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

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  • Reply 161 of 185
    Quote:
    Originally Posted by sog35 View Post

     

     

    You are wrong.  Samsung makes close to ZERO on their $400 phones.  They make all their money on $500-$700 phones.

     

    Lenovo/LG/Nokia/ect sell 200,000,000 smartphones combined and make ZERO profit or lose money.  The bulk of the phones they sell are mid/low end.  The only two companies that make any profits in smartphones sell a TON of high end phones. 


     

    Oh bs. You have no way of proving that a $400 is sold at a loss just as I have no way of proving that it doesn't.

  • Reply 162 of 185
    kevtkevt Posts: 195member
    Quote:
    Originally Posted by sog35 View Post

     

     

    I just named 4 companies that sell mostly $400 phones and they all make ZERO or LOSE money.

     

    Nokia has sold hundreds of millions of phones since 2011 and has not had a single profitable quarter

    http://seekingalpha.com/article/1602002-how-many-lumia-phones-must-be-sold-for-nokia-to-break-even

     

    Same with LG

    Same with Levono

    Same with ZTE

    Same with Huawei

     

    All these companies sell in the mid-range below $500.

    Use your brain.

     

    So you want Apple to do something that has never been done before? Risk there premium brand name, margins, and canibalization for the 5S just so you can sell a few more phones to cheapskates?  Nokia/LG/Leveno/ZTE/Huawei has already done that.  And they have all FAILED.


     

    All these companies make plastic phones. They all lose money. Therefore Apple should never make a plastic phone.

     

    Well, using your brain.

     

    Apple has risked its premium brand name by selling a plastic phone, that (whilst good by plastic phone standards) is a clear step down in quality from the iPhone 4, 4S, and 5. They're taking the risk already, but for the sake of increased profit margins, not for competitiveness in price sensitive markets.

  • Reply 163 of 185
    Quote:

    Originally Posted by sog35 View Post

     

     

    I just named 4 companies that sell mostly $400 phones and they all make ZERO or LOSE money.

     

    Nokia has sold hundreds of millions of phones since 2011 and has not had a single profitable quarter

    http://seekingalpha.com/article/1602002-how-many-lumia-phones-must-be-sold-for-nokia-to-break-even

     

    Same with LG

    Same with Levono

    Same with ZTE

    Same with Huawei

     

    All these companies sell in the mid-range below $500.

    Use your brain.

     

    So you want Apple to do something that has never been done before? Risk there premium brand name, margins, and canibalization for the 5S just so you can sell a few more phones to cheapskates?  Nokia/LG/Leveno/ZTE/Huawei has already done that.  And they have all FAILED.


     

    Use your brain. For all you know they use the $400 phone to subsidize the cheap phones. You still haven't proven to me that $400 phones can't be made with a decent margin.

  • Reply 164 of 185
    Quote:
    Originally Posted by sog35 View Post

     

     

    Use your brain.  Apple does not sell products at a decent margin.  Espeically the cash cow (phone segment) that accounts for 70% of their profits.

     

    If they could don't you think Apple would have done it?  Or do you truly believe  you know the market better than Mr Cook?  Do you truly believe you know better than the Apple exec's who manage the most valuable company in the world?  REally?


     

    Obviously you are not using your brain.

     

    Your one big mistake is thinking that I ever said that Apple "should" do it. I have always maintained that Apple "could" do it... and I know it is possible and still have a very good margin. Unless you are thinking it takes over $300 to make any phone... which is absolute bs. Any thinking person can see thats not true.

     


    If you read my original post I stated that we don't know how well this line-up will sell and if Apple can keep the inventory flowing. If there is an unacceptable slow down then, as I stated before, Apple still has plenty of latitude by developing a $350 - $400 lower cost phone to compete in that market and still make a very good margin. For all we know, Apple already has that phone in the 5C.
  • Reply 165 of 185
    Quote:
    Originally Posted by sog35 View Post

     

    Let's look at simple math.

     

    5C

    $550

    Gross Margin 50%

    Cost $275

    Profit per phone $275

     

    5C - cheaper

    $400

    Gross Margin 31%

    Cost $275

    Profit per phone $125

     

    Estimated 5C sales is about 60,000,000 phones at $550

     

    Do you really beleive that Apple can sell 132,000,000 phones at $400?

