If Tim Cook’s all-hands meeting doesn’t fix Apple’s pricing, it’s pointless

“As yesterday’s surprise announcement of a significant holiday revenue shortfall made clear, Apple is in trouble — not the sort of ‘capital T’ trouble facing soon-to-be-bankrupt companies, but the nuanced dysfunction of a company that has lost more than 30 percent of its value, over $300 billion, in the past two months,” Jeremy Horwitz writes for VentureBeat. “Today, Apple CEO Tim Cook will hold an all-hands meeting to discuss the situation with employees, following his publication of a lengthy letter to investors.”

“My concern is that Cook will downplay or ignore the critical issue that has become obvious to virtually everyone outside the company: Apple’s pricing,” Horwitz writes. “It’s unclear whether Apple believes the laws of supply and demand don’t apply to its products or whether it thinks it can keep skirting those limitations by offering financing plans and milking existing customers until they’re dry.”

“There’s a finite and relatively small number of people who will pay two or four times the objectively reasonable price for a product. Even with that group as a ‘loyal’ customer base, a company that keeps raising prices will reduce the frequency of their purchases, a problem that would be reflected in declining unit sales,” Horwitz writes. “Tim Cook has two choices at today’s hands-on meeting. He can keep finding alternative ways to placate Apple’s current customers and hope they don’t leave, or he can make the difficult choice to shave down Apple’s insane 38 percent profit margin to expand the company’s user base.”

Read more in the full article here.

MacDailyNews Take: Two questions:

1. Has any other company in history ever lost over $300 billion in value in two months?

2. Do you think Apple’s iPhone and/or other product/service pricing is too high? If so, please give us some examples. We’ll start: Apple’s $39 for their clear case for iPhone XR is wildly, not-even-funny overpriced by a factor of three, at least. As we wrote when it finally debuted (late to market, naturally):

[It’s] a transparent, literally, money grab. And shameful, actually.

Do not waste $39 on a piece of plastic.

We recommend the Spigen Ultra Hybrid Crystal Clear Case for Apple iPhone XR:

SEE ALSO:
Wall Street analysts slash Apple target prices – January 3, 2019
Advisor to President Trump: Apple’s sales should pick up when U.S.-China strike trade deal – January 3, 2019
Two things Tim Cook just did that make Apple look guilty today – January 3, 2019
CEO Cook issues memo to employees after Apple slashes revenue outlook for the first time in almost two decades – January 3, 2019
Apple’s earnings warning means CEO Tim Cook now has a major credibility problem – January 3, 2019
Loup Ventures: We continue to expect AAPL to outperform the rest of FAANG in 2019 – January 3, 2019
Open thread: Does Apple need new leadership? – January 2, 2019
CEO Tim Cook on why Apple lowered first-quarter revenue forecasts – January 2, 2019
Apple CEO Tim Cook issues public letter to investors, lowers guidance – January 2, 2019

25 Comments

  1. Way too much hand wringing and finger pointing. Global markets are unhappy for a variety of reasons, Apple is a major global player.

    My advice? Take a deep breath, filter pundits and concentrate on EPS.

    1. Yup and :
      1-The biggest problem at Apple is Angela Ahrendts and the BS Burburry culture/image she brought with her and probably had great sucess influcing the managemnet with.
      Apple should be high-end, for masses.. not luxury for few.

      2 Ives is good but overated.. and he is pushing unnecessary idiosyncratic esthetic obsessions way over function.. the balance is off !

      3- Eddy Cue. Mr Convolution … !

      Tim , clean up the bs.

      1. Agreed. Angela is the most overpaid useless piece of crap that I’ve ever seen and, the Apple stores are worse than ever. The MacBook Pro however is my biggest hatred these new keyboards are a piece of shit and I recognize apple doesn’t care but I will never ever again by a MacBook Pro. I have such a hatred for the machine every time I touch it I think of what key won’t work next. Damn shame.

    2. And
      Again.. why is this being overlookd so conveniently.

      1-Most of the problem is directly related ed to china and its economy.

      2- even at revised level.. 84 billion revenue is the 2nd largest quarterly revenue for Apple ever!

      3- quote ““While we are disappointed to be falling short of our quarterly revenue goal, our fiscal first quarter was also a record setter for revenue from Services, Wearables and the Mac. iPad revenue grew double-digits over the year-ago quarter, and iPhone activations in the U.S. and Canada set new Christmas Day records. We expect to set all-time revenue records in key markets including the US, Canada and Mexico, Western European countries including Germany and Italy, and countries across the Asia-Pacific region like Korea and Vietnam. Our worldwide installed base of active devices also hit a new all-time high, reflecting the loyalty of our customers and their appreciation for the work you do.”

