Apple COO Jeff Williams 'Very Aware Of' Concerns Over Apple Product Cost

[ericinboston]

Dismissing huge margins by citing stuff like R&D etc ... meanwhile, just look at the actual profits (profit, not revenue) they have according to their own earning reports. The whole argument falls apart when looking at the actual numbers.

100% exactly. Look at Apple's PROFIT each year. I recall buying my iPhone 3GS for $299 10 YEARS ago for 32GB storage. I bought the 4S 32GB Years later for $299 also. Then when I was shamed into finally upgrading to a 7Plus, it was $769 for 32GB (but even the plain old iPhone 7 was $649 for 32GB)!!!

Seriously, this is my LAST iPhone until Apple returns to sub $300 iPhones that are not stripped down versions. Apple's been playing with the iPhone and iPad models to "differentiate" and confuse the heck out of people on what they are actually getting for the phone (varying camera qualities, storage sizes, features, etc) for several years now.

Costs should go DOWN as products mature and the markets saturate. Not triple in price.

Back to this article...yeah, Apple can cry all they want about how much love and effort they put into the products but at the end of the day the PROFIT is what tells the story.

 

[magenheimerdp]

The question should have been more specific. For example, on the 27" iMac Apple charges $600 (US) to upgrade the RAM from 8GB to 32GB. However, we can buy 32GB of high quality RAM for $250. The cost of the 8GB RAM is $50. Therefore, the upgrade cost should be $200 retail. With Apple's buying power they are still getting a significant margin. They are charging 3x the retail cost of the upgrade. Similar issues exist with their SSD upgrade prices as well.

This leads us to believe they are probably gouging us in other areas as well. I understand their need to factor in development costs, marketing costs, overhead costs, etc. but these kinds of price gouging makes me recoil. This is why Apple won't make inroads into the schools, the starving artists and other areas that require sound financial decisions. Increase revenue by increasing the sales base.

 

[Heineken]

The question should have been more specific. For example, on the 27" iMac Apple charges $600 (US) to upgrade the RAM from 8GB to 32GB. However, we can buy 32GB of high quality RAM for $250. The cost of the 8GB RAM is $50. Therefore, the upgrade cost should be $200 retail. With Apple's buying power they are still getting a significant margin. They are charging 3x the retail cost of the upgrade. Similar issues exist with their SSD upgrade prices as well.

This leads us to believe they are probably gouging us in other areas as well. I understand their need to factor in development costs, marketing costs, overhead costs, etc. but these kinds of price gouging makes me recoil. This is why Apple won't make inroads into the schools, the starving artists and other areas that require sound financial decisions. Increase revenue by increasing the sales base.

On this one I agree. Looking at those ram and storage prices feels like an exorcism.

 

[Spock]

100% exactly. Look at Apple's PROFIT each year. I recall buying my iPhone 3GS for $299 10 YEARS ago for 32GB storage. I bought the 4S 32GB Years later for $299 also. Then when I was shamed into finally upgrading to a 7Plus, it was $769 for 32GB (but even the plain old iPhone 7 was $649 for 32GB)!!!

Seriously, this is my LAST iPhone until Apple returns to sub $300 iPhones that are not stripped down versions. Apple's been playing with the iPhone and iPad models to "differentiate" and confuse the heck out of people on what they are actually getting for the phone (varying camera qualities, storage sizes, features, etc) for several years now.

Costs should go DOWN as products mature and the markets saturate. Not triple in price.

Back to this article...yeah, Apple can cry all they want about how much love and effort they put into the products but at the end of the day the PROFIT is what tells the story.

Those phones were subsidized by your carrier, a model that they have gone away from. The iPhone has always been expensive compared to other devices on the market.

 

[Baymowe335]

Yeah their loss of market share in China and Tim Cooks note to investors explaining how they're not going to make their numbers this quarter, that's an anecdote from me, totally a part of my personal bubble, not at all a reflection of reality. /s

Everyone already knows China was the problem in the most recent quarter. Apple told us in early January. You aren't breaking news, particularly to investors.

