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Apple CEO Tim Cook on cheap smartphones: 'We're not in the junk business'

post #1 of 208
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Facing criticism over higher-than-expected pricing of the new iPhone 5c, Apple Chief Executive Tim Cook has defended his company's strategy, saying there's plenty of room to grow ? and retain its profits ??in the high-end handset market.

Bloomberg
Apple executives Craig Federighi, Tim Cook, and Jony Ive. Source: Bloomberg Businessweek.


Following the introduction of his company's mid-range iPhone 5c and flagship iPhone 5s, Cook was joined by Apple design chief Jony Ive and software head Craig Federighi in speaking with Bloomberg for its latest cover story. The three executives exude confidence in the interview, with Cook saying that his company's share price doesn't affect his mood.

Apple's CEO noted that the trend toward cheaper electronics is not new, having occurred previously among VCRs, DVD players, cameras, and PCs. Now that it's occurring again with tablets and smartphones, Cook said he doesn't feel compelled to take Apple down that path.

"There's always a large junk part of the market," Cook said. "We're not in the junk business."

Instead, the Apple CEO said he'd prefer to "compete like crazy" for customers who want premium devices that meet their needs. But he won't "lose sleep" over cheaper electronics, because those kinds of devices simply aren't in Apple's DNA.

"Fortunately, both of these markets are so big, and there's so many people that care and want a great experience from their phone or tablet, that Apple can have a really good business," he said.

Prior to its announcement, observers though the iPhone 5c ??Apple's new plastic-backed, multi-colored handset ? might become a more affordable option in the company's smartphone lineup. Analysts presumed that Apple might price the device around $400 without a contract subsidy, helping increase sales in emerging markets like China, India and Brazil.

Instead, the iPhone 5c was introduced as Apple's new mid-range handset, available for $99 with a new two-year service contract, or $549 without a carrier subsidy. That price, along with the fact that Apple did not announce any preorder figures for the iPhone 5c this week, sent the company's stock tumbling.



In response, Cook said his company never had any interest in selling a low-cost iPhone. Instead, he said the purpose of the iPhone 5c is to offer a "great phone and provide a great experience" at a lower cost than the flagship iPhone 5s.

Also featured in the exclusive Bloomberg interview were Federighi and Ive, who revealed that their desks at Apple are a one-minute walk from one another. Both executives were assigned larger roles at the company last year, in a corporate shakeup that was designed to increase collaboration among the company's different departments.

Ive stressed how Apple spends a great deal of time focusing on the smallest of details ? something that consumers appreciate when purchasing a premium product, rather than a cheap alternative.

"I do think that we sense when somebody has cared," Ive said. "And one thing that is incontrovertible is how much we've cared."
post #2 of 208
It is great to hear Cook et. al discuss strategy.
post #3 of 208
Wow! Steve is that you?
post #4 of 208
Quote:
Originally Posted by anantksundaram View Post

It is great to hear Cook et. al discuss strategy.

Especially the quote in the articles' title.

Did Bloomberg use Flash for this pic:

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post #5 of 208
Man what a crappy interview. Businessweek has rare access to 3 apple execs and most of the article is about Android. 1rolleyes.gif

Counting 3,2,1 for all the trolls to show up with all the ways Apple doesn't care. lol.gif
post #6 of 208

Reminds me of Steve. "We don't ship junk."

post #7 of 208
"We're not in the junk business."

Yeah, f*ck you Samsung.

Standing ovation for Mr Cook.
post #8 of 208
Quote:
“We didn’t start opportunistically with 10 bits of technology that we could try to find a use for to add to our features list,” Ive says.

Take that, Samsung! lol.gif
post #9 of 208
This is the passion I want to see from Tim.
post #10 of 208

Ya gotta stick to your core.  I'm glad to hear Tim say that that's exactly what they are doing.

post #11 of 208

Apple managed to reduce the iPod concept to the super-cheap iPod shuffle. I guess it's a lot easier to do that with a music player than a phone/computer/camera/video player/music player/etc. 

post #12 of 208
Quote:
Ive stressed how Apple spends a great deal of time focusing on the smallest of details

Ive has taken the Copyrights from Steve Jobs to use this sentence very often. :)  This sentence is his signature now.


 

Quote:
"I do think that we sense when somebody has cared," Ive said. "And one thing that is incontrovertible is how much we've cared."

