Cook talks slumping iPhone sales in interview, to reportedly hold 'all-hands' meeting with...
After issuing an earnings forecast correction on Wednesday, Apple CEO Tim Cook sat down to discuss the anticipated revenue dip and a range of related topics including rising diplomatic tensions between the U.S. and China.
Apple CEO Tim Cook
The 13-minute interview with CNBC runs the gamut -- Cook discusses everything from iPhone subsidies to Apple's trade-in program -- but it manages to put the surprise forecast cut into perspective.
On Wednesday, Cook released a note informing investors that revenue for the first quarter of 2019 will be billions of dollars shy of an original estimate from November. Quarterly results won't be released until Jan. 29, but Apple's revised guidance shows some major issues lay ahead for iPhone.
In the interview, Cook reiterated what he said to investors and put the blame for weak iPhone performance squarely on China. Apple's top brass noted a slowdown in the important Chinese economy heading into the second half of 2018, a situation worsened by recent trade disputes with the U.S.
"It's clear the economy began to slow there in the second half. And what I believe to be the case is that trade tensions between the us and China put additional pressure on their economy," Cook said.
Additionally, Cook also put some of the blame for weak quarterly results on supply constraints impacting an impressively diverse lineup of products launched over the past few months. "We had some supply constrains during the quarter. We had an unprecedented number of new products during the quarter. New watches, new iPad Pros. Most of these were constrained during the quarter," he said during the interview.
On a positive note, Apple services and wearables categories reached new highs during the holiday quarter. Services, which has been Apple's fastest-growing category over the past year, performed especially well over the past three months.
"This is incredibly exciting for us because so many things hit records in there," Cook said. "The App Store did, Apple Music hit a new record, Apple Pay hit a new record, our search ad product from the App Store hit a new record, iCloud hit a new record."
Moving on from the question of iPhone, Cook addressed growing uncertainty surrounding China, particularly his own safety during travel.
Recently, a Huawei executive Meng Wanzhou was taken into custody in Canada at the request of the U.S., leading many to wonder if China would target U.S. execs in retaliation. Cook, however, doesn't seem to share this fear.
"I was just there in October. I'm going back later this quarter. And so it's not something I'm even thinking about is the truth," he said.
The mounting pressure has Apple on the defensive, and the company is apparently trying to mitigate fears both externally and with employees. According to a report from Bloomberg, Cook will be addressing these concerns internally as part of a town hall meeting on Thursday.
Apple CEO Tim Cook
The 13-minute interview with CNBC runs the gamut -- Cook discusses everything from iPhone subsidies to Apple's trade-in program -- but it manages to put the surprise forecast cut into perspective.
On Wednesday, Cook released a note informing investors that revenue for the first quarter of 2019 will be billions of dollars shy of an original estimate from November. Quarterly results won't be released until Jan. 29, but Apple's revised guidance shows some major issues lay ahead for iPhone.
In the interview, Cook reiterated what he said to investors and put the blame for weak iPhone performance squarely on China. Apple's top brass noted a slowdown in the important Chinese economy heading into the second half of 2018, a situation worsened by recent trade disputes with the U.S.
"It's clear the economy began to slow there in the second half. And what I believe to be the case is that trade tensions between the us and China put additional pressure on their economy," Cook said.
Additionally, Cook also put some of the blame for weak quarterly results on supply constraints impacting an impressively diverse lineup of products launched over the past few months. "We had some supply constrains during the quarter. We had an unprecedented number of new products during the quarter. New watches, new iPad Pros. Most of these were constrained during the quarter," he said during the interview.
On a positive note, Apple services and wearables categories reached new highs during the holiday quarter. Services, which has been Apple's fastest-growing category over the past year, performed especially well over the past three months.
"This is incredibly exciting for us because so many things hit records in there," Cook said. "The App Store did, Apple Music hit a new record, Apple Pay hit a new record, our search ad product from the App Store hit a new record, iCloud hit a new record."
Moving on from the question of iPhone, Cook addressed growing uncertainty surrounding China, particularly his own safety during travel.
Recently, a Huawei executive Meng Wanzhou was taken into custody in Canada at the request of the U.S., leading many to wonder if China would target U.S. execs in retaliation. Cook, however, doesn't seem to share this fear.
"I was just there in October. I'm going back later this quarter. And so it's not something I'm even thinking about is the truth," he said.
The mounting pressure has Apple on the defensive, and the company is apparently trying to mitigate fears both externally and with employees. According to a report from Bloomberg, Cook will be addressing these concerns internally as part of a town hall meeting on Thursday.
Comments
The eye watering price of MacBooks and iPhones is putting off a lot of previously loyal fans. I often hear that friends plan on getting a new Mac then change their mind when they work out the actual cost of getting a machine with the RAM and storage they need. The inability to upgrade after purchase makes it a difficult buying decision for many. I appreciate why this is, but it’s a challenge for potential purchasers.
