Editorial: Apple's iPhone strategy is bad for investors, good for consumers

Posted:
in iPhone edited January 4
There has been much drama over Apple's stock prices lately, with the latest being the swing because of slowing iPhone sales in Greater China. While a lot of what Apple has done leading to this point isn't great for investors, it is pretty good for consumers.

iPhone XS Max
iPhone XS Max


One of the largest factors Apple has always had going for it is a commitment to quality. Sure, there are occasional missteps where something runs afoul, but by and large, the quality is unmatched. Having a quality product is good for investors by driving sales with a product people love and can trust.

Moreover, it also gives these devices long lifespans. Apple could make great products using cheaper materials, but they would fail much sooner and not be nearly as recyclable or good for the environment. These long lifespans are in direct opposition to what investors ultimately want right now -- a short upgrade cycle for iPhone purchases.






When a device lasts longer than the nearly three years most consumers use a device these days, and instead lasts five or more through aftermarket sales, consumers win. They get a device that lasts and continue to provide value over a longer period of time. The secondary buyer gets a more affordable device than Apple's prices for a new iPhone, plus the original owner gets a substantial pile of cash for the old device.

The four-year old iPhone 6 Plus routinely sells on the secondary market for around $250, a great subsidy towards a new phone.

iPhone battery
iPhone battery


Once a phone ages a bit, the battery -- which has always been a consumable -- often needs to be replaced. Apple offered inexpensive and quality $29 battery replacements for all through the end of 2018, another huge benefit for consumers potentially at the expense of investors. The program is over, but the steep price cut helped publicize that Apple was swapping batteries at all.

So, while the cost may have risen for the battery replacement at the turn of the new year, more people are aware that it can be done by Apple itself, and will likely utilize it when the time comes to extend the life of a device.

Beyond the physical quality of a phone, Apple has been investing heavily in its software platform. In 2018, Apple released iOS 12 which focused heavily on usability and stability. New features existed, over 150 by our count, but none of them were the huge overhauls many expected. This helps the latest and greatest software -- minus a few features -- run on years-old devices. This helps extend the lifespan of those devices further than just the hardware.

Apple iPhone
Apple iPhone


Recently, we've reached near-saturation of the smartphone market. There are no new geographic markets to expand into that don't have some form of Apple presence, be it authorized dealers or Apple Retail itself. To combat this, for over two years now, Cook and company have been highlighting services, where the number of new phones doesn't matter as much, but the install base does.

Analysts are on the cusp of figuring this out, with some ahead of the pack. Investors and Wall Street as a whole still haven't.

Given this not-new premise, the more devices that are out there that are in the hands of people willing to spend on services and apps, the more Apple benefits. Processors and cameras that are now a few years old are still very capable, so the incremental changes aren't necessarily as lust-worthy as they once were.

A user who pays $250 for an iPhone 6 Plus wasn't ever likely to grab one of the latest iPhones. But since the devices work so long, they can grab this four-year-old device instead and still get into the Apple ecosystem where they can pay for apps and other Apple services.

But, to rely on the second-hand and refurbished market like this, the devices have to last. And, the public has to know that they will.

There is a vast difference between designing products that are meant to last briefly and burn out, versus creating products that last a few years that last well past the average lifespan for a consumer electronics device. Apple has chosen the latter through both Steve Jobs' second-coming and Tim Cook's reign, and it remains great for consumers.

In the short term, this approach isn't so good for investors focused on unit sales. In the long term, however, it will pay off.
cornchipwatto_cobra
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Comments

