Notes from Apple’s COO Tim Cook’s presentation at Goldman Sachs Technology Investment Symposium:
• How does Apple maintain its edge in innovation: At Apple, it starts with a simple product-orientated focus. Employees are encouraged to innovate and workplace is structured to encourage that focus.
• Can Apple support more than Mac, iPod, iPhone, and Apple TV? Tim Cook covers all four aspects:
– Mac has huge headroom, huge opportunity, huge potential
– iPhone already an incredible accomplishement, but there is enormous potential (“need a word bigger than ‘enormous’ to describe it”).
– iPod is now transforming into first mobile platform (iPod touch).
– Apple TV is an interesting thing; started a year ago; was a “hobby,” however our guts tell us there is something more there with Apple TV. Apple TV “Take 2” is just beginning; potential exists for enormous opportunity.
• We’re as proud of the things we don’t do as the things that we do.
• Apple is devoted to excellence (more than anyplace else I’ve ever seen.).
• OS X on iPhone, iPod touch, and Mac is an example of tremendous synergy.
• I’m not saying that Apple is immune to economic factors, but look at Apple’s revenue and Mac share growth vs. the economy and PC industry last quarter.
• iPod saturation? Units grew 5% YOY (Dec. to Dec.). Revenue grew 17% YOY (highest growth in a year). That was due to iPod touch. Strategic goal was to extend iPod brand into becoming the first mainstream mobile Wi-FI platform and it was successful. Entry-level iPod shuffle lagged – down 17% globally (more than that in U.S) last quarter. That’s why shuffle prices have been lowered markedly along with capacity bump.
• Apple can maintain a very wide price range ($49-$499) in iPod model ranges.
• Moving shuffle’s price down can only help in emerging markets. Remember that many of these markets (like China) has a growing middle class, too – other companies tend to ignore that sometimes.
• iPod seasonality looks very similar 2007 vs. 2006 calendar years. The U.S. was flat, but international grew in the high teens. Saturation: last quarter, in the U.S., 40% of iPods sold were sold to people who did not have an iPod. To Apple, it doesn’t “feel like a saturated market.” Why was it flat in the U.S.? Economy, iPod shuffle pricing, other factors.
• iPod touch is the first mainstream mobile Wi-FI platform: allows to to do email, browse the ‘Net with a real browser, forthcoming SDK will broaden apps to the point where the devices capabilities will be limited only be the developers’ collective imaginiation.
• Is iPod touch cannibalizing iPhone? The touch is not a phone. Some cannibalization, maybe, but we’d rather Apple cannibalize Apple than somebody else cannibalize Apple.
• iPhone: More than a platform than a product for Apple. We have over 1,000 Web 2.0 apps for iPhone today. Now forthcoming SDK will make iPhone even more compelling. iPhone has the highest customer satisfaction of any Apple product ever shipped. Even higher than Mac. A very high bar to clear.
• Apple’s iPhone inventory management: Inventory management is something Apple knows how to do. iPhone is purposely rolled out into only 4 markets for a reason, so Apple could learn and apply what they learned to future rollouts. 4 million units sold over first 200 days. Again, to reiterate, we believe we are on track for hitting goal of 10 million units sold in 2008.
• iPhone unlocking shows a lot of pent-up worldwide demand. The product delights customers. Bodes well for future iPhone rollouts in new markets. There will always be some level of hacking. Most people are unlocking iPhone in countries that do not yet have official iPhone carriers. In U.S. most iPhones are used on AT&T. This shows that demand is there for iPhone which, again, has satisfaction rates that are unheard of for any Apple product.
• Why not offer the iPhone unlocked? In U.S., Apple would have had to have two phones. Chose against it in order to simplify learning process. Apple is not married to the single, exclusive carrier model. Apple is married to making the best possible products for users, that’s all. Carriers see iPhone as something that people want and that people use for large amounts of data. iPhone is coming soon to new countries; that will do the most to minimize the unlocking rate.
• iPhone pricing: In Europe, pricing in customarily quoted with VAT (close to 20% in some places) – in the U.S., pricing is customarily quoted without tax. Take that into account. Also, dollar strength/weakness is a factor and Apple adjusts for exchange rates when possible.
• Apple cut the iPhone price in order to make the device as attractive as possible for holiday shoppers. The more iPhones Apple could sell, the more developers the iPhone would get, the more word of mouth would sell additional iPhones, etc. The holiday season only comes around once per year. Apple chose to go for it.
• Mac market share: Is there any limit? Cook: iPod introduced the Apple brand to tens of millions of customers. Mac OS X reviews are strong; Mac OS X is “years ahead of Windows Vista.” Going to Intel removed an issue where Apple couldn’t produce products they wanted to due to thermal limits of PPC, Boot Camp gives Windows people a security blanket (they can run there Windows apps if they need to). 44% Mac market growth. This is a movement. The question is people’s minds has gone from “Why buy a Mac?’ to “Why not buy a Mac?” Many different reasons for Mac growth – Cook sees no limit, no ceiling for Mac potential.
• MacBook Air? Targeted to whom? Apple thinks road warrior, student, professor, people on-to-go, etc. What did the customer not want to trade off in a subportable? Screen, keyboard, camera. Apple put into MAcBook Air what they thought people really desired and traded off what they didn’t. Apple offers solutions for others: USB Ethernet adapter, external optical drive, other MacBook models, etc.
• Back to Apple TV: Right now it is a small “nichey” product. A hobby. First it was a peripheral (needed a Mac or PC). Now it is a standalone product. Apple sees something in Apple TV. Rent movies without a Mac or PC. People listen to songs over and over. People generally watch movies once. That’s why rentals make sense for movies. The customer will decide. Apple continues to invest in the Apple TV product because they believe it has potential.
