CHARLES: DOUG SCHOEN, GREAT
SEEING YOU.
>> CHARLES, ALWAYS.
CHARLES: APPLE SLASHING ITS
IPHONE XR PRICES IN JAPAN.
JOININGS US NOW, CONCERN JOINING
US NOW, GENE MUNSTER.
FIRST OF ALL, APPLE LAUNCHED ALL
OF THESE MODELS, LESS EDUCATION
PENSIVE MODELS ALL AT THE SAME
TIME.
IN RETROSPECT, DOES THAT LOOK
LIKE IT WAS A BIG MISTAKE?
>> I DON'T THINK SO, AND WHAT
THEY'VE BEEN DOING OVER THE PAST
FOUR YEARS, CHARLES, IS TRYING
TO GIVE A LITTLE SOMETHING FOR
EVERYBODY.
AND SO THE BREADTH OF THE
PRODUCT HAS BECOME MUCH WIDER,
AND THEY NEEDED TO DO THAT TO
COMPETE AGAINST LOWER PRICE
ANDROID PHONES AND -- SO I DON'T
THINK THEY MADE ANY MISTAKE.
I THINK THEY'RE BEING VERY
THOUGHTFUL ABOUT THE PRODUCT
LINE, AND I THINK SOME OF THESE
DATA POINTS THAT ARE COMING OUT
RELATED TO THE POTENTIAL DEMAND,
I THINK, ARE A LITTLE BIT
MISPLACED.
I'VE TRIED TO READ SOME OF THESE
TEA LEAVES AND FOUND IT IS A
DANGEROUS SUBJECT ESPECIALLY
WHEN YOU'RE THIS EARLY IN THE
QUARTER.
I THINK THESE DATA POINTS ARE
MORE RELEVANT WHEN YOU GET TO
THE END OF A QUARTER LIKE THE
END OF DECEMBER.
CHARLES: RIGHT.
WE ARE ACCUSTOMED TO THESE
STORIES, THERE'S ALWAYS A
STORIES OF SOMEHOW AN APPLE
SUPPLIER BEING IN TROUBLE.
CONSEQUENTLY, THE STOCK TAKES A
SHORT-TERM HIT, IS AND PEOPLE
LOOK BACK LATER AND SAY, GOLLY,
I WISH I HADN'T LISTENED TO THE
SCUTTLEBUTT.
ONE OF THE THINGS THAT'S WORKING
IS AVERAGE SELLING PRICE.
IT'S GONE UP DRAMATICALLY.
MAYBE THEY'RE TAKE THING A SMALL
HIT TO OVERALL SALES, BUT IS IT
MORE IMPORTANT FOR THEIR MARGINS
THAT THEY KEEP THIS AVERAGE
SALES PRICE GOING UP?
ONCE THAT STALLS AND PERHAPS
MAYBE EVEN VOLUME STALLS, THAT
COULD BE A TERRIBLE ONE-TWO HIT
TO THE COMPANY.
>> AVERAGE SELLING PRICES HAVE
BEEN THE BIG WIN FOR APPLE OVER
THE PAST YEAR, THAT'S EXACTLY
RIGHT.
THEY'VE GONE FROM CALL IT THE
HIGH 600 TO THE HIGH 700s ON
AVERAGE.
AND THAT DOES CREATE THE
QUESTION ABOUT HOW DO YOU START
TO THE ANNIVERSARY SOME OF THOSE
PRICE INCREASES, HOW DO YOU KEEP
THIS GROWTH STORY GOING.
I THINK, SURPRISINGLY, THERE'S
STILL MORE UPSIDE TO THESE
PRICES.
PART OF THE REASON IS MOST
PEOPLE, CALL IT THREE-QUARTERS
OF iPHONE OTHER THANS
GLOBALLY, BUY THEIR PHONES ON AN
INSTALLMENT BASIS.
SO THE DIFFERENCE BETWEEN $1,000
PHONE AND A $700 PHONE IS ABOUT
$10 A MONTH.
AND THIS NEW IDEA -- SO I THINK
THAT MY TAKE IS YOU'RE EXACTLY
RIGHT.
IF THEY CANNOT CONTINUE TO MOVE
PRICES HIGHER OVER THE NEXT FEW
YEARS, THAT'S A PROBLEM.
BUT I SUSPECT THEY WILL BE
SUCCESSFUL IN DOING THAT.
CHARLES: ALL EYES ON THAT AND,
OF COURSE, NOT BREAKING OUT THE
SALES, I THINK, IS SOMETHING
THAT'S GOING TO GNAW AT WALL
STREET FOR A WHILE.
I DO WANT TO SWITCH GEARS, GENE,
AND I'VE GOT TO ASK YOU ABOUT
FACEBOOK.
IT'S BEEN PRETTY ROUGH ON THIS
COMPANY, BUT CEO MARK ZUCKERBERG
SAYS HE HAS NO PLANS TO GO.
WHAT DO YOU THINK?
>> TOUGH YEAR FOR FACEBOOK.
NOT ONLY FROM THE HEADLINES, BUT
ALSO THE PERFORMANCE OF THE
COMPANY AND THE STOCK.
I THINK THAT ZUCKERBERG IS STILL
THE RIGHT PERSON TO -- HE KNOWS
THE COMPANY BETTER THAN ANYBODY,
AND I THINK IT'S EVEN MORE
IMPORTANT FOR HIM TO BE AT THE
HELM, BECAUSE I THINK IT'S GOING
TO GET MORE DIFFICULT FOR
FACEBOOK TO RETAIN SOME
ADVERTISERS.
THERE ARE TWO MAJOR TRENDS
WORKING AGAINST THE COMPANY.
ONE IS IT'S BECOMING MORE CLEAR
THAT THE COMPANY USES REALLY
GETS INTO PEOPLE'S EMOTIONS TO
PROPEL ENGAGEMENT.
YOU THINK ABOUT ALL THE
POLITICAL CONTENT ON FACEBOOK,
AND THAT CREATES A BRAND AROUND
FACEBOOK THAT ISN'T VERY
APPEALING TO ADVERTISERS.
CHARLES: RIGHT.
>> AND SEPARATELY, MOST PEOPLE
DON'T FEEL GOOD ABOUT THEMSELVES
AFTER THEY USE INSTAGRAM OR
FACEBOOK.
I THINK THAT COULD BE A
PUSHBACK.
IT'S IMPORTANT THAT ZUCKERBERG'S
AT THE HELM DURING THIS PERIOD.
CHARLES: I AGREE.
PLUS, HE JOINS 60% OF THE VOTING
SHARES.
GENE, ALWAYS GREAT TALKING TO