  • Reply 1 of 93
    rkorko Posts: 8member
    Once you get used to having an integrated stylus available, apple phones become a second choice, even with all the positives.  If apple were to release an iphone with an integrated stylus, it would become a top choice.  maybe the galaxy note market isn't worth it? 
  • Reply 2 of 93
    Mike WuertheleMike Wuerthele Posts: 4,196administrator
    rko said:
    Once you get used to having an integrated stylus available, apple phones become a second choice, even with all the positives.  If apple were to release an iphone with an integrated stylus, it would become a top choice.  maybe the galaxy note market isn't worth it? 
    I suspect that will make zero difference, as it doesn't matter at all to the vast majority of the smartphone using populace.
    muthuk_vanalingammike1mwhiterob53macseekermagman1979StrangeDaysbaconstangrandominternetpersondysamoria
  • Reply 3 of 93
    How come a strategy which was good for investors in the last 10 years became bad for the same investors in a matter of 3 months??? It is not as if Apple has changed their strategy with respect to the quality/longevity of the iPhones dramatically in the last 3 months. This editorial is beating around the bush, without addressing the core issues. 
    rogifan_newavon b7mwhiteatomic101anantksundaramdysamoriajony0
  • Reply 4 of 93
    canukstormcanukstorm Posts: 1,795member
    rko said:
    Once you get used to having an integrated stylus available, apple phones become a second choice, even with all the positives.  If apple were to release an iphone with an integrated stylus, it would become a top choice.  maybe the galaxy note market isn't worth it? 
    The Galaxy Note market is miniscule
    racerhomie3magman1979StrangeDays80s_Apple_Guychasmcornchipwatto_cobrajony0
  • Reply 5 of 93
    k2kwk2kw Posts: 1,647member
    How come a strategy which was good for investors in the last 10 years became bad for the same investors in a matter of 3 months??? It is not as if Apple has changed their strategy with respect to the quality/longevity of the iPhones dramatically in the last 3 months. This editorial is beating around the bush, without addressing the core issues. 
    So what are the core issues that you think are not addressed?
    baconstang
  • Reply 6 of 93
    rogifan_newrogifan_new Posts: 3,771member
    So is this editorial suggesting this is some new iPhone strategy by Apple (thereby implying the previous strategy was not longevity but getting people to upgrade more frequently)?
    muthuk_vanalingamdysamoria
  • Reply 7 of 93
    mike1mike1 Posts: 1,819member
    rko said:
    Once you get used to having an integrated stylus available, apple phones become a second choice, even with all the positives.  If apple were to release an iphone with an integrated stylus, it would become a top choice.  maybe the galaxy note market isn't worth it? 
    I suspect that will make zero difference, as it doesn't matter at all to the vast majority of the smartphone using populace.
    His post is why I wish AI would bring back the "Thumbs Down".
    ericthehalfbeemwhiterob53magman1979StrangeDaysrandominternetpersondysamoriaroundaboutnowcornchipwatto_cobra
  • Reply 8 of 93
    AI_liasAI_lias Posts: 272member
    Wow, mentioning the battery replacement discount as a strategy: silly. Consumers practically twisted Apple's arm in doing it, short term (one year, that's not a strategy timeframe). It would have been a consumer-benefitting strategy if Apple, on their own, will have disclosed the iPhone throttling, and reminded the people that you might just have to replace the battery, not buy that new phone. The article seems to focus on quality, which would have been good a couple of years ago, but now you pay more for that quality, and get less value than you used to. So the strategy benefits the investors, since Apple is charging more for the same quality, and in some cases, for less, since they removed some features people liked, and even charged for them: dongles. There are other indirect ways that quality and value went down through Apple's design strategy: what happens when you're out of warranty and a key breaks on your MacBook Pro? Or the back glass of the iPhone cracks? 
    edited January 4 muthuk_vanalingamblurpbleepbloopatomic101dysamoriacornchipxyzzy01
  • Reply 9 of 93
    k2kw said:
    How come a strategy which was good for investors in the last 10 years became bad for the same investors in a matter of 3 months??? It is not as if Apple has changed their strategy with respect to the quality/longevity of the iPhones dramatically in the last 3 months. This editorial is beating around the bush, without addressing the core issues. 
    So what are the core issues that you think are not addressed?
    In fact, there is only one major issue. People would come up with 100 other things, but all of them are minor. And it is damn easy for Apple to fix it. No, I am not going to repeat it a trillionth time. 
  • Reply 10 of 93
    Mike WuertheleMike Wuerthele Posts: 4,196administrator
    How come a strategy which was good for investors in the last 10 years became bad for the same investors in a matter of 3 months??? It is not as if Apple has changed their strategy with respect to the quality/longevity of the iPhones dramatically in the last 3 months. This editorial is beating around the bush, without addressing the core issues. 
    Nobody said that it was good for investors for the last 10 years.
  • Reply 11 of 93
    How come a strategy which was good for investors in the last 10 years became bad for the same investors in a matter of 3 months??? It is not as if Apple has changed their strategy with respect to the quality/longevity of the iPhones dramatically in the last 3 months. This editorial is beating around the bush, without addressing the core issues. 
    Nobody said that it was good for investors for the last 10 years.
    Then how do you explain Apple becoming the FIRST company in the world to have a Trillion dollar valuation not so long ago? 
    mwhite
  • Reply 12 of 93
    larryjwlarryjw Posts: 320member
    Well, there are the old time investors and the new investors. Old time investors buy stocks for the dividends and modest growth in stock prices. Newer stock investors buy for the speculation on stock prices. 

    Like much of the market, the Trump effect was speculation on the exponential growth of stock prices. Apple stock prices certainly grew exponentially along with the rest of the market (exceptions like GE, Toy's R Us, Sears, etc -- being run into the ground by poor management or rape by their CEOs and vulture capitalists). Key point, exponential growth is NEVER sustainable -- it has to collapse.

