Word From Our Editor: Tech Prices Take Advantage Of World Politics

Apple, Dell, Microsoft and now Sonos. The list of those profiting from global events keeps growing.

We live in constantly changing and uncertain times. From Brexit to the American election, there’s been massive upheaval in the political, and economic, landscape for many months now. And these politico-economic changes appear to have also presented many hugely profitable tech companies, with the perfect opportunity to take advantage of the situation.

It all began with Brexit

Back in June last year the UK, in its wisdom, voted leave the European Union. Within days, US computer-maker Dell and the Chinese smartphone company OnePlus, announced price rises in the UK, as a result of the vote.

Brexit result paved the way for substantial price increases. Picture credit: The Independent

At the time a spokesperson for Dell told the BBC: “In line with the rest of the industry, our component costs are priced in US dollars, and unfortunately, the recent strengthening of the US dollar versus sterling and other currencies in the EMEA [Europe, Middle East and Africa] region, following the UK’s decision to leave the European Union, will have a direct impact on the price we sell to our UK customers and partners.

“We understand that this is an uncertain time for many British businesses, and we will continue to work closely with our customers and partners to provide great value products and services.”

OnePlus said it would increase the price of its latest handset, the OnePlus 3, by 6.5%, up from £309 to £329, to protect its “extremely thin margins”.

16 weeks later…

Then in October 2016, Apple raised prices by as much as £500 on its products sold in the UK. As reported on MSN, this led to the ridiculous situation that it was actually cheaper to buy a return ticket to North America to purchase certain Apple computers, than to buy them on the British high street!

Apple enjoys gross margin of between 38 percent and 39 percent.

Apple increased prices across a broad range of computers in the UK on Thursday, the same day it made a long-awaited update to its MacBook Pro line.

The price changes – the second time Apple has raised the cost of products in the UK in less than two months – were another example of how big US tech groups passed on the fall in sterling.

The base price for a Mac Pro, the group’s high-end work station, rose from £2,499 to £2,999. In Canada, the product sells for C$3,499 – about £800 less than the UK price – and in the US starts at $2,999.

Cheaper to fly to Canada and buy Macbook

At the time, Canadian low-cost airline WestJet advertised return tickets from London to Toronto for £349 – meaning a Macbook Pro buyer in the UK could fly to Canada and back and still have money in the bank!

In September 2016, Apple raised prices of iPads and accessories in the UK after unveiling the iPhone 7 and latest Apple Watch. At the time, analysts blamed the price increase on the sharp depreciation of sterling against the dollar following the EU referendum in June.

An Apple spokesperson said: “Apple suggests product prices internationally on the basis of several factors, including currency exchange rates, local import laws, business practices, taxes and the cost of doing business. These factors vary from region to region and over time, such that international prices are not always comparable to US suggested retail prices.”

Fast forward to 2017

It had all been a bit quiet on ‘don’t blame us we’ve got to put our prices up’ front, but luckily, wireless speaker supremos Sonos recently changed all that. On February 13, Sonos announced that it too is about to hike its prices up… by up to 25%.

As the Verge reported, Sonos’ most ‘affordable’ speaker, the Play:1, is increasing in price from £169 to £199; the midrange Play:3 is going up from £259 to £299; and the top-of-the-line Play:5, which used to cost £429, will now set you back £499. The biggest increases, though, are hitting the Connect line, which allows users to hook up their existing speakers to streaming music sources, and are getting a 25% price increase.

It’s not our fault, honest!

The company’s explanation is a familiar one: it sets its prices by region, but pays for everything it makes in US dollars, meaning prices are now more expensive. The Sonos blog post states: “Over recent months, there has been a significant change on the US Dollar to GBP exchange rate. As a result, our existing pricing has become unsustainable and, like many other companies, we have to increase prices for all products priced in GBP.”

Not wanting to miss out on the party, three days after the Sonos announcement, Microsoft revealed it was going to increase the price of its Surface and Surface Book computers by up to £400 (15%).

Microsoft to raise prices of some PCs by up to £400 due to… you’ve guessed it, Brexit.

A Microsoft spokesperson said: “In response to a recent review we are adjusting the British pound prices of some of our hardware and consumer software in order to align to market dynamics. For indirect sales where our products and services are sold through partners, final prices will continue to be determined by them.”

Hardware increases are one thing…

Now I understand the issue price increases in the supply chain of physical product. But announcements by Microsoft to increase software prices and Apple upping the price of apps just feels like blatant profiteering – using changes in exchange rates and the political landscape as a convenient Trojan Horse.

Last October Microsoft said it would raise the prices of its UK enterprise software services such as Office and Azure by as much as 13%.

Then in January this year, Apple announced that it was to increase prices of the cheapest apps from 79p to 99p – making them comparable to US app store pricing of 99 cents. These changes also had a significant impact on more expensive gaming apps. For example, the paid version of Super Mario Run went up from £7.99 to £9.99 – an increase of 25%.

Apple’s justification was that “When foreign exchange rates or taxation changes, we sometimes need to update prices on the App Store. Prices for apps and in-app purchases (excluding subscriptions) will increase in India, Turkey, and the United Kingdom.”

Record profits

So imagine consumers’ joy at the news on January 31 that ‘Apple Reports Record First Quarter Results’… Its statement read: “Apple® today announced financial results for its fiscal 2017 first quarter ended December 31, 2016. The Company posted all-time record quarterly revenue of $78.4 billion and all-time record quarterly earnings per diluted share of $3.36. These results compare to revenue of $75.9 billion and earnings per diluted share of $3.28 in the year-ago quarter. International sales accounted for 64 percent of the quarter’s revenue.”

Well, ain’t that dandy?!

These poor, impoverished tech and software giants ‘forced’ to increase costs, through no fault of their own… And the record profits? Pure coincidence.