Secondly the technology is so good that there’s little reason to upgrade an older device. My 5 year old MacBook Pro is easily fast enough for my needs and the new ones offer no great benefit for me that could justify the high cost.
A lot of enthusiasts and keen Apple users bought an iPhone X last year but given the high cost see little reason to upgrade to an iPhone XS which looks identical and feels the same in use. I love my iPhone XS but cannot recommend anyone upgrade from an iPhone X as it doesn’t offer any obvious benefit. Most users would be unable to tell the difference without running benchmarks. That’s not to say it isn’t enormously faster and have many other technological improvements - it’s that most users won’t notice. Without some significant new features it’s difficult to see where Apple (and other manufacturers) can go with smart phones - were approaching the limit of what consumers need in terms of hardware.
Meanwhile the wider market of people who thought $1000 was too much for a phone last year still feel that way now.
Exchange rates and challenging market conditions obviously play a big part too. The high dollar against the pound means Apple prices really are extremely high in the UK and it’s making Apple products far less affordable.
If Timmy wants to be an activist - fine - keep it at the local level where it might be relevant, but the moment he steps outside the US, his message is either irrelevant because many countries gained the rights he keeps fighting for even decades ago, or it flies right in the face or their religion, culture and belief systems. Incidentally these geographies falls under Apple's definition of emerging markets. So it is not only price and currency issues that discourage customers in these markets.
And history repeats itself...
Show me 1 decision by Apple in the last year that was beneficial to the customer more-so than Apple? You can't.
This company has become more about the shareholders and influence than it has about innovation, industrial design, and the customer experience.
Completely ignoring their customers needs and instead telling their customers what they want.
You know, all the "Pro" users out there screaming for secretly throttled phones and bent iPads for obscene money.
Hubris.
Brought them down before - it's bringing them down again.
Can try and deflect with China all you want Tim - but when the stock hits $84 this summer you're gone.
Ah yes, the "potty mouth" CEO standing up for basic human rights once in a while. Just terrible you should have to hear that. /eyeroll
Huh? Most telcos are now offering these phones on installment plans. I’m on the iPhone Upgrade program, and my only upfront cost is tax and activation fee. Also where was anyone ever only paying $15/month for a new iPhone?
That works very well in the early stages of a product cycle, when there is lot of scope for differentiation using innovation, lot of scope for new must have features, etc.
However, when the market starts approaching maturity, when older products and competitor products start hitting “good enough” levels, Apple is late to see the writing on the wall. They resort to hubris, and customer unfriendly techniques to increase Average Selling Price, and to increase margins.
At some point, even the most loyalist fans of Apple start noticing that there is little justification for buying the latest Apple product, paying a ridiculous price, and then having to deal with the compromises Apple forces on you.
These compromises could be in many ways. A Buggy Bluetooth Audio implementation, combined with removing the Headphone jack and replacing with Lightning. Pathetic battery life. Poor quality cables and rip off replacement cables. Soldered hardware that isn’t user replaceable. All of this is ignored when the going is good - but suddenly all these customer unfriendly ways hit them from all angles, the moment Apple starts skidding.
And the result is visible for all to see.
https://daringfireball.net/2019/01/steve_jobs_and_apples_last_previous_earnings_warning
I think he is right that the letter was too long and was all over the place like let’s just throw things at the wall and see which one sticks. But I think the rest of his post focuses way too much on China, especially China & Trump. Apple didn’t revise down guidance because of Donald Trump. And this so-called trade war was well known/discussed when Apple put out guidance for Q1 on their Q4 earnings call. And when you’re revising revenue guidance down $5B to $7B the market is not really going to care that you’re generating the most profits in a segment with declining growth. But Gruber is right that Jobs was better at delivering bad news.
Macs are the same story. Sacrificing upgradability over form factor, prices have increase dramatically with little innovation. Who cares how thin a desktop computer is when you can’t upgrade it.
Apple now nickles and dimes you for everything. They can’t afford to put the 3.5mm dongle in with a $1,250 iPhone? How about the crazy dongle prices when switching to USB C? Apple doesn’t need to make 1000% margin on those when it means breaking the people who are overspending for their products already.
Apple needs to go back to 1998 and review their lineup again. There was a time when Apple Sold one iPhone per year. Now they have a half dozen that don’t appear to be all that different. But keeping each on production costs money. Narrow the assortment and offer products people want (upgradable!) at fair prices.
Apple is just the first casualty of the trade war with China (and much of the rest of the world) and shortsighted nationalism. There will be many more casualties and nobody wins. This isn't a sports game with winners and losers and everyone goes home afterwards. This is a case where everyone loses, wealth is obliterated, because the world economy, and especially the US and China, are codependent on each others success. Suffering less isn't a win.