Apple's Cook, Maestri bullish on short- and long-term iPhone SE impact

AppleInsider

Apple's 4-inch iPhone SE is attracting switcher and new-user sales in an otherwise slow period between major iPhone releases, and supply of the sought-after model is just now catching up with demand, leaving room for future growth, according to Apple executives.

At the beginning of Tuesday's Q3 earnings call, CEO Tim Cook commented on trends with the primary purchasers of the SE.

"Our initial sales data tells us the the iPhone SE is popular in both developed and emerging markets," said Cook, adding that "the percentage of iPhone SE sales going to customers who are new to iPhone is greater than we've seen in the first weeks of availability for other iPhones launched in the last several years."

"We had a very successful global launch of iPhone SE and demand outstripped supply throughout the quarter," he continued. "We brought on additional capacity and we are able to achieve supply [and] demand balance as we enter the September quarter."

Apple's supply issues with the phone have not yet been solved. AppleInsider spoke with corporate store managers for AT&T and T-Mobile, who both said that the SE is exceeding their expectations. One manager commented that they "rarely ever" have any stock of the 64GB model on hand for more than a few hours after arrival, with quantities in line with other models of the iPhone or new Samsung Galaxy-series devices. Similarly-sized deliveries of the 16GB model last less than a day.

Stock levels at AT&T's online store on Wednesday showed similar supply problems. An SE ordered today won't ship until August 1.

Apple CFO Luca Maestri addressed cannibalization issues on the call, dismissing any concerns about the loss of higher-end iPhone sales. "We see a higher rate of previous iPhone owners that really prefer the 4-inch form factor," he said. "We have not seen clear evidence of cannibalization from iPhone 6s or 6s Plus."

Maestri did admit that the SE dilutes the company's profit margins, but argued it was worth it for the "much bigger opportunity to bring more people into the iOS ecosystem."

The iPhone SE is similar in many respects to the last 4-inch iPhone, 2013's iPhone 5s, but adds an A9 processor, and is capable of 4K video recording. An NFC chip gives the phone full Apple Pay compatibility.

In April, Apple noted that the SE's demand at the time was primarily from iPhone users who prefer smaller form factors, in addition to switchers from other mobile phone vendors.

brooklinedean

Pretty much the only "feature" phone option in small size form-factor. Not surprising that Android users who want a small, fast, secure phone that can do 4K video are switching to the SE.

turbopgt

AppleInsider said:

Maestri did admit that the SE dilutes the company's profit margins, but argued it was worth it for the "much bigger opportunity to bring more people into the iOS ecosystem." 

Indeed, completely offset by the additional services revenue from those users.

cintos

Still is a large contingent if 4S, 5 and 5S out there. It would be foolish to dismiss the desires of those folks to keep a smaller form factor while still getting newer electronics. Apple did not gamble on the success of the SE, as they know their customers. The did under estimate the demand. Yes, price is enticing, also.

512ke

This discussion brings up a great question. If the SE had been bigger, but priced identically, would this product be such a smash hit?

i wonder if small form factor is only one factor for its success ... Along with smaller price. (?)

mubaili

I suspect people buying SE would spend much money on additional service. Are Tim Cook and Maestri out of touch? Shouldn't a 33% drop in China make them worry instead of hyping it with words like "better than the results suggest". I would rather they adopt a strategy used by Warren Buffet, just give us as much data as possible (without compromising the secret) instead of just jubilee every time, and we will use those data to judge ourself.

jbishop1039

While a lot of family and friends of mine have purchased and love the SE, it is primarily the price that sold them on the phone. The feature set, while amazing at that price, was mostly irrelevant to most people. Even when I hang out at the Apple Store, people will ask the differences between the SE and the 6s and the Specialist will list all of the features and once they hit the price difference, conversation over, sold on the SE. So, I can see why the SE is so popular and I don't think it's totally because of the internals. That only appeals to a small set of consumers.  Most consumers are sold on price, and in Canada at least, the difference is quite a bit. A 16GB SE is $579 while a 16GB 6s is $899. So I can see why, at least here, the SE is selling well.