On seeing these many videos of Jony Ive, I can think how he would have uttered the above line - with his booming voice and shoulders a little down etc. :)

post #13 of 208
Here's the cover pic. Man I'm glad I'm ignoring tech sites this week. I can only imagine the coverage and comments, especially after this article. lol.gif

11cavxg.jpg
post #14 of 208
Quote:
Originally Posted by RichL View Post

Apple managed to reduce the iPod concept to the super-cheap iPod shuffle. I guess it's a lot easier to do that with a music player than a phone/computer/camera/video player/music player/etc. 

The nano is not super cheap. You can go to any electronics store sand by a small MP3 player for under $10. The nano is simple & small. It does cost a lot less than the touch, but it is moderately priced as an MP3 player.
post #15 of 208
Hey I care but the fact remains Apple makes a massive profit on each iPhone sold. Right now they basically sell everything they make which means they are under no pressure to adjust prices. That is good for now but being greedy is never perceived well in the long run.

Here I'm not saying that Apple needs to offer up a dirt cheap limited quality iPhone, rather I'm saying that something like iPhone5c needs to be priced with more reasonable margins. High margins should be reserved for flagship models.

On the other hand I have just installed iOS 7 on my iPhone 4 and iPad 3 and all I have to say is nice job Apple! 😛😛😛😛. Obviously both pieces of hardware are getting on in age but even so performance is not that bad at all. The only problem I have with Apple is that they need to focus on functionality. Many apps got a facelift but not the sort of functionality improvements they need. Looking at Notes in particular and Contacts too. On the other hand moving the text input cursor around has never been this good.

What I'm trying to say is that iOS and Apples stewardship of the platform is certainly worth a little extra Apple "tax". So better margins than the industry standard is good. However so good that you start to look greedy isn't so good.
post #16 of 208
Quote:
Originally Posted by GTR View Post

"We're not in the junk business."

Yeah, f*ck you Samsung.

Standing ovation for Mr Cook.

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post #17 of 208
Quote:
Originally Posted by wizard69 View Post

Hey I care but the fact remains Apple makes a massive profit on each iPhone sold. Right now they basically sell everything they make which means they are under no pressure to adjust prices. That is good for now but being greedy is never perceived well in the long run.

Here I'm not saying that Apple needs to offer up a dirt cheap limited quality iPhone, rather I'm saying that something like iPhone5c needs to be priced with more reasonable margins. High margins should be reserved for flagship models.

On the other hand I have just installed iOS 7 on my iPhone 4 and iPad 3 and all I have to say is nice job Apple! 😛😛😛😛. Obviously both pieces of hardware are getting on in age but even so performance is not that bad at all. The only problem I have with Apple is that they need to focus on functionality. Many apps got a facelift but not the sort of functionality improvements they need. Looking at Notes in particular and Contacts too. On the other hand moving the text input cursor around has never been this good.

What I'm trying to say is that iOS and Apples stewardship of the platform is certainly worth a little extra Apple "tax". So better margins than the industry standard is good. However so good that you start to look greedy isn't so good.

"High margins should be reserved for flagship models. "

The problem with that is the flagship model will contain higher cost components, thus offer lower margins if they want to stick with their current price points.
post #18 of 208
Quote:
Originally Posted by wizard69 View Post

Hey I care but the fact remains Apple makes a massive profit on each iPhone sold. Right now they basically sell everything they make which means they are under no pressure to adjust prices. That is good for now but being greedy is never perceived well in the long run.

Here I'm not saying that Apple needs to offer up a dirt cheap limited quality iPhone, rather I'm saying that something like iPhone5c needs to be priced with more reasonable margins. High margins should be reserved for flagship models.

On the other hand I have just installed iOS 7 on my iPhone 4 and iPad 3 and all I have to say is nice job Apple! 😛😛😛😛. Obviously both pieces of hardware are getting on in age but even so performance is not that bad at all. The only problem I have with Apple is that they need to focus on functionality. Many apps got a facelift but not the sort of functionality improvements they need. Looking at Notes in particular and Contacts too. On the other hand moving the text input cursor around has never been this good.