    Do you really believe that Apple can sell 220% more phones at the lower price?

    Do you really think that Apple can manufacter over 200,000,000 phones in one year (with the 5S)?

     

    Use your brain people


     

    Now I know you are full of bs. Where did you get those figures.

     

    Weren't you person who said that there is zero profit in a $400 phone. Now you've shown us that even a new premium phone will give a company a gross margin of 31% on exaggerated bs BOM.

     

    Now picture a 16 gig iPhone 4S in a new case and sold for $400 instead of $450 and you probably have bumped your gm up to 38-40%. Hmmm... not bad....but, of course, according to you, no company could live with those margins.

  • Reply 166 of 185
    Quote:
    Originally Posted by sog35 View Post

     

     

    Apple sold about 120M phones last year.

    I'd say the sale 60M 5C.  Isn't that reasonable?

    http://techcrunch.com/2012/10/25/apple-hardware-sales-in-fy-2012-125-04m-iphones-58-23m-ipads-18-1m-macs-and-35-2m-ipods/

     

    Estimated margin on iPhone 5 was 50%-60%.  I used 50% since the 5C is $100 cheaper.

    http://www.forbes.com/sites/ericsavitz/2012/09/21/apple-jefferies-sees-55-gross-margin-on-iphone-5/

     

    if those don't seem reasonable give me your GP% and i can run the numbers.

    Regardless they would have to sell 150%-200% more phones at $400 than $550 just to break even.

     

    FYI there is a HUGE difference between Gross Margin and Net Income/Profits.  Yes they may get 31% for gross margin but then you need to take out overhead, admin, sales costs, ect.  That will get the Profit margin to only 10%.  Apple's Profit margin is about 25%-30% bottom line.

     

    I'm a CPA in corp finance so i go through this type of bs everyday.


     

    Who the hell is talking about replacing the premium tier phones to sell a low cost phone.


     


    The BOM of the 5 was around $225... the complete cost with all added items was around $280... but that is not even close to the type of phone I am talking about so your figures are just a red herring.


     


    I'm a cpa at a fortune 500 company.


     


    I'm done with you. Ignore list.


     


    You need to follow your own advice and use your brain. 
  • Reply 167 of 185
    sennensennen Posts: 1,466member
    Quote:

    Originally Posted by kevt View Post

     

     

    The point is Apple has gone for cheaper in terms of casing - but that's not reflected in the price.


     


    How many times have posters on this board dismissed Android or Windows phones as being 'cheap plastic crap'? A U-turn as far as plastic goes.


     


    Now the iPhone 5c brings the worst of both worlds. Plastic casing ...  but ... same premium prices. Exactly the same prices they've always charged for last year's technology. 


     


    Nobody is expecting any Apple product to be dirt cheap, but instead of using plastic savings to get a bit more competitive on price, Apple is using it to bolster their already healthy profit margins.


     

    From someone who bought a 5C this morning:

     




    Quote:


    I just got my 5C. Definitely feels very very solid, even better than the Lumia 620 I had once. It's heavier than the 5 but that's a good thing in my opinion, just adds to the feel. Definitely no flex at all anywhere on the case, the steel reinforcement's doing its job. I got the pink model and it's actually a lot closer to fluro pink than it seems in pictures, but I don't mind.

    Performance should logically be identical to my 5 but the animations actually look smoother, but that might level out once I use it more.

    It definitely feels much nicer in the hand than my 5 did, as pretty as the solid aluminium is, it's not very friendly to hold, this is much nicer.



     

    Premium plastic.


  • Reply 168 of 185
    sennensennen Posts: 1,466member
    Quote:

    Originally Posted by ImAndrewSmith View Post

     

    "New is easy. Right is hard." - Craig Federighi

     

    Bravo, sir.

     

    I feel like people are missing the point of the iPhone 5C. Everyone is looking at it like it's this whole new phone that Apple came out with and it's missing all of these features, etc. No... just no...

     

    What Apple has done is great, really. Instead of doing what they've been doing for years, which is knocking the year-old iPhone model's prices down $100, they've turned it into a new, yet same (if that makes sense), phone. They've redone the looks/components on the outside, yet kept the components on the inside the same(?) (is there anything different on the inside compared to the 5? I'm not positive. I know it's nothing worse, that's for sure.)

