It's not unheard of for Apple's (NASDAQ:AAPL) super-active rumor mill to hurt sales. Speculation about what the company may or may not have in the pipeline is a daily activity, and few companies or products generate this level of attention and hype. Some of this is arguably self-inflicted, since a culture of secrecy just makes people all the much more curious. The benefit of hype is that it translates into excitement in short order. The tough part for Apple is that rumors about the next big thing can sometimes cause consumers to not buy the current big thing.
This is nothing new, but it's rather pronounced this year.
It's different this time
When asked about a recent 451 Research report that suggested that iPhone purchase intent was at a nine-year low, while retention rates have been declining toward 80%, CEO Tim Cook pointed to one likely culprit: rumors. Here's Cook on the earnings call last night (emphasis added):
I only glanced at [the 451 Research report], and so I haven't had time to study it. But in general, what we are seeing, we're seeing what we believe to be a pause in purchases on iPhone, which we believe are due to the earlier and much more frequent reports about future iPhones. And so that part is clearly going on, and it could be what's behind the data. I don't know, but we are seeing that in full transparency.
There are a few reasons why the rumor mill and related purchase delays could be more prominent this year. For starters, this is the first time in the iPhone's history that Apple has used the same overall design for a third year running, so the market is itching for a redesigned form factor. There weren't really any compelling headline selling features, either. Some consumers may not have upgraded to the 7 or 7 Plus for these reasons and are anxiously awaiting the next model (myself included). This year's iPhone will also be Apple's 10th-generation model, which raises expectations even further given the importance of the milestone.
Stop me if you've heard this one before
If this all sounds familiar, that's because a similar storyline played out in late 2011, just days after Steve Jobs' death. The iPhone 4s had been unveiled the day before Jobs' passing, but rumors about the device had start to hurt sales of the iPhone 4. On the fiscal fourth-quarter 2011 conference call, the rumors were a prevalent theme. Here's then-CFO Peter Oppenheimer:
As we predicted, iPhone sell-through did decline across the quarter especially in the second half as new product speculation intensified.
The stores experienced very strong year-over-year growth in Mac and iPad sales, which was largely offset by a decline in iPhone sales given the tough comparisons in the year-ago quarter when iPhone 4 was launched and compounded by speculation about a new iPhone this year.
I think the biggest impact were the rumors that were just very pervasive, particularly in the second half of the quarter. There just seemed to be the rumor of the day.
Cook, who had just been officially named CEO a few months prior, chimed in:
The [channel inventory] reduction happened largely in the back half of the quarter as the speculation hit extreme highs.
So we can't tell you with precision how many units we would have sold if there had not been rumors and people weren't expecting a new iPhone. But I certainly believe it was a substantial, and that's the reason that we called it out. And I think anybody monitoring the press would probably come to the same conclusion.
The good news is that any purchase delays that are caused by rumors are merely that: delays. That limits the impact to the short term, while Apple's high customer loyalty maximizes the likelihood that customers will still buy an Apple device when the time is right and won't defect to another platform. The vast majority of those sales aren't lost, although some small percentage of users may switch.
Sorry, Tim, but talking about the next iPhone is kind of my job.