• End of presentation.
Hmmm…shuffle was down last year 17% YOY, globally, and even more in the US.
Didn’t realize that 17% iPod revenue growth was the largest YOY growth, ever. Must have meant in absolute dollars.
Says US iPods last quarter went 40% to new owners, not previous iPod owners; so a little uncertain about saturation.
Ooooh, iPhone and Touch SDK will “only be limited by imagination”.
That was awkward to read. So many typos.
@KenC
I read that and wow. I want my iPhone to control my AV system and ATV now. hehe
Wow, the return of Max Headroom. And isn’t oriented an easier word to use than orientated?
Wow, Tim says the MBA will be desirable to everyone, which I think everyone else agrees may not be true.
Tim is no Steve.
Yeah, Tim doesn’t know how to sex it up. I’d rather watch Max Headroom.
APPL is up +$8.45 in after hours trading…..
“iPhone pricing: In Europe, pricing in customarily quoted with VAT (close to 20% in some places) – in the U.S., pricing is customarily quoted without tax. Take that into account. Also, dollar strength/weakness is a factor and Apple adjusts for exchange rates when possible”
I find this patently untrue. One example, the price decrease of the AppleTV in the US has not been repeated in Europe. I have a different opinion as to Apple’s future abroad.
If Apple is serious of increasing its market share in the rest of the world it will have to look at it’s pricing. It sources its manufacturing in Asia and some in Europe. There is, in my opinion, no reason for the company to charge more for its products in other countries above the prices it charges in the US, except for the obvious VAT tax charges.
Apple should also dramatically increase its Apple stores in all major cities abroad, as they are an effective way to increase awareness of its products. What about advertising and targeted publicity in foreign countries?
Apple does not take full advantage of its superiority in design and user friendliness. Apple has the resources and the skill, but is too focused on the US market to make real inroads abroad.
@ charel
agreed!
the pricing in europe is ridiculous. it is aproximately 25% higher here in germany. for instance a macbook entry level is now 999 euros. that is 1490 dollars. if we take into account that apple only works with an internal anual model of 1/1.4 for the dollar/euro ratio this means 1400 dollars. how much is the vat in the us in different states? 6%?, 11%? not much more me guess. that means 1100 dollar (including tax) in the us versus 1400 dollars here in germany. as much as i love this company he is simply lying on this.
this is particuly sad, because a lot of people i know tell me they would love to buy a mac if it weren’t so outrageous expensive. a lot of missed oportunities here on the old continent.
p.s. apple tv is still 299 euros for the 40 GB model, exluding vat that is 247 euros, which is 368 dollars vs 229 dollars in the us. 60% more expensiv. 60 % !!
You misunderstood Apple’s pricing in the U.S. You say
“…that means 1100 dollar (including tax) in the us versus 1400 dollars here in germany”
NO, the $1100 price in the U.S. does NOT include sales tax. The tax in the U.S. is added on top off the $1100 price. In Germany, the price already includes your VAT.
@ ralph from Berlin
“.s. apple tv is still 299 euros for the 40 GB model, exluding vat that is 247 euros, which is 368 dollars vs 229 dollars in the us. 60% more expensiv. 60 % !!”
The extra cost, ralph, is for the labor Apple added to their workforce to get your rental selection increased faster.
To my European and British brethren: Apple products will always cost more in Europe and UK than in the US because the cost of doing business is so much higher. Taxes, regulatory costs, fuel. utilities, building costs, rents – all have to be factored in to retail prices.
if Europeans were less dependent on huge welfare entitlements, months of holiday and costly state bureaucracies, then our Macs and iPods (not to mention everything else) would fall dramatically in price.
Also, like most companies, their prices don’t change as exchange rates change. If something cost 999 euros yesterday, and you live in Germany. It still costs you 999 euros the next day, even if exchange rates change. It does NOT affect your purchasing power one bit!
You, presumably, are paid in euros. Local goods priced in euros, do not affect your purchasing power when exchange rates change. So QUIT YOUR WHINING!
Now, foreign made goods, could change in price, due to exchange rate changes, but generally don’t. The classic example is cars. Did the price of a BMW made in Germany change during the 2007 model year? No.
Does your salary change to reflect changes in exchange rates? NO. They only change, presumably, to reflect rates of inflation, and perhaps whether you are doing well at your job, or not.
The potential market for Apple abroad is much bigger than the US market, yet they sell less abroad than in the US. The reason is that their price levels are too high.
And what has our social security system to do with the cost of good? The EU has created a Eurozone in which the cost of doing business across borders has been slashed.
If you take the VAT off the prices charged in Europe and convert to US Dollars the difference is exorbitant. But then, if Apple does not want to sell as much and more abroad as in the US, so be it.
Certain cost nevertheless are compensated by the fall of the $… But this represents a loss what Apple Shares are concerned… $ is loosing almost 1 swiss cent a day. For big investors, it’s a lot of money… Apple shares should now grow value very fast to get it all back.
yes, my mistake: the price for the macbook in the us is 1100 which means roughly $1200 including vat vs. $1500 here in germany. means: 25% more expensive here in germany
and @ Spark:
” width=”19″ height=”19″ alt=”grin” style=”border:0;” /> i wish they would let me do it. there is incompetence at work at the moment. they don’t even manage to reflect new additions in their genrelists. it’s a shame, really.
magic word: ten as in “ten new movies a day, is this to much to ask for?”
From the article : “…but we’d rather Apple cannibalize Apple than somebody else cannibalize Apple.”
Someone else would be feeding off Apple, they won’t be cannibalizing
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