What I'm trying to say is that iOS and Apples stewardship of the platform is certainly worth a little extra Apple "tax". So better margins than the industry standard is good. However so good that you start to look greedy isn't so good.
I agree with you on 5C pricing but at least we're now getting some clarity from Cook. Apple is content with competing in the higher end of the market. We'll see if this continues to be a winning strategy. My guess is Cook figures its impossible to win in a market where its all about price. But I think more than ever Apple will need to demonstrate its value, that its products are worth paying more for. Especially when you have companies that are willing to subsidize hardware in order to get eyeballs.
post #19 of 208
Quote:
Originally Posted by RichL View Post

Apple managed to reduce the iPod concept to the super-cheap iPod shuffle. I guess it's a lot easier to do that with a music player than a phone/computer/camera/video player/music player/etc. 

Shuffle wasn't super cheap by any means. The problem right now is that Apple basically sells every iPhone made with ease so they aren't in a position to have to address pricing. Times change though.

Just look at the market for sports and high performance cars, something that was once very profitable for the car companies. That market cooled off considerably to be replaced by the Mini Van and SUV market which later was replaced by the hybrid market. These are all markets where the car companies soaked customers for a long time until trends changed.

Now the smart phone market isn't the car market, nor do I believe smart phones are a short term trend, but it is easy to get caught with ones pants down. It is clear that Apple doesn't see a short term problem in the smart phone market but people and desires change rapidly. I see Apples move to 64 bit as a way to keep things hot in the market for at least another 5 years. It allows many to dispense with laptops and desktops completely. Eventually though the smart phone market will go the same way the PC market did. PCs got to the point of being good enough so price became a big factor in purchase decisions.
post #20 of 208
Quote:
Originally Posted by RichL View Post
 

Apple managed to reduce the iPod concept to the super-cheap iPod shuffle. I guess it's a lot easier to do that with a music player than a phone/computer/camera/video player/music player/etc. 

 

 

The shuffle is cheap because it uses less materials and doesn't have any kind of screen on it, not because they cheaped out on engineering, R&D, design, and materials that aren't as durable as other iPod models. For how small it is, though it really isn't that "cheap."

post #21 of 208

Nice!

post #22 of 208
Quote:
Originally Posted by Rogifan View Post

Man what a crappy interview. Businessweek has rare access to 3 apple execs and most of the article is about Android. 1rolleyes.gif

They keep misinterpreting stats too. At one point, they say:

"According to market researcher IDC, Android runs on nearly 80 percent of the world’s smartphones and nearly two-thirds of its tablets."

Google has activated 1 billion units, Apple has sold over 650 million (they say it'll be over 700m soon), the recent worldwide sales share may be 80% but the amount of active Android devices is not 80% of the total. 40% of the Google ones run Android 2.x. Reporters keep making out like the usage stats conflict with the marketshare and they really don't. Apple is selling more premium devices than anyone else. They are only 2nd in overall volume to Samsung and Samsung makes up half of all Android devices.

The point that gets raised about Android volume eventually becoming a tipping point for developer support has some merit but it ignores the fact that relative volume isn't as big a factor as absolute volume here. If a developer targets iOS, they still have a potential audience of 700 million (give or take some broken devices). Even if Android tops 2 billion and outnumbers iOS 2:1 in say 3 years, the sheer volume of iOS users is still really compelling to make iOS a priority, especially considering the portion of iOS models that are flagship models.
post #23 of 208
Thank You Tim for saying it like it is. Thank You!!
post #24 of 208

I love it when I here Apple is "Greedy" or "Apple Tax"

 

It is not that Apple is over priced it is that the competition is in a race to the bottom for 5% profit or less per unit.

 

Apple does not fall for the pressure of the competition to compete for "junk".

 

I here how people talking about there 3rd or 4th generation back device like the iPhone 4 and iPhone 4s with the latest iOS 7 on said device and how happy they are.

 

Do you hear that about Samsung, Black Berry or HTC?

 

That alone speaks VOLUMES about the quality of Apple devices.

 

So when fan boys are ripping Apple for not producing a device designed to last 2 years or less take into account they are only doing so because the product they use on a daily basis is no where to quality level that Apple produces.

 

I believe you can't copy quality because if you are copying some other companies product in the first place you already have a lack of innovation or creativity and are always following and never leading nor will you ever.

 

Look at all phones in the last 4-5 years, 75% of all the true inovation has come from Apple and the 5s in no different with real useable fingerprint tech and complete 64bit. 

 

Now with in the next 6 months every MFG and Android will offer the same specs but again it will not be as fluid and polished like Apple products because..... they will be copying instead of leading.