    3. Apple’s pricing is ridiculous. I was upset when they raised the price of the MacBook Pro 15″ by $500 CAD!

      And the iPhone X was dumb, and now the new iPhones with how much MORE expensive they are. A smartphone costs more than a 12.9″ iPad Pro? (iPhone Max).

      I never upgraded because:

      The prices are just now too high. They’ve passed a threshold.
      They don’t offer enough over what I already have. Nobody will see a difference in a photo when comparing an iPhone X to an iPhone XS or even from an iPhone 7 to a new iPhone. And when you factor out the camera improvements, there really isn’t anything here to justify people upgrading.

      Apple also got caught with the software slowdown/battery issue and now the reality hits. I feel more and more this is a scumbag company that wants to milk people for as much money as possible to push them to upgrade through planned obsolescence.

  2. Agree, their pricing has gotten out of wack. But, there is a way to eat your cake and still have it too.

    This article is relevant:
    https://www.macobserver.com/columns-opinions/devils-advocate/apple-needs-edition-category/

    If Apple adds an Edition category in addition to the consumer and pro categories, you could push the ‘plush’ products into the Edition camp. Lots of high margin there. You could give professionals what they really want. More battery, more memory, expandable storage and slot expandability. And professionals would pay more for that. And that would take the pressure off the consumer line, which could be more reasonably priced (still premium, but not lunatic prices like Apple has now).

    1. Macbook Air – was £749 in the UK via apple and you could get from John Lewis, Argos, Currys from £700
      Realignment to +£1000 price point

      iPhone UK prices at launch were around £500/600 they are now £1000 for the iPhone you actually want. £749 for XR’s

      Accessories too – i initially bought an apple silicone case for £25 when i purchased my iPhone. (it lasted a year and i replaced with one of ebay which cost £1 and arrived and was identical to the apple one – lesson learnt)
      The same case now for the current iPhone is £45

      HomePod launches at £349 – almost the cost of x4 amazon echo’s, the price of two Sonos One’s, almost x2 google home’s – WHY?

      Apple music – anti competitive – slow to allow people like Spotify on the watch and still wanting a cut of profits via the app store.

      Apple watch edition = an attempt to take a wad of cash from people with more money then sense
      Apple watch (no cellular) from £399 – there’s a couple of fitbits right there. (No ECG here so why are we expected to pay if it doesnt even work? It’s wonderful innovation but it should have been approved and available for launch) Plus fitbits last days for batteries, can handle notifications, can do NFC payment and they track sleep with a pretty decent app too, even work with apps other then apple music.

      You expect a premium for apple a littlebit – but apple pricing double, triple + then its competitors its arrogant, deluded and opportunistic. People will delay, or move away from them.

      1. I should add that carriers are usually way more competitive on none apple stuff too. Meaning come retention/upgrade time people who were paying £35-45 for the best phone with a decent plan are less willing to spend £80-100 for a new iPhone. So they either keep their old phone and get a cheap sim only tariff. OR many going to be helped over to a brand spanking new, good enough for the vast majority Android phone – especially if it ends up at £25-£35 in the process – which is entirely possible.

  3. peak iphone has passed.
    people are seeing behind the curtain.
    wizard of oz needs to make a better computer again.

    really, they are relying on the telco industry with its yearly subsidized upgrades.. apple has turned into a parasite, instead of an innovator. services proves this.. useless pointless digital nothings that people are handing over money for..

  4. I think many people fall into the category I am in; no compelling reason to spend the (ridiculous) money. My 6 is on its second Defender case and is in mint condition with a new battery. I recently retired and I’ll be damned if I shell out my limited resources on a new Phone – this one is great as-is (and fits in my jeans pocket). Talk to me in several more years – and even then you better have a much better reason for me to switch… Face recognition? so what…

  5. Apple is not doing themselves a favor by overpricing Macs.

    People have price points they are willing to pay up to. Most are not willing to pay $1,000 more for a Mac. Costco over Christmas was selling Dell XPS 15’s with an i7 processor, 32gb ram, and a 1tb ssd along with a four year warranty for $1,900.

    Apple wants over $3,400 for a similar configuration. If I wasn’t a really dedicated Mac user I would have purchased the Dell. This overpricing is limiting sales, which hurts Apple software developers by reducing their income potential. In the long run overpricing hurts Apple by limiting the amount of software available for the Mac.

    If Apple is serious about improving services revenue they need to become more competitive on their device prices. I know a lot of people who used to buy a new Mac every four years. Not now, they are still using their 2009 Macs upgraded with Solid State Drives. Do they want a new Macs? Absolutely, but not at the current prices.

    Apple needs to remember – Device sales drive service sales.

    1. Apple is not doing themselves a favor by overpricing Macs.

      This.

      Especially when one looks at adding RAM, SSD, etc.

      The “techhie” consumer saw 1 TB SSDs as low as $100 this past month.

