As a result, Apple's share of the smartphone market fell from nearly 19 percent at the end of 2012 to about 15 percent last year, according to IDC. Samsung remains the market leader with a 31 percent share at the end of last year, up a notch from 30 percent in 2012.
Apple tried to widen the iPhone's appeal with the cheaper 5C, which was essentially a recycled version of the iPhone's previous generation. To make the 5C look like something new, Apple dressed it up in a brightly colored array of plastic casings.
In Monday's conference call with analysts, Apple CEO Tim Cook made it clear that the 5C didn't sell as well as the company anticipated, though he didn't provide specifics. Cook hailed the 5S model as the star performer in the company's holiday quarter.
With the 5S leading the way, Apple sold 51 million iPhones in the fiscal first quarter. Even though that set a record for the company, it represented a letdown because analysts had projected 55 million.
Analysts suspect that many of those iPhones are being bought by repeat customers who love the mobile operating software and other services, as well as the cachet that comes with the Apple brand. Cook said Apple still attracts a "significant" number of first-time iPhone buyers.
Jobs carefully cultivated Apple's luxury image before he died in October 2011, and Cook has given no indication he will risk tainting it with an inexpensive smartphone sporting lower-quality parts.
"Our objective has always been to make the best, not the most," Cook said Monday.
He also said Apple will expand its horizons this year with new products that will push the company beyond smartphones and tablets. Most analysts expect an Internet-connected smartwatch and possibly a long-rumored television set that would run on the same software as the iPhone and the iPad.
Apple also is preparing to sell an iPhone with a 5-inch display screen, according to unidentified people cited in a report this month in The Wall Street Journal.
Apple declined comment Tuesday.
If an iPhone with a bigger screen is in the works, it would pose another test for the company as it tries to ensure the device retains the same high resolution and other features in earlier generations.
"There is clearly a standard that Apples has set for itself: Anything less than fantastic won't do, and no one is going to give them a pass if they don't live up to that," Llamas said.