     

    So at the end of the day, they have a phone at the $199/$299/$399 price point, a phone at the $99/$199/$299 price point and a phone at the free price point. How is that anything worse than any other year? No one ever complained that the 4S was too much last year, or the 4 was the year before, etc... why is the 5C this catastrophe? They're keeping the same premise, but making it new at the same time. I applaud them for turning a piece of their business into something sort of new.

     

    I'm confused as to why people are confused...


     

    Very nicely said.

  • Reply 169 of 185
    sennensennen Posts: 1,466member
    Quote:

    Originally Posted by sog35 View Post

     

    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.


     

    I've said the same thing here and on other fora. It should also be mentioned that the middle class in Asia will number approximately 1.7 billion by 2022. That's the demographic that Apple is aiming for, they don't need to go cheap, or cheaper for that matter, at all.

  • Reply 170 of 185
    Who the hell is talking about replacing the premium tier phones to sell a low cost phone.
     
    The BOM of the 5 was around $225... the complete cost with all added items was around $280... but that is not even close to the type of phone I am talking about so your figures are just a red herring.
     
    I'm a cpa at a fortune 500 company.
     
    I'm done with you. Ignore list.
     
    You need to follow your own advice and use your brain. 

    In the "Battle of the CPA's"... I'm going to have to side with Sog35 here, because he previously made some very solid posts above the one you're replying to.

    Specifically: you or anyone else has failed to answer his question (paraphrased):

    "Who makes... and what is the model of phone... that is $400-500 and BETTER than the iPhone 5C, or even equal to it?"

    Let's keep it simple and not even consider the ecosystem, on-site support, or choice of materials; all of which IMHO add at least $100 of "soft value*" to Apple's products.

    * Ah yes.. soft value... something that can not be accurately measured in the "cold hard numbers" of a CPA's spreadsheet.

    But that's why I tip my hat to Sog35: he actually has the smarts to see beyond the numbers. I wish the number crunchers that I frequently run across could/would do the same and be as bright.

    Re: BOM - read the Anand Tech review. The BOM for the previous iPhone 5 and new 5C are almost the same, regardless of the casing.

    Besides the fact that not all plastics are created equal, both the aluminum and the plastic casings are created, cut and finished using robots. The only difference is the raw material cost and the number of process steps needed to get to a final casing. In the plastic case of the iPhone 5C, I don't see that too many steps in the process have been eliminated... and neither did Anand Shimpi.... who certainly knows more about these things than anybody commenting here.

    One CPA figured that in to their analysis (among other very valid points) vs. one who didn't. Maybe we should all be "done with" the one who missed the forrest for the trees behind their Almighty Spreadsheet...?>>>> :smokey:
  • Reply 171 of 185
    asciiascii Posts: 5,941member
    It's really brave of him to say, as CEO of a publicly owned company, look we go in to markets to steal the cream, not get the biggest share. And I totally get that approach, it's no fun for the employees making junk. If you find your company making low margin products it's time to change to a more up-market industry.

    And there's nothing inherent about being publicly owned that says you *have* to go for highest market share, you just have to get enough return on capital to keep enough people interested, and if you can do that with the cream then more power to you.
  • Reply 172 of 185
    Remarkable how these three guys actually seems to have split Steves personality between them.
    Including their looks.
    That could have both advantages and disadvantages.
  • Reply 173 of 185
    aaronjaaronj Posts: 1,595member
    Quote:

    Originally Posted by island hermit View Post

     

     

    Well, that comment on its own...: it would mean that Apple has the ability to build a lower cost phone with high quality that would gain even more customers without a massive hit to its margins.

     


    ... but that comment coupled with the qualifying comment in the last paragraph:


     


    "Depending on how the fiscal 1st and 2nd quarters add up, Apple may or may not change its strategy."

     

    ... would mean that if Apple's current strategy (inserting the 5C into the mid tier) doesn't pan out then there is still an opportunity to build a lower priced model without "racing to the bottom", as you put it.

     

    You seem to have missed the majority of what I said in my post.  (ie. I didn't just include Ford as an example)


     

    Again ... let me repeat:

     


    "When Apple made a partnership with a fashion house, they did so with Burberry.  That should give you some idea where their thinking is.  They didn't partner with GAP or Target (not that there's anything wrong with either -- heck, major designers design clothes for both).  But Burberry is upper-tier.  I mean, the next time you want a calfskin trench coat for your wife/girlfriend, you can get a Burberry one for $13,000.  Or a python-skin skirt for $6000.