jcrew

Hello, its the price! I honestly don't feel that my iPhone 6s Plus 64GB with Apple Care is worth $1055 that I paid for it. The value just isn't there! Just like the value isn't there in the Mac product line, and Apple TV. The value added that Apple gave us in the past is no longer there any more and Apple is coasting on it's success. If the SE had been out when I bought my phone I would have gone with the 64GB SE and saved myself $500.

turbopgt

mubaili said:

I suspect people buying SE would spend much money on additional service. Are Tim Cook and Maestri out of touch? Shouldn't a 33% drop in China make them worry instead of hyping it with words like "better than the results suggest". I would rather they adopt a strategy used by Warren Buffet, just give us as much data as possible (without compromising the secret) instead of just jubilee every time, and we will use those data to judge ourself.

But..they aren't just words. They are providing important factors to consider that explain the numbers. I certainly prefer that to your alternative of having them say "China is down 33%...well, doesn't that suck? Next."

rogifan_new

I have a feeling the iPhone C didn't do as well because of price. The SE is a much better phone and launched at a cheaper price than the 5C. I really do think the only failure with the 5C was it was too expensive.

k2kw

brooklinedean said:

Pretty much the only "feature" phone option in small size form-factor. Not surprising that Android users who want a small, fast, secure phone that can do 4K video are switching to the SE.

64 GB model will probably be Apple's top seller this year.

nolamacguy

jasonc@media828.com said:

Hello, its the price! I honestly don't feel that my iPhone 6s Plus 64GB with Apple Care is worth $1055 that I paid for it. The value just isn't there! Just like the value isn't there in the Mac product line, and Apple TV. The value added that Apple gave us in the past is no longer there any more and Apple is coasting on it's success. If the SE had been out when I bought my phone I would have gone with the 64GB SE and saved myself $500.

your post doesn't make any sense. why didnt you just get a smaller and cheaper iPhone instead of the plus?

cropr

I find it a little bit strange that a lot of people are stating that the SE made Android users switch to the iOS ecosystem.    My feeling is that the device is mainly sold to existing iPhone users, who don't want a bigger a phone or who prefer to spend less.
Since the SE is launched, Apple continued losing market share to Android, apparently the SE did not help stop this negative  trend

toddzrx

jasonc@media828.com said:

Hello, its the price! I honestly don't feel that my iPhone 6s Plus 64GB with Apple Care is worth $1055 that I paid for it. The value just isn't there! Just like the value isn't there in the Mac product line, and Apple TV. The value added that Apple gave us in the past is no longer there any more and Apple is coasting on it's success. If the SE had been out when I bought my phone I would have gone with the 64GB SE and saved myself $500.

Then why'd you buy it?

toddzrx

AppleInsider said:

Apple CFO Luca Maestri addressed cannibalization issues on the call, dismissing any concerns about the loss of higher-end iPhone sales. "We see a higher rate of previous iPhone owners that really prefer the 4-inch form factor," he said. "We have not seen clear evidence of cannibalization from iPhone 6s or 6s Plus.

Why would it?

If I were Apple, I'd be more worried that pre-6 and 6S customers are choosing the SE over this fall's release.  The SE isn't cannibalizing 6/6S purchases, but it's most likely eating into iPhone 7 (or 6SE if you prefer) sales.

I still think we'll see 3 screen sizes in the 2017 iPhone due to the current SE's success.

drewys808

cropr said:

I find it a little bit strange that a lot of people are stating that the SE made Android users switch to the iOS ecosystem.    My feeling is that the device is mainly sold to existing iPhone users, who don't want a bigger a phone or who prefer to spend less. ..

You're over simplifying.

The SE was not offered to "make" people switch.

It was offered to fill a gap for a VARIETY of potential buyers:
Smaller form factor, cheaper, with less bells/whistles (3D touch, 128gb, etc.)... and including potential switchers.

