Apple To Reduce Prices Of Products

Apple's iPhone revenue has plunged in the December quarter, and the company is ready to make some changes.

According to CEO Tim Cook, Apple will reduce prices of the iPhone in markets where local currencies have weakened against the dollar.

“As we’ve gotten into January and assessed the macroeconomic condition in some of those markets, we’ve decided to go back to more commensurate with what our local prices were a year ago in hopes of helping the sales in those areas,” Cook told Reuters (via The Next Web).

"If you've never bought an iPhone outside of the U.S., you may not be aware of just how staggering the price difference is. I've been pointing it out over and over and over -- it's hard to justify spending $1,760 for a maxed-out iPhone XS (UK pricing at launch) when the exact same model costs $1,349 in the U.S. And it's even harder in a country like Hungary, where the price is even higher and the average customer's purchasing power is far lower than in the U.S.

Yes, a part of the price difference is in taxes, and yes, the U.S. pricing does not reflect local taxes, and yes, Apple has additional distribution costs in markets other than the U.S. But the simple truth is that iPhone prices are too high for many international buyers, and Apple definitely can do something about it. Now, we've simply reached the point where the company is willing to address the issue".

In the same interview, Cook talked about the growth of its services business. There, revenue is up 19 percent year-over-year, and the company is poised to launch new services in 2019, including (probably) a video streaming service.

Cook noted that the services gross margin gets more efficient as services business gets larger, and the business gets larger when the company sells more iPhones, so reducing its price makes sense. But it's worth noting that Cook sang a different tune in 2017, when the company launched the iPhone X, its first $1,000 phone.

In any case, it'll be interesting to see how new iPhones are priced internationally come September. Unfortunately, Apple does not break down iPhone unit sales in earnings reports at all, let alone by market, so assessing the potential benefits from this new strategy will be hard.