Apple CEO Tim Cook Says iPhone Prices Aren't Too High


Apple's dramatic shortfall in iPhone sales at the end of 2018 resulted in "disappointing" results for the tech giant’s latest quarter, Apple CEO Tim Cook announced on Tuesday.

But amid questioning from a Wall Street analyst, Cook continued to avoid acknowledgment that increased iPhone prices may be at least partly to blame, as many analysts have contended.

[Related: 5 Takeaways From Apple CEO Tim Cook's Bombshell iPhone Letter]

During a conference call with analysts on Tuesday, Cook also highlighted quarterly growth in all of the company's other segments, including Mac, iPad, wearables and services.

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"In fact, outside of iPhone, our business grew strongly, by 19 percent," Cook said.

In early January, Apple initially disclosed that iPhone sales for its first quarter of fiscal 2019, ended Dec. 29, had come in well below expectations. That led the Cupertino, Calif.-based company to slash its quarterly revenue guidance to $84 billion—from a previous range of between $89 billion and $93 billion.

On Tuesday, Apple announced a final number of $84.31 billion for its first-quarter revenue—for a drop of 4.5 percent from $88.29 billion during the same period a year ago.

As expected, the revenue slide came from the iPhone business. Apple reported that iPhone revenue for the first fiscal quarter plummeted 14.9 percent to $51.98 billion, down from $61.1 billion during the same quarter a year earlier.

In Apple's news release on the quarterly results Tuesday, Cook acknowledged that it "was disappointing to miss our revenue guidance." Poor iPhone demand in China accounted for much of the drop, though a slow pace of iPhone upgrades in developed markets was also a problem, according to Cook.

"Our customers are holding onto their older iPhones a bit longer than in the past," Cook said during the call with analysts on Tuesday, due in part to Apple's own iPhone battery replacement program.

However, after being asked by analyst Steve Milunovich of Wolfe Research whether Apple now believes the iPhone lineup may be priced “too high,” Cook said no.

For the prices of the latest iPhones—the iPhone XR, XS and XS Max—”there is actually a pretty small difference in the United States compared to last year," Cook said during the conference call.

Cook added, "I do think that price is a factor"—but only in the sense that foreign-exchange adjustments and a decline in carrier subsidies have made the new iPhones more expensive for some customers, he said.

Still, the current flagship, the iPhone XS Max, starts at $1,099 in the U.S.--and that makes it $330 more expensive than Apple’s flagship from just two years earlier, the iPhone 7 Plus.

Jerry Zigmont, owner of MacWorks, a New Haven, Conn.-based Apple consultancy, previously told CRN he hopes the business troubles will be a "wake-up call" for Apple on pricing.

"I'm kind of glad they're feeling the pinch. I hope they correct course," Zigmont said. "Apple is just outpricing itself—not only in the iPhone market, but also in the MacBook Pro market."

Starting with the refresh in late 2016, the MacBook Pro has "really crept up in price" compared to what it used to cost, Zigmont noted. The current 13-inch MacBook Pro with Touch Bar has a starting price of $1,799, whereas the version of the MacBook Pro prior to the refresh had started at $1,299.

Mac sales have not been a problem of late for Apple, though. Cook called it the "best quarter ever for Mac revenue," driven by recent refreshes to the MacBook Air and Mac Mini.

The two long-neglected members of the Mac family received updates that were released in early November. And last July, Apple had updated the MacBook Pro with Touch Bar, improving its performance, keyboard and display.

For Apple's fiscal first quarter, Mac revenue reached $7.42 billion, up 8.8 percent from $6.82 billion the same period a year earlier.

Meanwhile, Apple reported that iPad sales were strong during the year-end quarter, as well. Sales of iPad jumped 16.8 percent, to reach $6.73 billion during the quarter, up from $5.76 billion a year ago. Cook called it the "highest growth rate in almost six years" for iPad.

Apple's refresh for both sizes of the iPad Pro, launched in early November, drove the latest iPad results, Cook said.

In addition, Apple disclosed major growth in both of its other segments—

• Wearables, Home and Accessories—which includes the Apple Watch and HomePod smart speaker—rose 33.4 percent to reach $7.31 billion in revenue for the quarter, compared to $5.48 billion a year earlier

• Services—including App Store and Apple Music—climbed 19.1 percent to a record $10.88 billion, up from $9.13 billion during the same period of 2017

Overall, Apple not only beat Wall Street expectations of $83.97 billion in first-quarter revenue, but the company's earnings of $4.18 per diluted share beat Wall Street estimates by a penny. Net income for the quarter came in at $19.97 billion, compared to $20.07 billion a year earlier.

Apple's stock price rose 5.64 percent, to $163.40 a share, in after-hours trading Tuesday.