Apple CEO says company "making moves to make things more affordable"
Apple will move to lower costs and remove barriers to entry for its ecosystem, chief executive Tim Cook said Tuesday, but company will not sacrifice quality to do so -- even for products that will target emerging markets.
In an interview at Tuesday's Goldman Sachs Technology Conference, Cook was asked how the company plans to create a great user experience for customers who find the price of the existing iPhone offerings too rich for their blood and must instead rely on prepaid phones and plans.
"This is a popular question. [?] We wouldn't do anything we wouldn't consider a great product," he said. "There are other companies that do that, and that's just not who we are."
Cook pointed to Apple's recent strategy with the iPhone, where its kept the legacy -- but proven -- iPhone 4 and iPhone 4S on the market at reduced prices while rolling out the enhanced iPhone 5, rather than create a cheaper, crippled version of the handset outright. Results of this initiative recently shocked even the company's most informed forecast analysts.
"If you look at what we've done to appeal to people who are more price sensitive, we lowered the price for iPhone 4 and iPhone 4S, and in the December quarter, we didn't have enough supply of iPhone 4, so it surprised us as to the level of demand we had for it."
"We are making moves to make things more affordable," he said. "Instead of saying how can we cheapen this iPod to get it lower, we said how can we do a great product, and we were able to do that. The same thing, but in a different concept in some ways."
Similarly, Cook said that his team struggled several years ago to figure out a way to build a cheaper Mac. "We concluded we couldn't do a great product, but what did we do -- we invented iPad," he explained. "Now all of the sudden we have an incredible experience and it starts at $329. Sometimes you can take the issue and you can solve it in different ways."
Cook gave no word on when consumers and investors could expect to see a more affordable iPhone. Piper Jaffray analyst Gene Munster, though, followed Cook's speech with a note to clients in which he predicts such a device will be brought to market sometime during the September quarter of this year.
"We continue to believe Apple will have a cheaper phone product to address the emerging markets, which may or may not be similar to the existing iPhone," Munster said. "Additionally, we note that over time, something like the rumored smart watch could be an option in addressing emerging markets with a lower cost product through a different form factor (iPad as cheap Mac)."
In an interview at Tuesday's Goldman Sachs Technology Conference, Cook was asked how the company plans to create a great user experience for customers who find the price of the existing iPhone offerings too rich for their blood and must instead rely on prepaid phones and plans.
"This is a popular question. [?] We wouldn't do anything we wouldn't consider a great product," he said. "There are other companies that do that, and that's just not who we are."
Cook pointed to Apple's recent strategy with the iPhone, where its kept the legacy -- but proven -- iPhone 4 and iPhone 4S on the market at reduced prices while rolling out the enhanced iPhone 5, rather than create a cheaper, crippled version of the handset outright. Results of this initiative recently shocked even the company's most informed forecast analysts.
"If you look at what we've done to appeal to people who are more price sensitive, we lowered the price for iPhone 4 and iPhone 4S, and in the December quarter, we didn't have enough supply of iPhone 4, so it surprised us as to the level of demand we had for it."
In the December quarter, we didn't have enough supply of iPhone 4, so it surprised us as to the level of demand we had for it."Cook also recalled how the original iPod carried a $399 price tag and noted how today consumers can buy an iPod Shuffle for $49.
"We are making moves to make things more affordable," he said. "Instead of saying how can we cheapen this iPod to get it lower, we said how can we do a great product, and we were able to do that. The same thing, but in a different concept in some ways."
Similarly, Cook said that his team struggled several years ago to figure out a way to build a cheaper Mac. "We concluded we couldn't do a great product, but what did we do -- we invented iPad," he explained. "Now all of the sudden we have an incredible experience and it starts at $329. Sometimes you can take the issue and you can solve it in different ways."
Cook gave no word on when consumers and investors could expect to see a more affordable iPhone. Piper Jaffray analyst Gene Munster, though, followed Cook's speech with a note to clients in which he predicts such a device will be brought to market sometime during the September quarter of this year.
