By Tripp Mickle
As Apple Inc.'s longtime chief operating officer, Tim Cook was
known for ensuring that new products hit the market on
schedule.
With Mr. Cook as CEO, though, Apple's new gadgets are
consistently late, prompting questions among analysts and other
close observers about whether the technology giant is losing some
of its competitive edge.
Of the three major new products since Mr. Cook became chief
executive in 2011, both AirPods earbuds in 2016 and last year's
HomePod speaker missed Apple's publicly projected shipping dates.
The Apple Watch, promised for early 2015, arrived late that April
with lengthy wait times for delivery. Apple also was delayed in
supplying the Apple Pencil and Smart Keyboard, two critical
accessories for its iPad Pro.
The delays have contributed to much longer waits between Apple
announcing a product and shipping it: an average of 23 days for new
and updated products over the past six years, compared with the
11-day average over the six years prior, according to a Wall Street
Journal analysis of Apple public statements.
Longer lead times between announcement and product release have
the potential to hurt Apple on multiple fronts. Delays give rivals
time to react, something the company tried to prevent in the past
by keeping lead times short, analysts and former Apple employees
said. They can stoke customer disappointment and have cost Apple
sales.
Production issues contributed to the company largely missing the
important Christmas shopping season with its two newest products,
AirPods and HomePods. When the $349 HomePod was unveiled in June,
Apple touted its superior sound and said it would be ready in
December. Then it announced in November that shipment would be
delayed until this year, causing it to lose out on a gift-giving
season when such smart speakers were big sellers. Apple hasn't yet
given a new arrival estimate.
Meanwhile, Amazon.com Inc. in September announced a redesigned
Echo for $99 with sound-boosting processing from Dolby
Laboratories, Inc. Weeks later, Alphabet Inc.'s Google unveiled an
improved speaker of its own, the Google Home Max, for $399.
The HomePod delay was "a huge opening" for Amazon and Google to
increase sales to loyal iPhone and iPad customers, said Matt
Sargent, an executive at research-based consultancy Magid. Apple
seems "to be losing step, and that's a big strategic concern with
how they're positioning the brand," he said.
Apple declined to make Mr. Cook available. Apple seldom explains
why products are delayed and in the case of the HomePod said only
that it wasn't ready.
Some Apple competitors also have faced supply-chain issues.
Samsung Electronics Co. Ltd. issued a recall in 2016 for faulty
batteries in the Galaxy Note 7, and Alphabet Inc. issued a two-year
warranty for its Pixel 2 after reports the smartphone was
experiencing screen burn-in.
And Mr. Cook's tenure has been successful by other measures.
Revenue has more than doubled, despite stalling in the past two
years, and Apple's share price has more than tripled in the past
six years to record-high territory. The company has said it expects
in final three months of 2017 to hit a new sales record.
One reason for the delays could lie in the differences in
approach between Mr. Cook and his predecessor Steve Jobs. Mr. Cook
announces products and shipment dates earlier than did Mr. Jobs,
who former employees said preferred waiting until a product was
ready for shipment before publicizing it, except for unique devices
like the iPhone and Apple TV.
For instance, Apple shipped its flagship handset, the iPhone X,
in November, six weeks later than it usually does with new models
following production bottlenecks over the summer.
Mr. Cook said during a November interview with The Wall Street
Journal that Apple would have preferred to ship the iPhone X, 8 and
8 Plus simultaneously in September when the devices were
introduced, but "didn't have that choice" because the iPhone X,
which was slated to ship later, wasn't ready. Still, he went with
announcing all three devices at the same time so that customers
could choose the phone they most wanted.
The staggered schedule led many customers to hold off iPhone
purchases in September and October, triggering a 7.6-percentage
point decline in U.S. market share for smartphones in the October
quarter to 32.9%, according to Kantar Worldpanel. Mr. Cook
acknowledged in the interview the release schedule may have
affected sales but was best for customers.
Neil Cybart, who runs Above Avalon, a site dedicated to analysis
of Apple, said he has grown concerned that the delays could
indicate Apple is struggling with limited time and attention of
talented engineers and executives working across so many products.
"It's becoming much harder to brush this off as business as usual,"
Mr. Cybart said of the late deliveries.
Of the 70-plus new and updated products launched during Mr.
Cook's tenure, five had a delay between announcement and shipping
of three months or more and nine had delays of between one and
three months. Roughly the same number of products were launched
during Mr. Jobs' reign, but only one product was delayed by more
than three months and seven took between one and three months to
ship after the initial announcement, according to the Journal's
calculations.
Updated models of its biggest products--iPhones, iPads and
Macs--largely have arrived on schedule. But in recent years, Apple
has added new products at a much faster clip than under Mr. Jobs,
who engineered Apple's revival in the early 2000s partly by
slashing its number of products. The Apple co-founder believed that
sales would rise if Apple made fewer but better devices.
Under Mr. Cook, who oversaw manufacturing and operations before
becoming CEO, Apple's product portfolio has more than doubled since
2007, and now includes eight iPhones, four iPads, a dozen Macs, two
smartwatches, two TV-streaming devices and an array of
accessories.
Apple's large and global customer base also add to logistical
and manufacturing challenges, former employees said. The company
now has an estimated 1.1 billion devices in use world-wide, about
triple the 400 million in early 2013, according to market-research
outfit Asymco.
Former employees also cite the increasing complexity of Apple's
devices as a contributing factor in the delays. AirPods feature
lasers that detect when the device is inserted into an ear, which
has made manufacturing more difficult. With the facial-recognition
camera on the iPhone X, Apple had production issues partly because
its miniature, infrared laser was so sensitive that it could easily
be knocked out of alignment, a person familiar with the production
process said.
At the same time, Apple has moved to control more components in
its supply chain. For early models of the iPhone, Apple would buy
an entire camera from one supplier, former employees said, but in
more recent years, they said the company would source each
component in a camera from lens to sensor to adhesives.
Drilling deeper into the supply chain helped Apple control costs
and differentiate devices from rivals, the people said, but also
required more staff and coordination between suppliers and
assemblers. Apple has increased its number of employees sevenfold
in the decade since it launched the iPhone.
"It's not the little Ferrari that Steve built for himself," said
Roger Kay, an analyst with Endpoint Technologies Associates. "It's
become this big organization, and that has to contribute to some
unevenness of execution."
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
January 05, 2018 05:44 ET (10:44 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Sep 2023 to Sep 2024