Apple's Accountants Have Spotted AppleCare's Weaknesses

By several measures, it appears that accountants have gone over the AppleCare ledgers and found that it wasn't making money—or enough of it. There have been several on-going and recent revisions to the long-time warranty program that raise prices and alter policies, both affecting the bottom line. The long-time basic AppleCare service extends the usual 90-day tech support and one-year warranty protection for a full two years. The newer AppleCare+ service for IOS devices also extends the support and warranty protection, but adds hardware repair or replacement for two incidents of accidental damage. [I am an Apple stockholder.]

Like all warranty programs, a profit or loss depends upon a large number of factors, including the reliability of the product, the cost to repair or replace and, in Apple's 's case especially, how often employees give the customer the benefit of the doubt. Remarkably, despite all of those variables, the price of AppleCare for a Macintosh has increased just $20 over the last 13 years—in 1999 it cost $149 for an iMac, while today it's $169 for any desktop Mac. Perhaps that's why Apple has relied on tweaks to the program's policies over the years to maintain its profitability.

For example, you could originally extend AppleCare for one additional two-year, providing up to four years of protection. Now, you cannot extend the program when it expires. In 1999, the program included a CD copy of TechTool Deluxe, a software trouble-shooting tool. Now, software is no longer a feature of the program. Notably, AppleCare originally included on-site service for desktop computers within some regions of the U.S., along with ship-in repair service. On-site service is no longer available, although you can still send your product to Apple for service work.

AppleCare+ debuted in October 2011, and at the same time Apple imposed restrictions on purchasing it. Originally a customer could purchase a product, and then delay buying AppleCare until just before the expiration of the standard one-year warranty. In fact, in the early days Apple would mail you a postcard reminder to purchase AppleCare. Now, you must purchase either AppleCare coverage within 30 days of your product purchase. Most recently, on Tuesday Apple changed the pricing for AppleCare+ iPhone coverage. The initial price is still $99, but the accidental damage fee was raised from $49 to $79 per incident, no doubt reflecting two years of experience with the program.

Other reported changes to the program haven't been implemented yet. Earlier this year AppleInsider reported that Apple's free telephone support would be extended from 90 days to one year. They also reported that Apple's retail stores would begin performing more in-store repairs, instead of exchanging iOS devices for a new or refurbished product. This one change could save the company nearly $1 billion a year, the report said. That figure represents over five percent of the retail stores' annual revenue, a potentially significant boost to the chain's bottom line, and all generated without selling a single additional product.