"We continue to believe Apple will have a cheaper phone product to address the emerging markets, which may or may not be similar to the existing iPhone," Munster said. "Additionally, we note that over time, something like the rumored smart watch could be an option in addressing emerging markets with a lower cost product through a different form factor (iPad as cheap Mac)."
Comments
Wow - THIS IS a major product marketing / management shift for APPLE. They've always been a premium product segment company - heck how else could a company sell you essentially a $400 PC for $1000+.
Don't get me wrong, I am not downing Apple, but how this plays out is going to be REALLY interesting.
Apparently I'm getting you wrong because I don't see any other vendor that is selling what Apple sells for over $1000 for just $400. Care to show me some examples of $400 PCs that on par with the design, performance, fit and finish, resale value, environmental friendliness, quality and service of Apple's PCs?
I think Tim Cook is leaving the door open to a less expensive mobile device. This could be VERY interesting. Put a mobile phone in a bluetooth device? Thing is, that's going to take some juice. That means it's got to have some minimal heft.
Will the iWatch be a low priced mobile phone??? Couple it with FaceTime and Siri and make it waterproof, drop the price down to a couple hundred bucks (extra for a bluetooth ear bud, of course, but give it a small speaker and microphone so you don't "need" one), and BAM!, you have an inexpensive phone that can interface with all the other Apple products.
I wonder if anyone at Apple has started to think in terms of multiplying the power of their user's physical abilities with robots or exoskeletons?
Remember when the 4 first came out and Foxconn had to purchase many machines to produce certain parts that were typically only used for prototyping? They've found a way to make enough of the parts since then, but part of me questions if they should just consider repackaging previous year's models into something easier and cheaper to make and compromising a bit on the 'premium' aspect. They'd still be great products in terms of usability, can be considered/marketed as 'new' each year and can help lower prices slightly. An example would be to take the 4/4S, keep the glass screen, but make the back and antenna parts into a plastic unibody and include internal antenna.
Has this been covered/suggested on here before?
I think that Apple should make things even more expensive. They often can't meet the current demand, and making things cheaper is not going to help.
I also think that Apple should concentrate a bit more on it's pro products, and not worry too much about "emerging" markets. Making budget products for "price-sensitive" people is not exactly likely to produce any drool worthy devices, quite the contrary. When I see an Apple keynote, I want to be blown away, I want to be surprised and amazed by what they're presenting on stage.
Better than use cheap components, have an easier way to assemble the products. A big chunk of the iPhone 5 price is due to increased difficulties encountered by Foxconn in building this model. Take iPhone 4 gen components, a cheaper back, a model a tad easier to assemble (a bit more thick), a smaller screen… and you can easily cut the price by a third, maybe more if you're after healthy margins and great market share instead of great margins and healthy market share.
I expect an iPhone mini to be released soon to wash over Chinese and Indian markets, and a big screen iPhone for more traditional markets.
Quote:
Originally Posted by gwmac
Would be nice to see a Mac Mini at $499 again.
Or a $599 model with the option for an AMD 7750 single slot or Nvidia equivalent GPGPU.
Quote:
Originally Posted by Apple ][
I think that Apple should make things even more expensive. They often can't meet the current demand, and making things cheaper is not going to help.
I also think that Apple should concentrate a bit more on it's pro products, and not worry too much about "emerging" markets. Making budget products for "price-sensitive" people is not exactly likely to produce any drool worthy devices, quite the contrary. When I see an Apple keynote, I want to be blown away, I want to be surprised and amazed by what they're presenting on stage.
Did you notice the comment by Cook where he said they couldn't keep up with demand for the iPhone 4? There's clearly a market for less expensive products, in spite of your hatred for anything that isn't overpriced (and those who use such products). It's worth tapping into those markets because building a user base is critical for long term profit growth.
Originally Posted by AppleInsider
... Apple's chief executive on Tuesday issued a pledge to continue to drive down the cost of buying into the company's ecosystem.
It's all about the ecosystem + infrastructure. Hardware inevitably comes down in price. In 10 years, Apple will need to begin generating more revenue from iTunes + iCloud and/or enter new markets ripe for innovative (and profitable) disruption.