The main story is that China was the problem and the results aren't a referendum on the entire strategy. Other huge markets hit new records including the US, Canada, Netherlands, Germany, Italy, Spain, Korea, and others INCLUDING the Asia Pacific region.

Many companies blamed China for poor sales in the region, so the deceleration is/was real and not necessarily Apple specific. Investors, (people with real money at stake) have to look at the whole picture instead of screaming their entire strategy is broken. It's not.

Global business has both positives and negatives. Not every country will fire on all cylinders every quarter. They still made $20B in profit in 90 days and record EPS. Cry me a river.

 

[UK-MacAddict]

Yup I know, but the base model Air's at the lower costs weren't anything special either. The XR just shows that Apple are trying to work down costs. No doubt the flagships will continue to drop also. My guess is $899 for XS variant and $999 for Max variant this year, but we will see.

I don’t think Apple will lower price significantly unless they see another decline in quarter sales.

The other issue being in the UK is they sprout “Bologna” to quote Tim Cook about exchange rates to justify a like for like price conversion. So $999 will be £999 in the UK which is ridiculous.

So if you convert UK pricing on the 512GB iPhone XS Max of £1449 to US it would be $1900.

 

[DNichter]

I don’t think Apple will lower price significantly unless they see another decline in quarter sales.

The other issue being in the UK is they sprout “Bologna” to quote Tim Cook about exchange rates to justify a like for like price conversion. So $999 will be £999 in the UK which is ridiculous.

So if you convert UK pricing on the 512GB iPhone XS Max of £1449 to US it would be $1900.

You could obviously be right, but I think the opportunity is too great for Apple not to drop costs a bit. I guess we'll see what happens.

 

[BSG75]

Those phones were subsidized by your carrier, a model that they have gone away from. The iPhone has always been expensive compared to other devices on the market.

I think people forget about that. I remember looking at prices of non-subsided phones and they were quite expensive back then. Even the old flip phones weren't that cheap out of contract. IIRC, even when the phone was past contract, you still paid the contract price, which included the portion of the phone's price you paid during the contract period.

Personally, I'm not a fan of the eye-watering prices of the iPhones, either, but I do feel that things are a little more transparent regarding pricing today than in the contract days.

 

[balaplus]

I don’t think Apple will lower price significantly unless they see another decline in quarter sales.

Apple would like us to see iphone as a product that costs $1/day. It is just that the number of days between change is now 3 years instead of 2 years.
If the period of change goes to 4 years, either a) the price has to go up or b) the user base has to grow to maintain the margins

 

[OllyW]

The other issue being in the UK is they sprout “Bologna” to quote Tim Cook about exchange rates to justify a like for like price conversion. So $999 will be £999 in the UK which is ridiculous.

So if you convert UK pricing on the 512GB iPhone XS Max of £1449 to US it would be $1900.

The UK price includes VAT, so the £1449 512GB iPhone XS Max converts to $1,578 with the tax removed. Still more expensive in the UK but you can't blame Apple for the VAT.

 

[predation]

So a “but R&D!” Article has come out to try and justify the high prices Apple charges.
Whereas consumers (even the hardcore Apple followers) are starting to questions timmy’s Tactics.

Lol

 

[Stereophonic]

The cost wouldn't be an issue if we were't being saddled with chronic issues like keyboards that not only suck to type on but constantly fail, graphics cards that burn out generation after generation, weak metal chassis, and other questionable design/engineering choices. Oh, and this BS of gluing everything together so that nothing can be repaired on a $4000 laptop after two years is ridiculous. Build in some long term value for the hardware itself, and stop obsessing about "thin" and put a big fat battery in it like we want.

 

[LordVic]

So a “but R&D!” Article has come out to try and justify the high prices Apple charges.
Whereas consumers (even the hardcore Apple followers) are starting to questions timmy’s Tactics.

