If an analyst is to be believed, Apple is expected to announce significant price cuts for the iPhone XR in the Chinese market. The company in November had reduced the price of the iPhone XR in Japan and many Apple resellers started offering heavy discounts on a number of iPhone models in China this week. Additionally, the analyst claims the Cupertino-based company may have to go the acquisition route to accelerate its video streaming service launch. The iPhone maker is rumoured to unveil the said streaming service sometime this year.
According to Daniel Ives, an analyst with Wedbush Securities, Apple needs to course-correct on the pricing front and the company is expected to announce “significant price cuts” for the iPhone XR model in the coming months to get the iPhone sales on track. Major retailers in China have already announced price cuts of their own last week, and NTT Docomo made a similar move back in November itself.
“As we have discussed with investors, it has been Apple’s pricing hubris on iPhone XR that was the major factor in the company’s December-quarter earnings debacle,” Ives said.
He noted that the iPhone maker is facing a “code red” situation in China and in order to avoid losing more customers to the competition, the company will have to reduce the price of iPhone XR, even if it means losing the perception of being a luxury brand.
“Apple needs to make sure that over the next few quarters they do not lose any current iPhone customers and thus speaks to the more significant price reductions on the way,” he added.
Additionally, Ives claims that with increasing pressure from the slowing iPhone sales, Apple’s services division needs to step up and pick up the slack. Which means the company may have to accelerate the launch of its much-awaited video streaming service. The company CEO Tim Cook had recently revealed in an interview with CNBC that the company is planning to launch several new services this year. One of these services is believed to be the streaming platform. However, Wedbush Securities estimates that the Apple’s streaming service is on track for a launch next year and the company is playing catch up with already established players like Netflix, Amazon, and Hulu. Daniel Ives says that a major acquisition is the only way to make sure that Apple’s streaming service is beefed up when it debuts.
“While acquisitions have not been in Apple’s core DNA, the clock has struck midnight for Cupertino in our opinion and building content organically is a slow and arduous path, which highlights the clear need for Apple to do larger, strategic M&A around content over the coming year to “double down” and drive the services flywheel,” Ives noted.
He remarks that A24, Lionsgate, and Sony Pictures are some “high probability” acquisition options for the company.