Tim Cook’s revised revenues forecast downward has already spelled bad news for Apple investors—company shares fell more than 7 percent in after-hours trading Wednesday.
Might Apple CEO’s modified guidance, however, have the opposite effect and work in the favor of consumers who have been infatuated with some of Apple’s latest products but put off buying them because of their lofty prices?
Maybe, but not so fast.
Apple’s top of the line iPhone XS and XS Max, start at $999 and $1099, respectively. The starting price for the new Apple Watch Series 4 is $399, and it goes way up from there. An entry 12.9-inch iPad Pro fetches $999 and could more than double if you choose greater storage capacities and pile on accessories.
Granted, Apple has been promoting “limited time” discounts on its devices: the iPhone XS from and XR from $649 and $449, respectively. But you’ll have to trade in your current iPhone–and hope its in decent shape–to get a new one at those prices.
In his letter to investors, Cook blamed much of the revised company forecast on the “magnitude of the economic deceleration,” particularly in China leading to lower sales of the iPhone.
Avi Greengart, research director for consumer platforms and devices at GlobalData, points out, “if Apple products were supply constrained, then discounting them would make no sense– first, you need to be able to make more of them.”
But Greengart adds that Apple might try to make up for falling sales in China by juicing up sales in the U.S. and Europe with promotions. “We’ve already seen Apple offer higher trade-in values – and aggressively advertise the resulting ‘price’ of the iPhone as a result,” he says.
Patrick Moorhead, the principal analyst at Moor Insights & Strategy, has a similar view: “I believe Apple and its retailers will continue to discount iPhones in the short term, but longer term, we could see the return of a lower priced ‘SE’ product. I don’t expect any pricing changes to AirPod, Watch, iPad Pro or Mac.”
When it comes to declining iPhone sales, Cook cited another factor: consumers having to adapt to a world with fewer wireless carrier subsidies. How, or even if, the carriers respond, at least in the near future, will be worth watching.
Cook told CNBC that ”to a consumer, the trade-in looks like a subsidy because it lowers the price of the phone that you want.” By way of example, he said that the retail price for the iPhone XR in the U.S. is $749. But if you happened to trade in iPhone 7 Plus, the price drops to $449.
“So there’s a substantial benefit, economic and environmental from trade-in,” Cook said. “It begins to look like more the traditional way of paying for it through the carrier by, you know, taking the rates out for 24 months or so. And so you wind up getting an incredible new phone that’s so much better than what you’ve had for $20, $30 a month or so.”
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