      …whereas Apple asks $600 for 0.75T (MBP upgrade price from 256 to 1TB).

      Granted, there’s some differences in quality & speed, but the generic customer doesn’t grok those – they just see a 600% markup.

      And over the past few weeks, I’ve noticed a suspiciously high number of unprecedentedly large discounts on “loaded” Macs from retailers such as B&H.

      Given how tightly Apple had traditionally controlled retailers to prevent discounts, its patently impossible for Apple to not be a party to a $1100 discount on an iMac Pro.

      Thus, I believe that Apple must be “helping” – they’re obviously trying to quietly move hardware without overtly making an official price cut.

      Time for Apple to come clean, and finally abolish this decades-old source of YA “Apple Tax”.

    2. My current MacBook Pro all maxed out was $2,700 in 2013. To replace it with a maxed out model is well over $5,000. That puts it about $300 north of an equivalently spec’d HP, but $1,500 north of an equivalently spec’d Dell.

      And that doesn’t count the loss of all the useful ports (“Hello MagSafe?!?”) with dongle, dongle, everywhere.

      Thus I will just keep limping along with what I have even though I really want to replace it or go Windows or go Hackintosh.

  6. The pricing in general is too high and the product mix (on the Mac) is completely out of whack when people don’t upgrade for periods of 7-4 years in lack of better replacement products.

    I know plenty of people, including myself holding on upgrading iPhones because the noe models simply are not worth it given the combination of currency fluctuations, price increases and VAT.

    Rather than get one of the new models, I got a brand new 6s, which is plenty fine for my primary use of making calls and reading/sending short messages and mails.

  7. Apple has a choice. Profit margin vs. marketshare.

    And as the company has revealed that services are its newest important revenue stream, the answer is obvious: marketshare.

    And if you are pushing services, you have to get in to some manner of interoperability with other hardware, if you can’t sell enough hardware to push services.

    As to too high pricing, one just needs to look back at the iPhone 5c launch video (sept 11, 2013) where they talk about phones for the “budget” crowd.

    The 5c launched at $99/199 with a two year contract. So $99 + $40*24 = $1179 total cost at Verizon for the cheapest plan at the time. That sells iPhones.

    Today’s iPhone XR sells for $31/month for a 2 year agreement at Verizon. Total cost: $3124 + 5524= $2070.

    So today’s introductory new iPhone costs almost $900 more than the introductory iPhone from 5 years ago. So yeah, a little inflation pushes it up, maybe 10%. The argument that the iPhone XR is worth more doesn’t hold water, as hardware/software always improves over time. And yes, the carrier plan cost is more, but that is part of total cost.

    Steve Jobs was a master at picking the proper price point to market products. Almost always keeping the price the same, or decreasing it a little unless the product was a radical revision, or new product category.

    But effectively, a combination of factors has pushed the introductory iPhone out of the reach of many people. And that’s before we even talk about the missing product category of a smaller iPhone for those who want it.

    So yeah, Apple’s drive to milk profit margin at the expense of marketshare in some areas will take its toll. And with the uncertainty of trade wars and tariffs, Apple will have to figure out how to adjust. Just too bad that it didn’t read the writing on the wall (or did but didn’t react fast enough). Many of us foresaw major problems with Apple due to the China fiasco, 9 months to a year ago when Trump first started talking about tariffs and a trade war.

    1. I could do the same with other product lines: Mac Mini, MacBook Pro, iMac, etc. Here’s a quick comparison with product launches from today vs. 5 years ago for the introductory (cheapest) models:

      Mac mini: $799 vs. $499 (late 2014 model)
      iMac (27″): $1799 vs. $1799 (2013 – Apple CAN upgrade hardware with no increase)
      MacBook Pro 15″: $2399 vs. $1999 (late 2013 model)
      MacBook Pro 13″: $1799 vs. $1299 (mid-2014)

      All pricing from EveryMac, showing price at release for base model.

  8. For me, the phones have gotten too expensive. I had a very hard time spending $800ish on my 2-year old 7 Plus. My wife’s 6s is still hanging around because we don’t want to drop another $1200 for XRs with trade-in.We’ll continue to hold on even longer until we can find some good X’s in the 2nd hand market.

    I’m not Android adverse either, but even they jacked their prices to X levels.

    I don’t think their services are overpriced though. Apple Music for the family is reasonable, and we only need 200GB of iCloud ($2.99).

  9. Apple’s premium products are great but I think Apple has been overcharging it’s customers. I have a mid 2011 iMac that can’t upgrade to Mojave. So looking to replace my iMac with th Mac mini. The prices changed to upgrade the memory and SSD are outrageous. In the past I always upgraded my memory with aftermarket memory at a fraction of the cost. If it’s true that Apple is pulling in a 38% profit that’s beyond most companies profit take.

Leave a Reply to Steve Cancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.