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.