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Apple?s efforts to boost iPhone meet with mixed results

Despite Apple selling 51 million iPhones - a new quarterly record - during the last three months of 2013, the company?s share of the overall smartphone market is declining, suggesting it needs to tinker more aggressively with the design and positioning of its signature device.

The iPhone rewrote the mobile phone market, but it is beginning to look a little long in the tooth, with its small 4-inch screen standing out among the more prevalent 5-inch premium smartphones. With interest building around a wide variety of mobile-enabled devices, such as wearables, connected cars and smart appliances, it is clear that Apple must move aggressively to diversify its portfolio of mobile devices.

?While they still are able to increase their distribution ? the ultimate example is the China Mobile deal ? soon their distribution won?t be able to hide the fact that the high end is getting saturated and that they are going to have to start be satisfied with much lower growth rates than they have previously experienced unless they do something dramatic and drop the price point,? said Nick Spencer, London-based senior practice director for mobile devices, applications and content at ABI Research. ?But they don?t seem to have any interest in doing that, judging by the 5C.

?They have some quite big decisions to make this year around their portfolio,? he said.

?The premium tier is almost exclusively phablet at this point except for the iPhone. It really does stick out as a bit of an anomaly [that Apple does not have a phablet].?

Shrinking share
Apple reported yesterday that it sold 51 million iPhones during the quarter that ended Dec. 28, 2013, compared to 47.8 million in the year-ago quarter.

Despite the growth, Apple is facing growing competition in the mobile space, which is reflected in its shrinking market share.

IOS's smartphone market share in the United States dropped 5.8 percent during the last three months of 2013 while Android continued to grow, gaining 4.4 percent, according to new data from Kantar Worldpanel ComTech.

The Apple operating system also declined in China and Europe while Android grew.

Samsung's market share dropped as well, thanks to growing competition in the Android ecosystem. However, Samsung and Google have just signed a patent cross-licensing deal that could help the South Korean manufacturer gain a foothold in the next generation of mobile devices, including wearables.

The iPhone 5C
Apple?s release of the 5C last year was seen by some as the company?s attempt to broaden the appeal of the iPhone and regain market share by targeting a more cost-conscious consumer.

Sales for the 5C have been disappointing, in part, because at only $100 less than the 5S, it is not clear who exactly Apple is targeting with the device.

?[The big news for Apple in the last quarter is] the slightly inauspicious start to the 5C,? Mr. Spencer said. ?The price point is only $100 lower, and it seems to be a slightly confused positioning.

?People who are going in large contracts are willing to pay the extra money and just get the 5S,? he said ?So I think there is a question mark over how they organized their portfolio there.

?What is the point in the 5c? The main marketing thing has been around color, and I would say that when you are focusing on color as your main marketing message, you are slightly running out of ideas.?

With most of the future growth in the smartphone market expected to come from lower-end markets, Apple still has a hole in its strategy to address this market.

The premium ecosystem
The rumors are flying that Apple will introduce a phablet this year. With premium smartphone owners increasingly choosing a phablet, it is critical that Apple have an entry in this space.

Phablets are so named because they are considered a hybrid between a phone and tablet by offering a larger screen size for viewing content while still being usable as a phone.

For now, quarters such as this last one continue to insure Apple?s significant influence in the premium end of the market. It is just not clear how much longer that will be the case if Apple does not start to bring more innovation to the market.

?I think between them and the rest, they are still very much the premium device and therefore the premium ecosystem in terms of developers,? Mr. Spencer said.

?People still do generally develop for Apple first,? he said. ?Also developers make more money per capita on Apple.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York