Apple CEO cites carrier changes, iPhone 5S inventory as reasons for U.S. smartphone share decline

Tim Cook

Tim Cook

Apple CEO Tim Cook is not worried about Apple’s market share.

“As I’ve said before, our objective has always been to make the best, not the most,” said Cook on Monday’s earnings call. “And we feel we’re doing that.”

That said, it’s not all sunshine and roses. Cook did admit that the company’s iPhone business in the U.S. wasn’t doing as well as it has in years past. But before people start chiseling the iPhone’s tombstone, Cook offered a couple of explanations for why people in the U.S. aren’t buying as many iPhones as they used to.

He said that part of Apple’s decrease in sales was caused by changes cell phone carriers made to their upgrade policies. In the past, carriers would let customers upgrade their phones at a subsidized price a few months before the end of their 24-month contracts, which meant that people could pick up new iPhones at convenient times outside their contract, like at the launch of a new iPhone, or around the holidays.

But, since T-Mobile’s early-upgrade program caused larger players in the wireless industry to react with their own options to allow customers to upgrade early, carriers have decided to become harsher about keeping users to the full length of their contracts. Ultimately, that translates into fewer customers able to get a fully-reduced price for their iPhone, which could cost up to $800 when purchased without any sort of subsidy or payment plan. Unsurprisingly, people don’t want to pay that much for a phone they could get for a fraction of that price a few months later.

In addition, Cook said that Apple had undersestimated just how popular the iPhone 5S would prove to be in North America, and spent a significant part of last quarter ramping up inventory to meet demand, which also contributed to reduced iPhone sales in the U.S. That said, he thinks things will be back to normal in half a year or less.

“I think part of what’s happening in North America is a short term effect because of these upgrade policy changes,” Cook said. “This affects the period of time, three to six months, I would think, and then it washes through.”

Though the U.S. faltered, Cook said that the iPhone grew in developing markets, where Apple wanted to see expansion in this past quarter. There are signs that there’s more good news to come as well: Cook said that last week was the best week ever for activations of the iPhone in China. Overall, though, he seemed confident on the conference call about Apple’s outlook.

  • guest

    US carrier price war heating up and device subsidies going away. ASP moving rapidly to the $179 unlocked Moto G benchmark. Not seeing how Apple leads in this market.