 

Done with my rant, thanks for reading...flame away

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post #25 of 208
Quote:
Originally Posted by RedRaider2011 View Post
 

 

 

The shuffle is cheap because it uses less materials and doesn't have any kind of screen on it, not because they cheaped out on engineering, R&D, design, and materials that aren't as durable as other iPod models. For how small it is, though it really isn't that "cheap."

 

It's super-cheap for an iPod though. Apple reduced the concept in terms of complexity rather than quality. 

 
Reducing the complexity of an iPhone is a much harder task. People expects the iPhone to do so much more than make phone calls. Perhaps the iPhone 5c is as far as it's possible to go without reducing quality. 
post #26 of 208

Does anyone else read quotes from these execs in the execs voice? Lol. Everytime I read Jony, he speaks it in my mind.

 


Good for them. :)

post #27 of 208

Upper Middle class in China is growing massively.

 

"These trends will accelerate over the next 10 years as the role of “upper middle class” consumers expands. Today, the mass middle class – with annual household incomes of between $9,000 and $16,000 – are dominant, accounting for 54 percent of all urban households; upper middle-class households, with incomes of $16,000 to $34,000, represent only 14 percent. By 2022, however, the upper middle class will become the new mainstream, accounting for 54 percent of all urban households and generating just under half of total Chinese private consumption. "

 

http://thediplomat.com/pacific-money/2013/05/30/half-a-billion-chinas-middle-class-consumers/

 

Soon over 50% of the Chinese population can afford an iPhone.  Next year it will be close to 20% or over 250,000,000 people.

post #28 of 208
Had Apple charged $50 less their margins would likely have been the same as the iPhone 5.

I'm not suggesting that Apple should hit junk pile pricing but increasing already incredibly high margins makes sense in the short term only.

Ok, I'm not ready to get pulled apart.
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post #29 of 208
Quote:
Originally Posted by josephwinters View Post
 

Does anyone else read quotes from these execs in the execs voice? Lol. Everytime I read Jony, he speaks it in my mind.

 


Good for them. :)

 

Yes, I absolutely do that. :)

post #30 of 208
Quote:
Originally Posted by josephwinters View Post

Does anyone else read quotes from these execs in the execs voice? Lol. Everytime I read Jony, he speaks it in my mind.



Good for them. 1smile.gif
He made a really good point about touch id and not just adding a bunch of features that may or may not work great just so you can boast about a bigger features list. I have yet to come across a review of the 5S that said touch id didn't work for them. Most reviews said it was flawless after set up. Then you have Samsung releasing a clunky watch with a laggy UI and barely one day battery life. Just because they wanted to beat Apple and Google to the punch. Not because the market is crying out for a smartwatch,
post #31 of 208
Quote:
Originally Posted by saarek View Post

Had Apple charged $50 less their margins would likely have been the same as the iPhone 5.

I'm not suggesting that Apple should hit junk pile pricing but increasing already incredibly high margins makes sense in the short term only.

Ok, I'm not ready to get pulled apart.

 

do you really think it cost $150 less to make a plastic case the quality of the 5C than a metal case? no way.

 

At $500 the margins would be hit HARD.  At $550 it gives Apple the flexability to lower the price for certain markets and keep it high in other markets and STILL retain the premium image. 

post #32 of 208

Nice way to create even more anti Apple sentiments. Not very smart this Cook. He's not even original.

post #33 of 208
Quote:
Originally Posted by Rogifan View Post

I agree with you on 5C pricing but at least we're now getting some clarity from Cook. Apple is content with competing in the higher end of the market. We'll see if this continues to be a winning strategy.
I'm not even sure this is the strategy. We have to remember the prices that people are upset over are the list prices for off contract phones. It is already clear that some carries are being very aggressive with the marketing of these phones.
Quote:
My guess is Cook figures its impossible to win in a market where its all about price.
And he would be right! You can't win in a market where there are no profits but you also can't win if your profits are so high that they seem greedy. As to the low end of the market, well yeah stay out of the no profit zone. However there is a vast middle ground that Apple can address.

For me the greatest problem I see for the 5s is not its cost per say as it is what you get for that money. Here I'm specifically thinking flash memory which is quickly becoming marginal in capacity and too high in price on the iPhones. Really 32 GB should be the minimal configuration on a flag ship model. The system and the common apps demands it.
Quote:
But I think more than ever Apple will need to demonstrate its value, that its products are worth paying more for. Especially when you have companies that are willing to subsidize hardware in order to get eyeballs.
This is sorta of what I was getting at, iPhones and even Apples tablets look like great values now. There certainly is little real competition if you look at user acceptance. How long that will go on is unknown. In any event if you look at iPad Mini it really is a low cost machine and competes well at the lower end of the market even if people try to pan it as expensive.

