Report: iPhone Sales Fail Triggered “Fire Drill” at Apple

Posted on December 4, 2018 by Paul Thurrott in Apple, iOS with 59 Comments

A new report details the emergency response within Apple when it became clear that its new iPhones were not selling as well as expected.

“Company executives moved some marketing staff from other projects to work on bolstering sales of the latest handsets in October, about a month after the iPhone XS went on sale and in the days around the launch of the iPhone XR, according to a person familiar with the situation,” a new Bloomberg report explains.

That source referred to the reaction within Apple as a “fire drill,” and said that it led quickly to strategy changes. Among the changes, Apple is now offering its customers double the normal amount on trade-in devices for those who buy a new iPhone. This effectively lowers the price of a new iPhone … without Apple having to go through the embarrassment of actually lowering the price.

Bloomberg notes that Apple on Sunday actually went so far as to denote a starting price of “$449*” for the iPhone XR on its website. The iPhone XR actually starts at $749.

But as the footnote at the bottom of the site explains, ” $449 reflects [the] price of iPhone XR after trade-in of iPhone 7 Plus … Trade-in values vary based on the condition, year, and configuration of your trade-in device, and may also vary between online and in-store trade-in.”

This change, which Apple’s site says is for a limited time, suggests that Apple’s strategy of raising prices to make up for diminished sales—what I called Apple Jacked—is not working. And the timing of the “fire drill” at Apple is interesting: In the one month between the launches of the iPhone XS/XS Max and iPhone XR, Apple suddenly discovered that things were going south. And that the iPhone XR was not going to solve the problem.

The good news? Even a diminished iPhone is only diminished in the context of Apple’s size and success. Over the last year, Apple earned $167 billion in revenues from the iPhone alone. By comparison, Microsoft—all of Microsoft—earned just $110 billion in its most recent fiscal year. And Microsoft, by all accounts, is doing just great.

 

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