Cook promises Apple will 'learn' and 'take action' in memo to workers

Posted:
in AAPL Investors
Following up on the sudden news that December-quarter earnings will be lower than predicted by between $5 billion and $9 billion, Apple CEO Tim Cook promised future changes in a memo to employees.

Apple CEO Tim Cook


"External forces may push us around a bit, but we are not going to use them as an excuse," Cook wrote in the memo, obtained by AppleInsider from a source not authorized to speak on behalf of the company. "Nor will we just wait around until they get better. This moment gives us an opportunity to learn and to take action, to focus on our strengths and on Apple's mission -- delivering the best products on earth for our customers and providing them with an unmatched level of service. We manage Apple for the long term, and in challenging times we have always come out stronger."

The memo otherwise reiterated many of the claims in his bombshell letter from Wednesday, blaming weaker-than-expected iPhone sales on "macroeconomic" conditions, as well as problems "specifc to Apple and the smartphone industry."

In the letter Cook specifically highlighted China, noting that the entirety of Apple's revenue shortfall can be traced to the country. He also however blamed factors like a strong U.S. dollar, fewer carrier subsidies, and even people taking advantage of discounted battery replacements, which some saw as an admission that the company depends on degraded batteries to spur upgrades.

Confirmed in the memo are plans for an "all-hands" meeting on Thursday, set to take place at 9:30 a.m. Pacific time. Because of construction work at Apple Park, the meeting is being held in the Town Hall at 1 Infinite Loop.

"I'll have more details about the quarter, and I'm looking forward to your thoughts and questions," Cook concluded.

Some have seen the new guidance -- revised from between $89 billion and $93 billion to just $84 billion -- as evidence that Apple has finally pushed iPhone prices too high, starting the XR at $749 and the XS at $999. That's a hard sell in markets like China, where brands like Huawei and Oppo are now offering mid-range and high-end phones for hundreds less.
«1345

Comments

  • Reply 1 of 88
    iPhones have become too expensive, I simply quit upgrading.

    Apple's other products don't offer any compelling upgrades to the older models I already have. I despise the new MacBook Pro and have zero interest in the trashcan 2013 Mac Pro.
    ouragankitatittrackeroz
  • Reply 2 of 88
    wood1208wood1208 Posts: 1,770member
    While Apple offering higher end, with new features products than at the same time continue producing what has worked and accepted. For example, why drop non OLED strip Macbook Pro when introducing touchstrip Macbook Pro higher priced version ? I am sure Apple will make appropriate changes in ever changing world and will be same successful great company at the end.
    edited January 3
  • Reply 3 of 88
    tulkastulkas Posts: 3,742member
    They lost price discipline. Ahrendts gained too much influence and appears to have convinced Tim that they could go full out fashion house pricing strategy “we priced super high so people that want spend a lot can”.

    hopefully that’s a lesson Tim learns. Let Angela run the stores, let the professionals run the business.

    ksecouragankitatittrackeroz
  • Reply 4 of 88
    rogifan_newrogifan_new Posts: 3,752member
    tulkas said:
    They lost price discipline. Ahrendts gained too much influence and appears to have convinced Tim that they could go full out fashion house pricing strategy “we priced super high so people that want spend a lot can”.

    hopefully that’s a lesson Tim learns. Let Angela run the stores, let the professionals run the business.

    I guarantee you Angela Ahrents has no involvement in setting iPhone prices. I doubt Jony Ive does either.
    edited January 3 randominternetpersondelreyjonesmike1muthuk_vanalingamksecneil anderson1983urahara
  • Reply 5 of 88
    And Apple has pissed me off on an IPhone again. I just saw a commercial last night that XR is now starting at $499.

    Ah nevermind, that price is with a trade in.
    edited January 3 jbdragonh4y3s
  • Reply 6 of 88
    rogifan_newrogifan_new Posts: 3,752member
    I keep seeing on Twitter people talking about how Apple services are tied to iPhone. Nilay Patel for one is saying that. While true it doesn’t mean services are tied to NEW iPhone sales. Apple has an active install base of over 1B. That’s a lot of people services can be sold to. Plus it’s not like nobody is buying new iPhones anymore. That 1B figure is only going to grow.
    edited January 3 delreyjonesAppleExposed1983
  • Reply 7 of 88
    canukstormcanukstorm Posts: 1,780member
    tulkas said:
    They lost price discipline. Ahrendts gained too much influence and appears to have convinced Tim that they could go full out fashion house pricing strategy “we priced super high so people that want spend a lot can”.

    hopefully that’s a lesson Tim learns. Let Angela run the stores, let the professionals run the business.

    I guarantee you Angela Ahrents has no involvement in setting iPhone prices. I doubt Jony Ive does either.
    Pricing is marketing
  • Reply 8 of 88
    rogifan_newrogifan_new Posts: 3,752member
    tulkas said:
    They lost price discipline. Ahrendts gained too much influence and appears to have convinced Tim that they could go full out fashion house pricing strategy “we priced super high so people that want spend a lot can”.

    hopefully that’s a lesson Tim learns. Let Angela run the stores, let the professionals run the business.