Just because ONE specific source of customers (i.e. switchers) was not dominated because of the lack of domination by ONE model (i.e. the SE), does not constitute a failure by any means!

Instead of cherry-picking, I'd like to hear more of your thoughts with context to strategy and ecosystem success/failure.

Hint: Apple has been increasing iOS and OS X users for a long time now... and profiting handsomely from it.

harry wild

If Apple offer a 128GB or bigger 256GB version of the SE and a step of camera for the next version, maybe in September, I would buy one!  64GB and a camera dating back to the 5S is not exactly what I want.  Love the size but Apple crippled the features so that it would not compete with the 6S and 6S+.  Aplle should of made it equivalent and price it the same as the 6S instead of lowering the feature standards.  Hope for an A10 inside too.

drewys808

toddzrx said:

AppleInsider said:

Apple CFO Luca Maestri addressed cannibalization issues on the call, dismissing any concerns about the loss of higher-end iPhone sales. "We see a higher rate of previous iPhone owners that really prefer the 4-inch form factor," he said. "We have not seen clear evidence of cannibalization from iPhone 6s or 6s Plus.

Why would it?

If I were Apple, I'd be more worried that pre-6 and 6S customers are choosing the SE over this fall's release.  The SE isn't cannibalizing 6/6S purchases, but it's most likely eating into iPhone 7 (or 6SE if you prefer) sales.

I still think we'll see 3 screen sizes in the 2017 iPhone due to the current SE's success.

I think in context, the CFO was dismissing concern.

That doesn't mean there is no cannibalization but that there is little to show any material effect:
- whether or not previous iPhone users may have switched to Android for a 4-inch form factor (if SE was not offered) is hard to be proven.
- the number of sales lost to SE that would have otherwise been to 6s/6s+ is hard to determine.
And the net effect of those 2 factors/results is anyone's guess.

The only data he did share is that of previous iPhone owners... there seems to be higher rate that prefer the 4" form factor...jibberish?

Now...whether SE will cannibalize the 7 is to be seen.
But I say it's not a concern as the 7 is technically/feature-wise a completely different product.

harry wild

Apple say in the conference call that they still trying to keep up with demand for the SE model!  If demand is still there, why not make the SE equal in features to the 7 and charge the same price for it?  Then Apple will have equal new iPhone for the buyers to choice from instead of a cripped SE version that is dated already back to 2013 -5S iPhone in terms of camera and flash!

k2kw

harry wild said:

If Apple offer a 128GB or bigger 256GB version of the SE and a step of camera for the next version, maybe in September, I would buy one!  64GB and a camera dating back to the 5S is not exactly what I want.  Love the size but Apple crippled the features so that it would not compete with the 6S and 6S+.  Aplle should of made it equivalent and price it the same as the 6S instead of lowering the feature standards.  Hope for an A10 inside too.

The camera in the SE is the same as the camera in the 6S. 12MP with 4K video

cropr

drewys808 said:

cropr said:

I find it a little bit strange that a lot of people are stating that the SE made Android users switch to the iOS ecosystem.    My feeling is that the device is mainly sold to existing iPhone users, who don't want a bigger a phone or who prefer to spend less. ..

You're over simplifying.

The SE was not offered to "make" people switch.

It was offered to fill a gap for a VARIETY of potential buyers:
Smaller form factor, cheaper, with less bells/whistles (3D touch, 128gb, etc.)... and including potential switchers.

Just because ONE specific source of customers (i.e. switchers) was not dominated because of the lack of domination by ONE model (i.e. the SE), does not constitute a failure by any means!

Instead of cherry-picking, I'd like to hear more of your thoughts with context to strategy and ecosystem success/failure.

Hint: Apple has been increasing iOS and OS X users for a long time now... and profiting handsomely from it.

I don't think the SE is a failure, I was reacting to some posts here and to Tim Cook who said that there a huge number of Android to iOS switchers, while the market figures tell a slightly different story.