Lol

So many here don't seem to understand that the term Profit, and it's calculation already includes all costs.

PROFIT is REVENUE minus EXPENSES.

that means that when Apple reports 38% profit margin on a device, that's 38% profit AFTER all expenses that are amortized to the device. Including labour, development, R&D marketing and anything.

this is all part of accounting and finance practices, budgeting and the like and it's not as cut and dry as many on here would like it to be.

Cost accounting is serious business.

 

[Carnegie]

So many here don't seem to understand that the term Profit, and it's calculation already includes all costs.

PROFIT is REVENUE minus EXPENSES.

that means that when Apple reports 38% profit margin on a device, that's 38% profit AFTER all expenses that are amortized to the device. Including labour, development, R&D marketing and anything.

this is all part of accounting and finance practices, budgeting and the like and it's not as cut and dry as many on here would like it to be.

Cost accounting is serious business.

No, the 34.3% gross margin (for products) which Apple reported for the last quarter does not account for R&D and marketing. R&D and SG&A were another 11.8% of Apple's total revenue. (Those operating expenses aren't broken down between products and services like cost of sales is.)

 

[LordVic]

No, the 34.3% gross margin (for products) which Apple reported for the last quarter does not account for R&D and marketing. R&D and SG&A were another 11.8% of Apple's total revenue. (It isn't broken down between products and services like CoS is.)

I was breaking it down and may not have voiced what I was trying to say greatly. it happens.


at the end of the day, when Apple reports it's profit in it's financial statements, those statements include all those expenses that it has incurred during that time period (and other expenses that ar accrued to that period)

when you read their financial statements and Apple claims at the end of it al 38% profit on the quarter, you don't then tack R&D on top of that.

 

[halluxsinister]

Why? Because a visionary died and was replaced by an a...ole obsessed with becoming as rich as possible and doesn’t care a bit about users except milking them for their money.

Apple isn’t really Apple anymore. It’s AAPL and nothing more.

Wanna explain why macOS has been ignored for years if you care so much about products? It still has bugs from years ago that have never been patched, forget new features.
Why has the Mac Pro still not received an update? Why is the MacBook Pro forcefully sold with a Touch Bar? If you care so much about your products why are you still selling the 6th Generation iPod Touch or the 4th Generation iPad Mini? There are so many segments of Apple's product line that show a complete lack of care and attention to detail compared to just 10 years ago.

 

[Freida]

So you folks want Apple to “innovate” and include the latest technology in your iPad Minis, but give you older function key technology in your MacBook Pros. Got it....

The new keyboard is not really new technology. Its just another way of doing something and actually making it worse.
Apple should innovate but the keyboard and touchbar was a wrong direction.
I have touchbar 15" MBP and I can tell you that I hardly ever use that function and it certainly is not worth the price hike. I would rather use that money and invested in bigger SSD or something. Touchbar was just stupid idea

 

[LordVic]

So you folks want Apple to “innovate” and include the latest technology in your iPad Minis, but give you older function key technology in your MacBook Pros. Got it....

What if we told you that those were mutually exclusive.

you can innovate and provide updates, better technologies on one devices, while ensuring usability on others...

Based on your own comment and logic, Why aren't Macs full touchscreen devices when iPads can innovate and get them?

In addition, something can be innovative and mak one product better, while that same technology implented in another device makes that device less usable.

this isn't something black and white with only one answer

 

[Carnegie]

I was breaking it down and may not have voiced what I was trying to say greatly. it happens.


at the end of the day, when Apple reports it's profit in it's financial statements, those statements include all those expenses that it has incurred during that time period (and other expenses that ar accrued to that period)

when you read their financial statements and Apple claims at the end of it al 38% profit on the quarter, you don't then tack R&D on top of that.

Sure. The reported operating income accounts for all expenses. (How they get accounted for can vary, of course.)

But then the number, for Apple, isn't 38%. It's more like 28% (pre-tax) for last quarter and 27% for FY 2018. That's including services which, in the aggregate, has higher gross margins.