    I guarantee you Angela Ahrents has no involvement in setting iPhone prices. I doubt Jony Ive does either.
    Pricing is marketing
    People underestimate the power of Phil Schiller and the product marketing team. His team is involved in product development from conception to release. No doubt they have a huge say in what features a product will get, what the different product tiers will be and what the pricing will be. It would have been fascinating to be a fly on the wall when discussions were had about shifting iPhone prices higher. I wonder if there was anyone in the company who thought it might not be a good idea or if the executive team was all in agreement. 
    elijahgentropysthtouragan1983trackeroz
  • Reply 9 of 88
    jbdragonjbdragon Posts: 1,966member
    sixcolors said:
    iPhones have become too expensive, I simply quit upgrading.

    Apple's other products don't offer any compelling upgrades to the older models I already have. I despise the new MacBook Pro and have zero interest in the trashcan 2013 Mac Pro.
    This is why I have always upgrade my iPhones on a 4 year plan. 2 years to pay it off and 2 years of no phone payment at all. So I went from iPhone 4 to iPhone 6 to now my current iPhone XS which I'll have for 4 years.

    But Ya, the High prices is not helping on the phones. Really overall, the high prices on ALL of their hardware, Most of which is at least over a year old. The only thing currently you can count on to even be updated yearly is the iPhone and the Apple Watch. The iPads are hit and miss. As for Mac's, look at that 2013 Mac Pro. 5 years old now and still wanting a premium price. Who is foolish enough to buy it at this point?

    Apple is just so focused on MONEY and how to make maximum profits on everything. But you reach a point where people have had enough of that. I do wish there was a real 3rd option.
    edited January 3 elijahgdesignrcaladanianouragankitatit1983
  • Reply 10 of 88
    elijahgelijahg Posts: 729member
    "External forces may push us around a bit, but we are not going to use them as an excuse," Cook wrote in the memo
    Hold on didn't he say yesterday that China was the reason Apple's sales have declined? Seems like an excuse to me. That said, it's not exactly a disastrous decline, its certainly not great but even Apple sans Jobs needs a kick up its ass every now and then, to bring the execs back to planet Earth.
    anantksundaramouragancolinngtoysandme
  • Reply 11 of 88
    tzeshantzeshan Posts: 1,856member
    tulkas said:
    They lost price discipline. Ahrendts gained too much influence and appears to have convinced Tim that they could go full out fashion house pricing strategy “we priced super high so people that want spend a lot can”.

    hopefully that’s a lesson Tim learns. Let Angela run the stores, let the professionals run the business.

    I guarantee you Angela Ahrents has no involvement in setting iPhone prices. I doubt Jony Ive does either.
    Pricing is marketing
    People underestimate the power of Phil Schiller and the product marketing team. His team is involved in product development from conception to release. No doubt they have a huge say in what features a product will get, what the different product tiers will be and what the pricing will be. It would have been fascinating to be a fly on the wall when discussions were had about shifting iPhone prices higher. I wonder if there was anyone in the company who thought it might not be a good idea or if the executive team was all in agreement. 
    Of course. The iPhone price and all other Apple products are set according to profit margin. Profit margin is one important index many Wall Street analysts use to recommend buy or sell a stock. If profit margin is decreasing, they think it means the company product is losing competition. 
  • Reply 12 of 88
    MplsPMplsP Posts: 1,006member
    I keep seeing on Twitter people talking about how Apple services are tied to iPhone. Nilay Patel for one is saying that. While true it doesn’t mean services are tied to NEW iPhone sales. Apple has an active install base of over 1B. That’s a lot of people services can be sold to. Plus it’s not like nobody is buying new iPhones anymore. That 1B figure is only going to grow.
    This is true, and despite the headlines, Apple can weather a quarter of slow sales. (I’m not so sure about the people around here whose entire fortune seems to rise and fall with Apple’s Stock price, however!) My concern is the bigger picture. Apple is not the only one feeling the pinch at the high end. Smartphones are a maturing product. The difference in features and capabilities between successive generations is dwindling. That combined with a near 25% price increase means many people will elect either to delay upgrading or to get a lower model rather than pay the premium Apple is demanding for its flagship model. Where this becomes a problem is when someone needs to get a new phone in a few years and decides they extra premium for an iphone is no longer worth it and gets a $500 Android phone instead. People can argue all they want about the added value of Apple products and how iPhone prices haven’t increased that much when adjusted for inflation, but for most consumers, the price on the shelf is the one they see, and when the majority of other phones are priced less, even for a decent phone, the premium gets harder to justify. If that starts to happen, then Apple’s user base starts shrinking, and that’s a much bigger concern than last quarter’s sales. 
    elijahgcaladanianouragankitatittoysandme
  • Reply 13 of 88
    tzeshantzeshan Posts: 1,856member
    elijahg said:
    "External forces may push us around a bit, but we are not going to use them as an excuse," Cook wrote in the memo
    Hold on didn't he say yesterday that China was the reason Apple's sales have declined? Seems like an excuse to me. That said, it's not exactly a disastrous decline, its certainly not great but even Apple sans Jobs needs a kick up its ass every now and then, to bring the execs back to planet Earth.
    Yes, China hurts a lot. But iPhone sales in other countries like India did not improve I guess. 
  • Reply 14 of 88
    maestro64maestro64 Posts: 4,422member
    The world is coming to an end, but Apple still will put more money into the bank this pass quarter than any other company. and Apple will use that money to buy back more of it shares at a lower cost. Those how are long time holder will get more dividends and able to repurchase shares at a lower cost. At some point there will be less share available for a company generating more cash then any company could imagine doing and then what is the market going to do.

