Wall Street

Cook: iPhone sales slowed due to higher prices, death of subsidies & less frequent upgrades

Apple's boss Tim Cook has admitted in yesterday's conference call following the latest quarterly earnings report that—aside from China—other factors such as higher prices, death of subsidies in many countries and customers holding on to their handset a bit longer than usual have all contributed to a decline in iPhone upgrades.

Jason Snell has transcribed Apple’s earnings call on Six Colors, here's what Cook said when an analyst pressed him on Apple's pricing strategy (emphasis mine):

Steve Milunovich, Wolfe Research: Some have the perception that you priced the new products, the new iPhones, too high. What have you learned about price elasticity and do you feel that perhaps you pushed the envelope a little bit too far and might have to bring that down in the future?

Tim Cook: Steve, it’s Tim. If you look at what we did this past year, we priced iPhone XS in the US the same as we’d priced iPhone X a year ago. iPhone XS Max, which was new, was a hundred dollars more than the XS, and then we priced the XR right in the middle of where the entry iPhone 8 and entry iPhone 8 Plus had been priced. So it’s actually a pretty small difference in the United States compared to last year.

He continued:

However, the foreign exchange issue that Luca spoke of in the call amplified that difference in international markets, in particular the emerging markets, which tended to move much more significantly versus the dollar.

And so what we have done in January in some locations and some products is essentially absorb part or all of the foreign currency move as compared to last year and therefore get close or perhaps right on the local price from a year ago.

So yes, I do think the price is a factor.

I remember Apple executives arguing in the past that iPhones weren't just for the rich people. But I digress, here's what Cook had to say about the death of the smartphone subsidy.

Secondly, in some markets, as I had talked about in my prepared remarks, the subsidy is probably the bigger of the issues in the developed markets.

I had mentioned Japan, but also even in this country, even though the subsidy has gone away for a period of time, if you’re a customer that your last purchase was a 6S or a 6 or in some cases even a 7, you may have paid 199 dollars for it. And now, in the unbundled world it’s obviously much more than that.

Cook says they have a number of actions to address the decline in iPhone upgrade rates, including the aggressive trade-in offers and and installment payments.

The Apple story is shifting from iPhone units to ecosystems and services.

The CEO concluded:

So where it goes in the future, I don't know. But I am convinced that making a great product that is high quality, that is the best thing for the customer. We work for the user and so that's the way that we look at it.

In the press release announcing quarterly earnings, Cook praised other aspects of Apple's business that have experienced healthy growth.

While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide.

Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.

Apple no longer reports units sales for iPhone and other products, robbing investors of the most important metric as the company transitions its story from one heavily dependent on iPhone to a combined products + services business.

During the holiday quarter, the Cupertino company pulled in $84.3 billion in revenue, a decline of 5% from the year-ago quarter. Strategy Analytics estimates that 65.9 million iPhones were shipped during the quarter, or 11.4 million fewer handsets versus the year-ago quarter.

Apple has never been more valuable

Apple just notched a new market cap record. As the company's shares opened at a price of $149.06 per share on Monday, its market capitalization increased to a cool $776.60 billion. In other words, the iPhone maker just broke its own record after setting a market-cap peak in February 2015 at $774.7 billion.

As per The Wall Street Journal, Apple's stock has set record highs 17 times since February.

Shares of Apple rose 3.7 percent last week after the Cupertino firm reported earnings that were in line with Wall Street expectations and company forecasts. The most recent jump in Apple's stock price has pushed the company's valuation on Wall Street to $776.60 billion at Friday’s close, a new record for Tim Cook & Co.

The previous high for Apple’s market value was $774.7 billion in February 2015.

At the time of writing, the company's stock was trading above $150 for the first time ever—that's after factoring in a 7-for-1 split in 2014. At $151.62 per share, the company's market capitalization was about $790.6 billion this morning.

In a note distributed to clients Monday, Drexel Hamilton analyst Brian White set his Apple price target to $202 per share from $185. Were $AAPL to hit $202 per share, its market capitalization would be valued at $1.053 trillion.

Apple's stock is up 29 percent this year. According to public records on the Apple Investor website, the company has 5.213 billion shares outstanding.

Will Apple become the world's first trillion dollar company?

Let us know what you think in comments below.

Warren Buffett’s stake in Apple now twice as large, reaches more than $18 billion

Berkshire Hathaway's position in Apple is now more than twice as large as previously disclosed at $18.2 billion, investment tycoon Warren Buffett told CNBC in an interview on Monday. At the end of last year, Berkshire Hathaway owned 61 million Apple shares, worth $7 billion at the time.

Buffet's annual letter to shareholders, which included a regulatory disclosure of its long positions, has revealed that his conglomerate had purchased about 120 million shares of Apple in 2017.

Apple’s stock surges to its highest price ever amid growing optimism over iPhone 8

Apple is breaking records—the company's stock price has surged to an all-time intraday high, trading as high as $134.88 today and having surpassed the previous all-time intraday high of $134.54 set on April 28, 2015. The current stock price gives the Cupertino company a market capitalization of nearly $710 billion, the largest market valuation for a publicly traded American company.

According to MarketWatch, just yesterday the stock had closed at a record $133.00, passing the previous record set two years earlier.

Despite Note 7 fiasco & bribery scandal, Samsung just had the most profitable quarter in 3 years

Despite seeing its brand tarnished and anywhere between $2 billion and $5 billion wiped off its operating profit in the aftermath of Note 7 fiasco, Samsung of South Korea has managed to boost its fourth quarter earnings on the back of its semiconductor division and strong sales of the Galaxy S7 and Galaxy S7 Edge flagship devices.

Operating profits rose to $7.2 billion over the last three months of 2016 on sales of about $45.8 billion. Samsung's mobile division captured $2.1 billion in operating income, a four percent year-over-year profit increase.

Samsung Mobile expects sales of its low-cost phones in the Galaxy A and J series to grow in the coming months. All in all, this was Samsung's most profitable quarter in three years as the company has clearly bounced back from the global Note 7 recall.

Tim Cook says iPhone activations in China growing as $AAPL stock falls below $100

Apple CEO Tim Cook made a rare move today by responding to an email from CNBC's Jim Cramer. Cook's letter, a copy of which was obtained by Business Insider, addresses the company's quarter so far and basically says that everything's fine with Apple's business and performance in China.

Apple's stock has been declining since the company's June quarter earnings showed iPhone sales coming slightly below investors' expectations. This morning, $AAPL fell below $100 amid bigger stock market woes as most indices are in the red today.

Apple announces 7-part bond sale to finance its capital return program expansion

During a conference call discussing its fiscal 2015 second-quarter results, Tim Cook & Co. also announced expanding their already massive capital return program to a whooping $200 billion through March of 2017 to “reflect strong confidence in what lies ahead for Apple.”

A filing with the United States Securities and Exchange Commission posted today on Apple's Investor website casts more light on the initiative, confirming the company will fund this expansion through a new seven-part bond to raise the funds.