Lateness Bedevils Apple CEO Cook New Apple Trend: Late Gear Delivery -- WSJ

By Tripp Mickle Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 6, 2018).

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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.

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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 06, 2018 02:47 ET (07:47 GMT)