As we've seen for decades, competitors can quickly mash up rough copies of Apple hardware. It takes them a little longer to bang out software features that crudely mimic Apple's OSes and apps. But there's no shortcut to building a robust, pervasive, transparent, and simple-to-use infrastructure to hold your ecosystem together. It takes years to design, plan, build, test, de-bug, rinse, repeat, upgrade.
And, unfortunately for the Apple wannabes, the infrastructure needs to be built first. Oops.
the devices have reached a point where there is no point to make them thinner and lighter. While every pundit who evaluates the newest gadget talks first about how thin and light it is compared to its competition, it really has been taken to ridiculous lengths. Who cares if its a mm thicker, or if it weights another ounce. Make the new cheaper phones thicker and with a bigger battery, make the camera as good as they are now but without trying to shrink them to such small sizes. The will be the best of its class, cheaper and allows more people to enjoy the beauty and simplicity of the Apple ecosystem.
Quote:
Originally Posted by wakefinance
Did you notice the comment by Cook where he said they couldn't keep up with demand for the iPhone 4? There's clearly a market for less expensive products, in spite of your hatred for anything that isn't overpriced (and those who use such products). It's worth tapping into those markets because building a user base is critical for long term profit growth.
Yes I did notice that comment about how they couldn't keep up with the demand for the iPhone 4. I believe that that is the point that I was trying to make. There is no doubt that there is a market for less expensive Apple products, I don't deny that. I just hope that these less expensive products do not cause delays or production problems with their other products. Maybe Foxconn should hire 500,000 more Chinese people.
If Apple wants to release a cheap iPhone or something, then fine, just as long as they don't neglect their other products, and hopefully they won't abandon their philosophy. It doesn't really bother me if Apple releases a cheap product, as long as they continue to release other products which aren't compromised.
Originally Posted by lkrupp
"Cheap plastic crap is on the way" said Apple CEO Tim Cook. Black plastic, dumbed down features, crappy battery life. If I wanted that I'd buy a Samsung product.
So buy a Samsung product. Nothing Cook said even remotely suggested that.
Quote:
Originally Posted by SockRolid
It's all about the ecosystem + infrastructure. Hardware inevitably comes down in price. In 10 years, Apple will need to begin generating more revenue from iTunes + iCloud and/or enter new markets ripe for innovative (and profitable) disruption.
As we've seen for decades, competitors can quickly mash up rough copies of Apple hardware. It takes them a little longer to bang out software features that crudely mimic Apple's OSes and apps. But there's no shortcut to building a robust, pervasive, transparent, and simple-to-use infrastructure to hold your ecosystem together. It takes years to design, plan, build, test, de-bug, rinse, repeat, upgrade.
And, unfortunately for the Apple wannabes, the infrastructure needs to be built first. Oops.
Great post, and spot-on. This will always be Apple's biggest advantage and ace in the whole. They control the entire ecosystem, from hardware, to software, to apps, to the cloud. Companies like Samsung have no clue what the next version of Android will hold, the best they can do is throw on their skin and a new plastic case.
Quote:
Originally Posted by lkrupp
"Cheap plastic crap is on the way" said Apple CEO Tim Cook. Black plastic, dumbed down features, crappy battery life. If I wanted that I'd buy a Samsung product.
Yes, this is EXACTLY what Cook said. EXACTLY. Except, he actually said quite the opposite. That Apple typically goes for the less obvious solution when lowering pricing, and isn't willing to compromise and cheap out to make a shitty product. It would rather reinvent the product or make something new. God knows how you got what you got from what he said- oh wait, you're one of these "Apple fans" that will make shit up just to kick the company down. Oh, and by the way that 'cheap black plastic phone' existed- under Steve Jobs- it was called the iPhone 3G and 3GS. The highest quality iPhone ever produced, the iPhone 5, was released under Cook. But don't get facts get in the way of your concern-trolling.
And Wall Street says: "Apple's margins will decline" and drive the stock even lower.