     


    There's a REASON Apple sidled up with Burberry: Image.  And of course, the same goes for Burberry.  It's a mutually beneficial arrangement. Burberry represents a classic, upper-class British style that will always remain in style.  Apple represents the top of the food chain when it comes not only to electronics, but to an image in the technology world.  That glowing Apple symbol on the back of a MacBook Pro MEANS something -- at least to people who understand the fashion of it all."

  • Reply 174 of 185

    Yes, you do pay a premium. It's remarkable however that version 7 can even be installed in an iOS device as old as the iPhone 4. You can't say that about the other platforms. Remarkable that almost overnight, 500 million iOS devices worldwide can be upgraded to the latest code, a code that takes the platform to a 64-bit OS, for no money other than what you paid for your device. Such epic technical exercises have never been done before, not because the tech was not there, but because it takes a lot of bucks, logistics planning and discipline to pull it off. It looks so simple, but something like this took a very long time to happen, and it began with Steve's vision, the first product of which is the iPhone. And they're not done. The point is, for the price, Apple gives back in the kind of vision and more importantly, implementation that really benefits its users. They sweat the details. This is not to say that they don't fail, because they obviously do at times. But just speaking for myself, despite the warts, I appreciate what they do and how they do it.

  • Reply 175 of 185
    aaronjaaronj Posts: 1,595member
    Quote:
    Originally Posted by sog35 View Post

     

     

    excellent point. Burberry is NOT going to be associated with a cheap or even mid-level brand.


     

    Yeah, Burberry partnering with Dell isn't something I see in the future. :)

  • Reply 176 of 185
    aaronjaaronj Posts: 1,595member
    Quote:
    Originally Posted by sog35 View Post

     

     

    Exactly.  While my 2 year old Android phone has not gotten a SINGLE OS update, people with a 3 year old iPhone run the same software as a brand new 5S.  Amazing.

     

    Over 66% of Android phones are running an OS from 2011 or older.  Pathetic.  Less than 10% are running either the current OS or the previous generation.  And this stuff does matter.  Some of my favorite apps either don't work or crash constantly because I'm running a 3 year old OS.  Can't wait to get my 5S in a couple of weeks.


     

    Aren't like 40%+ of iOS devices already running iOS7?

  • Reply 177 of 185
    sog35 wrote: »
    Over 66% of Android phones are running an OS from 2011 or older.  Pathetic.

    Maybe because Android users are accustomed to the hardware of Samsung and the like they do not even comprehend software refinement.
  • Reply 178 of 185

    Someone asked who make a $400-500 phone that is equal to the iPhone 5c?

     

    My honest answer is no one that I know of this second but the Nokia 925 is about 95% as good and for a LOT of people, it is really better.   IMHO it has a superior OS in terms of navigation at least, superior display, and superior camera then even the 5s.   Apple still deserves an edge if price is a non issue since the iPhone has the better ecosystem even though Windows 8 mobile is really catching up quickly for the apps that most people use.   And the Galaxy S3 deserves consideration as well.  (It has a somewhat different set of advantages/disadvantages)

     

    But if you simply asked that same question in 2-3 weeks, the clear answer will be Google/LG with the Nexus 5.  I own Apple and Microsoft stock so I am biased towards both companies but even I have to admit the next Nexus will be a game changer.    The Nexus 5 will probably be priced at $300-$350 and have a super fast quad core processor that compares to iPhone 5s, big battery, 16GB or 32 GB if you spend a bit more, 2GB or 3GB of internal RAM, a great camera with image stabilization that may be better then even the 5s and stock Android 4.4.   And a great 5" display with very thin bezel.  Google will probably have very small margins on this phone and that is why you can get so much for paying so relatively little.

     

    I've owned Android phones, iPhones and Windows phones and am taking a mobile graduate school class on developing on all 3 platforms so I know about each of them fairly well.

     

    My honest assessment Android manufactures other then Google with their Nexus line suck at supporting their OS in terms of upgrades so if your the type that wants to keep their phone a long time and upgrade the OS 2 or 3 times, avoid all Android manufacturers besides google.  Quite honestly most high end Android phones have OS that most users will like but its still at least a minor black mark that its hard to upgrade unless you are a techie.   

