap­ple got a lit­tle car­ried away with that same big­ger-is-bet­ter phi­los­o­phy and lost per­spec­tive about why peo­ple might want a low­cost, small, full-fea­tured iPhone.

That’s just spec­u­la­tion. What’s fact, based on what Ap­ple CEO Tim Cook said on Tues­day, is that Ap­ple blew it when it came to its fore­casts for how well the iPhone SE would sell. Right now, “over­whelm­ing de­mand” for the iPhone SE means that Ap­ple can’t make them fast enough – that used to hap­pen all the time, but it’s been a while since Ap­ple has been be­hind on iPhone sup­ply.

And Cook owned up to it. “It is clear that there is de­mand there, even much be­yond what we thought, and so that is re­ally why we have the con­straint that we have,” he said. More specif­i­cally, Cook sug­gested that Ap­ple un­der­es­ti­mated the num­ber of peo­ple who “wanted the lat­est tech­nolo­gies, but wanted it in a more com­pact pack­age.”

The power of the price tag

In an era where phone sub­si­dies are be­ing re­placed by fi­nanc­ing plans, con­sumers are now see­ing –

of­ten for the very first time – the ac­tual price of that shiny new smart­phone they’ve been buy­ing every two years or so. That’s go­ing to lead to some sticker shock. Hav­ing the iPhone line start at £359, or £17.24 per month, is a good place for Ap­ple to be, even in the rich­est mar­kets.

But more than that, the iPhone SE gives Ap­ple ac­cess to some po­ten­tial cus­tomers it might not have been able to reach be­fore. Ap­ple’s never go­ing to be the low-price leader in a cat­e­gory, but it’s a brand that rep­re­sents qual­ity, and peo­ple do aspire to buy Ap­ple prod­ucts, most es­pe­cially the iPhone.

“It’s at­tract­ing peo­ple who aspire to own an iPhone, but couldn’t quite stretch to the en­try price of the iPhone,” Cook said Tues­day. “I do think that we will be re­ally happy with the sort of new-toiPhone cus­tomers that we see from here, be­cause of the early re­turns we’ve had.”

A key player, not the star

I think it’s un­likely that the iPhone SE will ever sell in amounts within hail­ing dis­tance of the top-ofthe-line iPhones. But that’s okay. The iPhone is no longer a sin­gle prod­uct, like it was in the old days, but a prod­uct line. If you con­sider last year’s mod­els, which are still lin­ger­ing, there are five dif­fer­ent iPhone mod­els avail­able to po­ten­tial buy­ers.

The iPhone SE doesn’t need to be a run­away suc­cess. It’s a part of the larger story, a prod­uct that sets a lower en­try price and ap­peals to peo­ple who don’t like the feel of a larger phone in their hands. But it’s clear that, at least right now, it’s a big­ger part of Ap­ple’s over­all iPhone pic­ture than even Ap­ple it­self ex­pected a month ago.

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