Apple's new budget offering will be very successful, I guess. They have correctly identified the market segment which they want to address. By adding color choices, I guess the device will be more attractive to youth and female segments as well (though the iphone is already very popular among young people). There are some points I consider for Apple to be important in releasing the new model:
1. Preferable name is iPhone Sport or Active. Therefore, the iPhone 5S. From this point, S will mean the mid-end model. The name Sport is based on two things: the plastic case is much more durable than glass (I know, I used 3GS). More rugged iPhone model would be great for sport activities, jogging. Another is for Speed. I believe that it will have an updated CPU, my take is that it will feature dual core A5 clocked at 1 Ghz, 1 Gb of RAM, belonging to S5L8942 (32 nm version) family with dual core graphic processor PowerVR SGX554. It will be, therefore, faster than iPad mini and have graphic power slightly less than iPhone 5/6. Therefore, it will be by far faster and more powerful than iPhone 4/4S, Nexus 4 or HTC One. I assume this based on economies of scale as this assumption means that Apple will utilize the existing technology used for recent ipad mini and AppleTV with some minor tweaks to save battery life.
2. As being slightly less powerful than iPhone 5/6, the new iPhone will have a great battery life.
3. Display: the graphic chip is powerful enough to utilize Retina display at 4 inch.
4. Lightning connection.
5. Stereo speakers.
6. 8 mp camera with panorama and HDR capacity.
7. 16 Gb of memory or 32Gb.
8. Full iOS 7 capability.
9. GPS for cellular model.
10. No LTE (not needed for most of markets now; saves battery life), saved for next iteration, but China 3G frequency-included.
11. Pricing: This model will be in the supposed price range of no-contract 350 dollars (I wrote about it few months ago).
12. Next year the new iPhone 6S will be at 350 dollar price range and current model will go down to no-contract 299 dollar price range, still being more capable than current Nexus 4.

Forgot to add: what it means for Apple margin. It believe it will stay at current level, but volume of sales, market share and profits will all expand. Apple will have much much higher presence in India, Brazil and China and Europe. The model will be made in China and in Brazil.