 

[CordovaLark]

the new samsung costs $2000 if anything we can only blame apple for making it seem normal not being the only culprit. It's a free market if you don't buy it they will stop making it.

That is foldable phone and it's first gen.

 

[LordVic]

Sure. The reported operating income accounts for all expenses. (How they get accounted for can vary, of course.)

But then the number, for Apple, isn't 38%. It's more like 28% (pre-tax) for last quarter and 27% for FY 2018. That's including services which, in the aggregate, has higher gross margins.

I will also admit that the numbers I was using were for example only and not necessarily accurate to the financials. not really sure why it's got you so riled up to nitpick the accounting thoery that I'm talking about though.

So lets try this again without any numbers that seems to be what you keep getting your back up against

when a company financial statements reports profit, all expenses, including those of research and development are already factored into those profit and loss statements and financial reports. These statements are also audited to ensure their accuracy of data and that the calculations abide to accounting principles and regulations.

So when a company says that R&D is expensive and thats why they charge the price that they charge, but at the same time, also show extremely large profit numbers, or high (this is a qualitative statement, not quantitative so it's up to debate what is considered high), while stating this, it comes accross as disingenuous to say that "we need super high prices to account for our R&D" while ALSO claiming very large profits.

 

[Carnegie]

I will also admit that the numbers I was using were for example only and not necessarily accurate to the financials. not really sure why it's got you so riled up to nitpick the accounting thoery that I'm talking about though.

So lets try this again without any numbers that seems to be what you keep getting your back up against

when a company financial statements reports profit, all expenses, including those of research and development are already factored into those profit and loss statements and financial reports. These statements are also audited to ensure their accuracy of data and that the calculations abide to accounting principles and regulations.

So when a company says that R&D is expensive and thats why they charge the price that they charge, but at the same time, also show extremely large profit numbers, or high (this is a qualitative statement, not quantitative so it's up to debate what is considered high), while stating this, it comes accross as disingenuous to say that "we need super high prices to account for our R&D" while ALSO claiming very large profits.

I'm not at all riled up, and I wasn't nit picking any accounting theory.

I was correcting erroneous numbers you offered. You didn't give them as examples. You gave them as if they were Apple's actual numbers. When considering profitability - and the reasonableness thereof - there's a large difference between 38% and something like 23% (or even, including services, 27 or 28%).

38% (or so) is a number which gets referred to a lot when it comes to Apple's margins. That's fine. But it isn't close to Apple's operating margins, it's close to Apple's gross margins. And those don't include, e.g., R&D and marketing. If we want to talk about gross margins, we can. Or we can talk about operating margins. But we shouldn't talk about one and use the numbers for the other.

That said, as I was saying earlier (and have explained in more depth elsewhere)... Apple's tremendous profitability isn't the result of it having unreasonably high gross margins. Apple's gross margins are quite reasonable. It's a result of Apple doing such incredible volume with high-end products. You make a reasonable amount on each sale, but you're (1) mostly selling high-end products (so a reasonable amount of profit on each sale is more than a reasonable amount on low-end products would be) and (2) selling a **** ton of them. That adds up to tremendous overall profitability. If, e.g., Samsung or Huawei sold as many high-end smartphones as Apple does, they'd also be making a tremendous amount of profit from their smartphone businesses. (They surely are making a lot from their smartphone businesses, just not nearly as much as Apple is.)

 

[trillionaire]

I'm sure there are numerous costs that are not factored in by analysts and that only Apple knows about. I don't think we can dispute that because only company owners actually know what kind of costs they have and how much they are actually making. That said, I'm sure they have space to lower the prices but until they see clear indicators on price being a major cause of declining sales, then don't expect that to happen.

 

[Greymacuser]

Be aware all you want pal. Your arrogance creates more hackintosh users every day.

 

[cmaier]

Be aware all you want pal. Your arrogance creates more hackintosh users every day.

LOL. The amount of business they lose to hackintoshers is rounding error.