Sun, Jan 11, 2015 - Page 13 News List

Apple hikes Europe, Canada app prices

STRONG POSITION:Analysts said that the move to raise prices, which Apple has historically avoided, signals its belief that the US dollar will remain strong this year

Bloomberg

Apple Inc yesterday changed the prices of software applications from Canada to Europe, in one of the company’s more comprehensive global responses to currency swings in recent years.

With the US dollar rising, Apple earlier this week told software developers selling programs through its online App Store that it was increasing app prices in the EU, Norway, Canada and Russia because of foreign exchange rates and taxes.

The changes took effect yesterday, with the entry-level price for apps in Canada rising to US$1.19 from US$0.99. In Europe, the basic app price jumped to 0.99 euro from 0.89 euro.

The moves across two continents — coupled with Apple boosting iPhone prices in Russia last month after briefly halting online sales there when the ruble plunged — amount to one of the more concentrated worldwide actions by the Cupertino, California-based company to currency movements.

While Apple has previously raised the prices of programs in its international app stores, the company is typically reluctant to make such changes, said Slaven Radic, chief executive officer of app-developer consultancy Tapstream Network Inc.

“This is very unique,” Radic said. “They’re very measured about this — sometimes they’ll lose money if they can avoid showing too much price movement on things.”

All major currencies have declined against the US dollar in the past 12 months, with the US economy on an upswing. The Canadian dollar is down 10.1 percent since July last year and yesterday touched its lowest level versus the US dollar in five-and-a-half years. The euro has declined 13 percent against the greenback in the past six months, according to data compiled by Bloomberg.

Apple, which gets the majority of its US$182.8 billion in annual revenue from outside the US, has recently said it is mindful of how the strengthening US dollar will affect its business.

In October last year, chief financial officer Luca Maestri said the company faced “significant foreign exchange headwinds” from the strong US dollar, just as the company made new iPhones and thinner iPads available for the end of the year holiday shopping season.

By rolling out the pricing changes, Apple is signaling it believes the US dollar is poised to remain strong this year.

“They’re clearly reading the tea leaves, in terms of oil prices and the relative strength of the US economy and weakness elsewhere, and saying the strength of the dollar is not just a transitional event,” Andrew Bartels, an analyst at Forrester Research Inc, said in an interview. “Without making these changes, Apple would be looking at a very significant impact on its revenue.”

Apple’s App Store is a significant strategic advantage for the company that keep customers coming back to download new games and other programs to their iPhones and iPads. Last year, revenue generated through the App Store rose 50 percent to a record, Apple said this week. In 2013, customers spent more than US$10 billion in the App Store.

Apple’s revenue from other products may also be roiled by the strong US dollar. Sales of the iPhone, the company’s largest product by revenue, may have risen to 69.3 million units in the final quarter of last year from 51 million a year earlier, according to an estimate by UBS AG this week. The net average selling price was hurt by 2.8 percent because of the strengthening US dollar, according to estimates by UBS analyst Steven Milunovich, though that was probably offset by other factors including a more expensive iPhone 6 Plus.

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