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Apple's Only Surprise Was the Price Drop on iPhone SE, Apple Watch

Looking to spur sales in the U.S. and international markets.

The Verge

So much for that vaunted Apple secrecy. Virtually everything about Apple’s product launch today had been telegraphed — everything, that is, except the prices.

The new iPhone SE with a four-inch display starts at a price of $399, or about $50 below what most analysts expected. Apple also trimmed the price of its entry-level wearable, the Apple Watch Sport.

Both moves are intended to spur sales.

IDC notes global sales of the iPhone 5s have been decelerating as consumers gravitate to competing devices with more modern technology. So Apple loaded up the features on the latest version of its four-inch smartphone — adding a speedier A9 processor, a 12-megapixel camera and Touch ID for Apple Pay — in hopes of sparking sales. (Orders begin Thursday for the iPhone SE, which will be available March 31.)

Dropping the starting price to $399 is designed to appeal to price-sensitive customers here in the U.S., including those who use pay-as-you-go services like Cricket, as well as in emerging markets, where carriers don’t underwrite the cost of purchasing a smartphone.

The iPhone SE replaces the iPhone 5s as the entry-level Apple device. But the older model iPhone 5s will still be available for sale in select markets.

BTIG Analyst Walter Piecyk said that if Apple dramatically discounted the older-model iPhone 5s — say, to $300 — in markets such as Brazil, it would capture a greater share of consumers.

The price drop for the Apple Watch Sport, to $300 from $350, is similarly intended to grab more consumers by the wrist. The smartwatch market is still in its infancy — and Apple wants to maintain its early lead as it begins to feel the heat from traditional watch makers as well as makers of Android wearables and fitness bands.

Apple may well plan to make up the price cut on wristband volume, said Moor Insights & Strategy President Patrick Moorhead.

The company noted that the typical Apple Watch wearer likes to change bands. So Apple is keeping it fresh with new bands unveiled today — a $149 Milanese loop and $50 woven nylon bands in seven colors: Gold/red, gold/royal blue, royal blue, pink, pearl, scuba blue and black.

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