    With that said, Apple had to see this coming, the whole battery replacement impacting new sales and the fact consumers are hanging on to phones longer and longer. 
    As it was said, most of the phone in my house is now on the 4 yr upgrade cycle with at least one battery replacement in the middle. Even if Apple did not have any sort of battery issue, you can only charge and discharge a battery so many times, add any amount of heat to this process and the battery will fall off at some point. The who trade war which had been talk about since the beginning of the summer and Apple did not think this would not have some level of impact on their business, if that was the case it was short sighted on their part. They had to know all this back in the fall and they still put forward higher estimates.
    AppleExposed
  • Reply 15 of 88
    dws-2dws-2 Posts: 220member
    What I find hard to justify is that Apple needs to make more and more money to be a good company. I'll explain.

    If I really liked my iPhone 7, and it lasted me a couple years because of software improvements, is that a bad thing? It certainly reduces the money Apple makes, but I'm pretty happy that Apple is adding value even as the market matures.

    On the other hand, I bought an iPhone XS for a lot more money. It's objectively better in every way, but if I'm being honest, I don't like it better. Why not? The better camera, the better screen, and the faster processor aren't enough better that I notice in day to day life, mostly because the iPhone 7 was already very nice. And there are downsides. It's heavier and bulkier, and some apps (especially games) aren't really made for the screen, even now.

    Maybe this is the problem. What's good for Apple the company no longer seems to be good for many of its customers. They want to sell more expensive devices, but people aren't really getting the value out of them.
    elijahgcropranantksundaramouragan
  • Reply 16 of 88
    harrykatsarosharrykatsaros Posts: 15unconfirmed, member
    I really don't see the issue here. Tim Cook writing an apology letter to the employees is the only issue. Sorry that we are only making $84 billion dollars this quarter, and the fact that despite the lowered guidance, due to our ridiculous ASP's in 2018 we will still make a much higher profit than we did in the year ago quarter. Sorry for what? All this fuss over nothing. They are still making 3 x the revenue of Google and Microsoft every single quarter.
    SpamSandwichpalomineh2ptoysandme
  • Reply 17 of 88
    DAalsethDAalseth Posts: 409member
    If there's one thing Apple has a history of doing it is learning from past mistakes.
    AppleExposed
  • Reply 18 of 88
    It’s pretty pathetic that $84 billion in a single quarter just isn’t enough.
    palomineJWSCh2pneil andersontoysandme
  • Reply 19 of 88
    elijahgelijahg Posts: 729member
    dws-2 said:
    What I find hard to justify is that Apple needs to make more and more money to be a good company. 
    It's Wall Street that is the problem in that regard, they want Apple to make more and more money and grow bigger and bigger, and the stock will take a battering if ever they don't, as seen today. Whilst Cook doesn't publicly say much at all about share price, I think he's much more driven by it than Jobs. Jobs always said make a good product and the customers will come, and the profit will come after that. Cook is placing customers second, behind the maximum profitability of the company. Customers don't like being second best, even if the ultimate aim of all companies is to make as much money as possible.
    ouragancolinngneil anderson
  • Reply 20 of 88
    canukstormcanukstorm Posts: 1,780member
    tzeshan said:
    elijahg said:
    "External forces may push us around a bit, but we are not going to use them as an excuse," Cook wrote in the memo
    Hold on didn't he say yesterday that China was the reason Apple's sales have declined? Seems like an excuse to me. That said, it's not exactly a disastrous decline, its certainly not great but even Apple sans Jobs needs a kick up its ass every now and then, to bring the execs back to planet Earth.
    Yes, China hurts a lot. But iPhone sales in other countries like India did not improve I guess. 
    India is not even a factor.  Even at its peak, sales in India were at 2 million units per year which is barely scratching the surface of India's smartphone market.  Apple's iPhone sales in Canada (a country with 40X less the population) are far larger and more important than even India at this point in time.
    elijahgrandominternetpersonSpamSandwichJWSCouraganh2ptoysandme
Sign In or Register to comment.