Apple CEO Cook Defends Pricing For iPhone X, Calls Device 'Beloved' As Demand Drops

Apple CEO Tim Cook said Tuesday that the iPhone X is still going strong, even amid signs that demand is slipping and some Wall Street predictions that the company could pull the device from the market this year.

"Customers chose iPhone X more than any other iPhone each and every week in the March quarter, just as they did following its launch in the December quarter," Cook said during a quarterly earnings conference call with analysts.

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"Also, since we split the line with the launch of iPhone 6 and 6 Plus back in 2014, this is the first cycle that we've ever had where the top-of-the-line iPhone model has also been the most popular," Cook said, while reporting iPhone revenue growth of 14 percent during Apple's second quarter of fiscal 2018, ended March 31.

Apple is seeing 99 percent customer satisfaction rates for the iPhone X, he added. "The iPhone X is a beloved product," Cook said.

Cook drew a comparison to a team winning the Super Bowl but fans wishing that the team had won "by a few more points."

There were signals of slowing demand for the iPhone X during the second quarter, with the average selling price for the iPhone line dropping significantly from the previous quarter -- to $728 from $796 -- and falling below Wall Street analyst estimates of $740 for the quarter.

The drop can likely be attributed to dampening sales of the iPhone X, which carries a much higher price tag than other iPhone models with a starting price of $999. In a note to investors following the quarterly results Tuesday, analyst Daniel Ives of GBH Insights wrote that the iPhone X demand showed "softness" during the quarter.

In April, analyst Neil Campling of Mirabaud Securities predicted that the iPhone X will be taken off the market this year, as many consumers have been staying away due to its high price. "The iPhone X is dead," Campling wrote in a note to investors.

During the call with analysts, Cook contended that the iPhone X is "the most innovative product on the market" and "jam-packed with technology that's really set up the smartphone for the next decade. So that's how we priced it."

"The way we think about it is trying to [set] a reasonable price for what we deliver. And I feel we did that," he said.

Apple, Cupertino, Calif., reported that iPhone sales reached $38.03 billion during the second fiscal quarter, up from $33.25 billion during the same period the year before.

Sales of iPhone units grew at a much slower rate, though. The number of iPhone units sold rose 2.9 percent to 52.2 million during the second quarter, from 50.7 million iPhones the year before.

There are clear indications that smartphone users are replacing their devices less frequently, according to Gartner. The research firm reported that global smartphone sales saw the first-ever quarterly drop year over year in the final quarter of 2017.

"I'm hoping that perhaps with that slowdown, maybe some of the focus [at Apple] will go back into their Macintosh products as opposed to the iOS products," said Jim Harryman, founder and CEO of Kinetic Technology Group, a Mac-focused MSP and member of the Apple Consultants Network based in Dallas.

That would be a timely move on Apple's part, he said, as more businesses are starting to consider Macs for the first time.

"Companies that are predominantly on Windows seem to be more open to accepting Apple products into their environment than before," Harryman said.

That's partly a function of the rise of Software-as-a-Service and browser-based computing, where it makes less of a difference what computer you're using, he said.

As for Apple's efforts in Mac, "I think they could spend a little more time innovating on the laptop and desktop side," Harryman said.

For laptops, Apple has yet to pursue a convertible notebook -- perhaps with a detachable screen -- such as is offered in Microsoft's Surface Book line, he noted.

"Apple has not done that. If and when they do that, they will do it better than anyone else. I still firmly believe that they're that type of company," Harryman said.

On desktops, Apple has not significantly updated its powerhouse Mac Pro -- popular with multimedia editors and other creative professionals -- since 2013. "It's been almost five years since anything has happened there," Harryman said, though a recent TechCrunch report suggested that a new Mac Pro is in the works for 2019.

Mac sales were flat during Apple's fiscal second quarter, with revenue coming in at $5.85 billion versus $5.84 billion the year before. During the prior quarter sequentially, Mac revenue had dropped 5 percent year over year.

The iPad line was a brighter spot, with sales rising 6 percent to $4.11 billion for the second quarter, compared with $3.89 billion during the same period of 2017.

Overall, Apple reported Tuesday that it generated $61.14 billion in revenue during its fiscal second quarter. That was a 16 percent increase from the same period a year earlier, when revenue came in at $52.89 billion.

Net income reached $13.82 billion during Apple's fiscal second quarter, for earnings of $2.73 per diluted share. That's up from net income of $11.02 billion the year before, for earnings of $2.10 per diluted share.

Overall, Harryman said that "the relationship is strong" between Apple and partners such as Kinetic Technology Group.

"They continue to raise the bar for companies like ours," he said. "They're requiring more and more certifications to maintain that relationship, which I think is good."