    Apple stock price started 2017 at $121.35, and rose exponentially to $227.63 on Aug 1 2018. There was never a fundamental economic reason for a near 200% rise in Apple stock in two years, even given Apple's buyback of stock over the last two years. Apple stock price today ($148) is about 20 points below its January 2018 price, but from a linear growth perspective, even this is quite acceptable from an investment standpoint -- a 22% increase over 2 years -- compare that to your bank savings account. 




    muthuk_vanalingambaconstangn2itivguy
  • Reply 13 of 93
    rko said:
    Once you get used to having an integrated stylus available, apple phones become a second choice, even with all the positives.  If apple were to release an iphone with an integrated stylus, it would become a top choice.  maybe the galaxy note market isn't worth it? 
    Stop being delusional. You are not everyone.There are styluses for iPhones also. I despise them. If I note something down I use a Bluetooth keyboard,Siri or the built in keyboard. 
    StrangeDaysbaconstang
  • Reply 14 of 93
    Mike WuertheleMike Wuerthele Posts: 4,196administrator
    How come a strategy which was good for investors in the last 10 years became bad for the same investors in a matter of 3 months??? It is not as if Apple has changed their strategy with respect to the quality/longevity of the iPhones dramatically in the last 3 months. This editorial is beating around the bush, without addressing the core issues. 
    Nobody said that it was good for investors for the last 10 years.
    Then how do you explain Apple becoming the FIRST company in the world to have a Trillion dollar valuation not so long ago? 
    It should still be worth that, based on the fundamentals of the company, and the stupid amount of money that it will continue to make. But yet, here we are.

    The markets are irrational. They respond in a knee-jerk fashion to the news of the moment, and pay very, very little heed to long-term trends that aren't immediately quantifiable.
    edited January 4 muthuk_vanalingamrob53baconstangshark5150cornchipwatto_cobra
  • Reply 15 of 93
    jimh2jimh2 Posts: 105member
    There is no other phone company or wireless reseller concerned about longevity. Prior to Apple the goal was to make sure older phones were useless enough that the user had to have a new phone. There certainly were never ever any firmware/OS updates as those could have prolonged a products usefulness.
    cornchipwatto_cobra
  • Reply 16 of 93
    sirozhasirozha Posts: 475member
    How will this strategy be good for investors in the long run? Please elaborate. 

    I have an idea in mind how to jumpstart the upgrade cycle for iPhones. Have someone from Apple contact me. It's legit. 
  • Reply 17 of 93
    Mike WuertheleMike Wuerthele Posts: 4,196administrator
    sirozha said:
    How will this strategy be good for investors in the long run? Please elaborate. 

    I have an idea in mind how to jumpstart the upgrade cycle for iPhones. Have someone from Apple contact me. It's legit. 
    Point the first: Andrew did, in this piece.

    Point the second: You're on your own. I'm sure they'll be thrilled to hear your opinion.
    edited January 4 StrangeDaysbaconstangroundaboutnowwhodacornchipwatto_cobra
  • Reply 18 of 93
    This article is exactly correct. iPhones,Macs & iPads have been the most reliable tech products I have used,period . Even my aunt uses the iPhone 5S since 2013(swapped battery in 2018) and iOS 12 made it excellent. She will obviously get another iPhone when upgrading. 
    For my case ,I always purchase refurbished iPhones, and use them 2-4 years. I have now AirPods,Apple Watch Series 2 along with my iPhone SE.Apple Music subscription is being used too. So like DED said apple is investing on individual users.No one is being forced to use them.
    baconstangcornchipwatto_cobra
  • Reply 19 of 93
    sirozhasirozha Posts: 475member
    How come a strategy which was good for investors in the last 10 years became bad for the same investors in a matter of 3 months??? It is not as if Apple has changed their strategy with respect to the quality/longevity of the iPhones dramatically in the last 3 months. This editorial is beating around the bush, without addressing the core issues. 
    Nobody said that it was good for investors for the last 10 years.
    The article claims this strategy will be good for investors in the long run. Care to elaborate how? 
  • Reply 20 of 93
    avon b7avon b7 Posts: 3,313member
    I switched just over four years ago with the dilemma mentioned in this piece. I was priced our of the iPhone market (new phone), but picking up a much older iPhone (refurbished or second hand) was a ridiculous proposition as I could get a new phone with very competitive hardware for (in those days) 200€.

    New phone. Modern technology. Amazing build quality. Fast charging. Extra storage etc. It was Android but I liked the system much more than iOS.

    Nowadays, you can pick up amazing new phones that leave four year old hardware in the dust for 250€ (or less!) and follow a far shorter upgrade path or hang on to it for longer if you wish. 

    You would have to be an iOS die hard to pick up a four year old iPhone as your main phone.

    I think my situation is pretty indicative of many people who were in my situation and it is one of the reasons iPhone sales flattened.

    New, far cheaper phones from competitors are more than good enough on every level.

    The big difference between today and four years ago is that competitors are offering amazing phones at every price band right up into premium and far beyond.

    Plenty of options at plenty of prices.

    Apple has very limited options and an 's' cycle which is now taking the edge off of its ability to react to market trends.
    muthuk_vanalingam
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