Apple CEO Cook goes from record sales to iPhone stumbles

Apple Inc. Chief Executive Officer Tim Cook called the introduction of the iPhone 6 and 6 Plus over the weekend the "best launch ever." He may have spoken too soon.

Just three days after announcing that Apple had sold a record 10 million new iPhones over the opening weekend, Cook was faced with multiple snafus related to the bigger-screen handsets. The company pulled a new mobile-software update, dubbed iOS 8.0.1, after the program caused some people to lose cellular service yesterday, and promised a fix soon. Scores of consumers also took to social media to criticize the 6 Plus and how it can bend if sat on or if enough pressure is placed upon it.

The stumbles blemished what had been a carefully choreographed product unveiling that was meant to put Cook's stamp on Apple. Executives at the Cupertino, California-based company had for months teased the introduction of the new iPhones before finally debuting them on Sept. 9. The devices had spurred a frenzy of demand, with pre-orders topping 4 million, the record weekend sales and a thriving gray market for the smartphones in China and elsewhere.

Now Cook's rollout of the iPhone 6 and 6 Plus is marred, recalling incidents that the CEO has faced with other product debuts. Last year, Cook apologized for the iPhone's warranty and repair policies in China after receiving criticism from state- run media over customer service in the market. In 2012, Cook also said he was sorry for Apple's malfunctioning mapping software, which was faulted for misguided directions and inaccurate landmark locations.

Better Handle

"I just wish that Tim Cook had a better handle on things," said Jason Nochimson, 34, an iPhone 6 owner who spent 2 1/2 hours on Apple's customer support line after downloading the software upgrade yesterday and finding it stopped his cellular service. "I was worried that my daughter's school was going to call me today and I wasn't going to be able to get them."

Apple said in an e-mailed statement that it has devised a workaround for iPhone 6 users who lost voice service or other features. Users can reinstall the previous version of iOS to restore past functionality and Apple plans to release a new version of the operating system, iOS 8.0.2, in the next few days.

"We apologize for the great inconvenience experienced by users," Apple said in the statement.

The new iPhones are crucial to Apple. The devices generate more than half of the company's annual $171 billion in revenue and precede a swath of other products, including new iPads, an Apple Watch and a mobile-payments system called Apple Pay.

<h3 class="breakHead">Sales Momentum</h3>

Yet while Cook deals with consumer criticism over his handling of the iPhone rollout, the issues may have little impact on Apple's sales. Demand for the new handsets has the company poised to sell more than 61 million iPhones in the December quarter, surpassing last year's record 51 million sold, according to Barclays.

Sales are also set to pick up -- not decelerate -- as the new iPhones become available in more countries. On Sept. 19, the first day the handsets went on sale in stores, Apple rolled them out in 10 countries. The company is set to introduce the gadgets in another 22 countries on Sept. 26. In total, the iPhones will be in 115 countries by the end of the year, Apple has said.

"It will do nothing, I don't suspect it will dampen any demand," said Tim Bajarin, an analyst at Creative Strategies Inc., about concerns over bending phones and iOS problems.

Apple shares fell 0.9 percent to $100.83 in trading before U.S. exchanges opened, after closing at $101.75 in New York yesterday. The stock is up 27 percent this year.

<h3 class="breakHead">Second Thoughts</h3>

Still, some consumers are thinking twice about buying the devices in the wake of yesterday's snafus. After having problems with Apple's new software upgrade to his old iPhone, James Zahrt, a customer since 1989, decided to put off a new smartphone purchase.

"I was going to order one immediately" but now "I'm going to wait," said Zahrt, 58, of Mt. Prospect, Illinois, who's had troubles with his iPhone 4s's alarm clock working properly since downloading Apple's iOS 8 software last week. "I think the bugs need to be worked out on this thing."

The popular tide turned against the new iPhone 6 and 6 Plus earlier this week when reports began emerging that the 5.5-inch screen larger model was bending when people sat on it. Rivals including BlackBerry Inc. Chief Executive Officer John Chen took a jab at the iPhone yesterday, saying he "would challenge you guys to bend our Passport" device.

<h3 class="breakHead">Software Surprise</h3>

That was followed by reports from users yesterday that the iOS 8 software upgrade, which had been issued to address previous software bugs and add the health and fitness-monitoring application HealthKit, was causing some customers to experience dropped cell service.

Nochimson, the customer who spent 2 1/2 hours on the phone with Apple customer service yesterday, said his representative was unaware there would be a software update.

"He told me that he was not made aware that Apple was releasing 8.0.1 today," Nochimson said. "It was a shock to him that that happened. He said typically when they do software updates they know about it days in advance so they're ready for it."

Frustrations about iOS 8 had been mounting even before yesterday, with user complaints that their devices' battery life seemed to have dwindled after downloading the software, along with data showing applications were more likely to crash with the operating system. According to Crittercism Inc., an analytics firm, iOS 8 causes apps to crash about 3.3 percent of the time, or 67 percent more than last year's version.

While glitches aren't unusual for software updates, Apple attracts more attention, said Frank Gillett, an analyst at Forrester Research.

"Apple is a bit of lightning rod or a focus because as a company, they inspire a lot of positive and negative passion and also because they are now this company with a global brand and global reach," he said.

To contact the reporters on this story: Tim Higgins in San Francisco at thiggins21bloomberg.net; Adam Satariano in San Francisco at asatariano1bloomberg.net To contact the editors responsible for this story: Pui-Wing Tam at ptam13bloomberg.net Reed Stevenson, Aaron Clark