     

    Besides my Android phone, I currently own a Nokia 521 which is an amazing value and shows the Windows Mobile 8 OS is absolutely great.   From a purely OS perspective, it really has leap frogged both Android and IOS.    If price is not a consideration, Windows 8 on the desktop is not as good as OS X right now -- I am typing this on a Macbook air but own an HP All in One with Windows 8 -- since it really needs the 8.1 update to fix a few things.    That being said, live tiles work absolutely great on a cell phone.   And unlike cheap Android phones, with Windows Mobile the OS runs smooth as butter on low end hardware like the Nokia 521.

     

    The reason no $400-500 phone right now is clearly better then the iPhone 5c is other then Nokia, no manufacturer is really taking that market seriously.   Phones in that price range are usually sold to somewhat gullible people on contract and increase the margins of the telecom companies such as Verizon, At&T etc.

     

    Besides Google/Nexus, Nokia/Microsoft is the hope of the industry of bringing the margins on high end phones such as the Samsung S4 and iPhone 5c/5s to more reasonable levels.

     

    Google/Nexus really do no advertising so there sales will always be somewhat limited.   And quite frankly not that many people realize how good Windows Mobile actually is so the Nokia midrange phones probably don't sell as well as they should even though sales are increasing through word of mouth.   

     

    I've owned an iPhone as well and still have an iPod touch.   If the 5c was priced at $450, I would have bought one but now I'm either going to get a Nokia 925 used, perhaps used iPhone 5 or Nexus 5 when it comes out.    

     

    (Not all of the Nokia phones are executed as well as they should but I've owned the 521 and its ridiculously impressive for the price and looked at the 925 enough to know that is very well executed as well).

  • Reply 179 of 185

    "... And so for companies that want to chase that, that’s fine. I’m not criticizing it, actually. I call it junk. I don’t do that in a mean way. It’s just my label for it, right? But it’s just not who we are. I refuse to be driven by a blind ambition of unit share."

    Tim Cook, full interview here:

    http://www.businessweek.com/articles/2013-09-20/apple-ceo-tim-cooks-complete-interview-with-bloomberg-businessweek#p7

  • Reply 180 of 185
    Quote:

    Originally Posted by sog35 View Post

     

     

    The 925 does look really nice.  But I see it selling for about $500.  You can get the 5C right now for $530 at Walmart.  I don't count the Nexus line because Google is selling at cost and no one can expect Apple to sell at cost.

     

    In the $500-$550 range the iPhone 5C is the boss.

    If it was priced at $400 it would be the deal of the century.


    The 925 does sell for about $500.   It can be had for about $470 via Amazon resellers shipped including with Amazon fulfillment and prime shipping in some cases but I don't know of any actual big named stores that sell it that cheaply.   

     

    Given the market dynamics right now in the cell phone industry, excluding the Nexus line, you are absolutely right the iPhone 5c at $400 would be the deal of the century.

     

    My argument is the market for mid range to high end sell phones in the US at least is broken since right now there are really only 2 very strong players, Apple and Samsung, selling smart phones.    There may be many players selling Android phones but not enough strong players outside of Samsung and the whole contract model of selling destroys price transparency.   Google is a very strong player but they don't want to upset their partners too much by for example raising the price of the Nexus by lets say $25 and advertising it on TV.... 

     

    If HTC/LG/Sony etc. were stronger players in cell phones with better market share, the HTC One and Galaxy 4 would both probably be selling for around $450.   Those models selling for $450 would force even Apple to sell the 5c for $450 and probably lower the price of the 5s to at most $550.

     

    It would be interesting to know whether Google is really selling the Nexus 4 at cost.   I've have read on the internet where people speculate this to be the case but I think they are simply selling it at traditionally margins on electronics which are normally small.

     

    For example, I suspect due to components and manufacturing that isn't as nice -- no LTE for example --, that the Nexus 4 costs less then the iPHone 5 to manufacturer despite the Nexus have stronger components in some areas.

     

    There is no doubt that Google is subsiding Android development and just hoping to make it back on advertising.   I do think if you take the general Android development costs and only allocate a small percentage of those costs to the Nexus line that reflects the Nexus market share of all Android devices, the Nexus 4 phones especially the 16 gb model were profitable.    

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