Apple dips toes into lower-priced waters with colorful $99 iPhone 5c

But disappoints analysts who expected a more aggressive counter-attack against Android in China, elsewhere

Apple CEO Tim Cook and other executives today unveiled the iPhone 5s and the plastic-backed iPhone 5c, the first time in the six-year history of the iconic smartphone that the company has gone with a two-tier strategy.

Unlike last year, there were some surprises during the 80-min. presentation, which took place at Apple's Cupertino, Calif. headquarters.

"I was surprised by the 64-bit processor and the motion processor," said Ezra Gottheil, analyst with Technology Business Research, in an interview after Apple's event. He was referring to the faster Apple-designed A7 SoC (system on a chip) that will power the iPhone 5s, and its new motion data processor, which Apple touted as the foundation for a new wave of health and fitness apps.

"Overall, the 5s is a nice step up, they did things that made sense, but there's not a lot of avenues left now to take a smartphone," Gottheil said.

For his third iPhone introduction since taking the reins from co-founder Steve Jobs in 2011, Cook kept to tradition by kicking off the event, then introducing other Apple executives to handle the heavy lifting.

"In the past, we've lowered the price of the current iPhone, making it accessible to more people. This year, we're not going to do that," said Cook. "The business has become so large, so this year we're going to replace the iPhone 5. This allows us to serve even more customers."

The replacement for the iPhone 5 will be the frequently-leaked iPhone 5c, essentially a repackaged iPhone 5 that comes in five colors, its chassis composed of polycarbonate -- not the milled aluminum featured in flagships -- with a steel frame that doubles as an antenna.

Like the iPhone 5 and its 2013 replacement, the iPhone 5c boasts a 4-in. screen with an 1,136-x-640-pixel resolution and relies on the Lightning connectivity technology for connecting to a computer, charger or accessories. It boasts the A6, the same SoC (system on a chip) used by last year's iPhone 5.

Because of the introduction of the iPhone 5c, Apple will scale back but not ditch the practice of retaining previous-generation models, which it has sold at $99 with a contract for the past year's phone. In the case of the two-year-old model, Apple has asked for zero down when customers sign a two-year contract.

The iPhone 5 and iPhone 4 will be retired, but the iPhone 4S will continue to be the bottom-end model, offered free with a contract.

The iPhone 5c will go on sale Sept. 20 at prices of $99 for a 16GB device and $199 for 32GB; those prices assume a two-year carrier contract. Minus a contract, or sold "unlocked," the lower-end iPhone 5c will cost approximately $550, while the 32GB will run $650.

Those prices were considerably higher than most analysts' expectations. They had assumed Apple would sell the iPhone 5c at dramatically lower prices -- the lowest estimates were around $300 unsubsidized by a contract -- to battle even cheaper Android smartphones in major markets like China and India, where the Google mobile OS has been trumping iOS in sales volume and market share.

Turned out Apple didn't want to play that game.

"So, optimisation of the existing strategy. Not a new pricing strategy," tweeted Benedict Evans, an analyst with U.K.-based Ender Analysis.

"Apple isn't interested in giving away its technology," said Carolina Milanesi of Gartner in an interview. "They are staying true to their core [on the 5c and its pricing] "Maybe we will see another, less expensive device later, but clearly Apple felt it wasn't the right time to do that."

Keith Shaw and Computerworld's Ken Mingis discuss a few surprises from the Sept. 10 Apple event, in which the iPhone 5s and 5c phones were announced.

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