The other thing here is that Apples profit off each iPhone or iPad is on going as it gains significant income from the ecosystem. Apple has a lot more flexibility in pricing thus the various promotions through the telcos. However I wouldn't be surprised to see Apple become more competitive through seasonal promotions like Black Friday sales. If they ship an extra 500,000 during a Black Friday sale it might affect margins a bit but they get much of that back a couple days later when everybody goes to the App Store. I can see Apples attitude slowly changing about pricing, they just have no need to rush right now.
post #34 of 208

Buying the iPhone 5C instead of 5S is like buying last year MacBook Air or Pro for only $100-$200 cheaper than this year model. And with a plastic case instead of aluminum. Would you buy it? Of course not!

post #35 of 208
Originally Posted by Rogifan View Post
11cavxg.jpg

 

Ah, THAT explains where that other image came from.

 

Originally Posted by NelsonX View Post
Not very smart this Cook. He's not even original.

 

Hilarious irony in trolling.

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post #36 of 208
Quote:
Originally Posted by RichL View Post
 

 

It's super-cheap for an iPod though. Apple reduced the concept in terms of complexity rather than quality. 

 
Reducing the complexity of an iPhone is a much harder task. People expects the iPhone to do so much more than make phone calls. Perhaps the iPhone 5c is as far as it's possible to go without reducing quality. 

 

Apple could reduce it more without sacrificing quality. However, Apple would have to significantly reduce functionality. So, the question becomes is it worth it for Apple to do that? Probably not. It was with music because there are plenty of people who want just a small lightweight music player, but how many people really want a phone that just makes phone calls and nothing more? I doubt very many. 

post #37 of 208
If we dont innovate, we'll end up like Nokia
post #38 of 208
No, I do
Quote:
Originally Posted by sog35 View Post

do you really think it cost $150 less to make a plastic case the quality of the 5C than a metal case? no way.

At $500 the margins would be hit HARD.  At $550 it gives Apple the flexability to lower the price for certain markets and keep it high in other markets and STILL retain the premium image. 
No, I don't think switching to a plastic case would save $150. But using last years tech in a plastic case would certainly be $150 cheaper if not more.

I feel that Apple is being unnecessarily greedy with the iPhone 5C.

The iPhone 5S is a bargain.
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post #39 of 208
Quote:
Originally Posted by NelsonX View Post

Buying the iPhone 5C instead of 5S is like buying last year MacBook Air or Pro for only $100-$200 cheaper than this year model. And with a plastic case instead of aluminum. Would you buy it? Of course not!

Totally true but I'd buy several for grand kids.
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post #40 of 208
Quote:
Originally Posted by wizard69 View Post

I'm not even sure this is the strategy. We have to remember the prices that people are upset over are the list prices for off contract phones. It is already clear that some carries are being very aggressive with the marketing of these phones.
And he would be right! You can't win in a market where there are no profits but you also can't win if your profits are so high that they seem greedy. As to the low end of the market, well yeah stay out of the no profit zone. However there is a vast middle ground that Apple can address.

For me the greatest problem I see for the 5s is not its cost per say as it is what you get for that money. Here I'm specifically thinking flash memory which is quickly becoming marginal in capacity and too high in price on the iPhones. Really 32 GB should be the minimal configuration on a flag ship model. The system and the common apps demands it.
This is sorta of what I was getting at, iPhones and even Apples tablets look like great values now. There certainly is little real competition if you look at user acceptance. How long that will go on is unknown. In any event if you look at iPad Mini it really is a low cost machine and competes well at the lower end of the market even if people try to pan it as expensive.

The other thing here is that Apples profit off each iPhone or iPad is on going as it gains significant income from the ecosystem. Apple has a lot more flexibility in pricing thus the various promotions through the telcos. However I wouldn't be surprised to see Apple become more competitive through seasonal promotions like Black Friday sales. If they ship an extra 500,000 during a Black Friday sale it might affect margins a bit but they get much of that back a couple days later when everybody goes to the App Store. I can see Apples attitude slowly changing about pricing, they just have no need to rush right now.

All valid points. Next few years will certainly be interesting. 1smile.gif
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