Tim Cook took part in a live call as part of Goldman Sachs Technology and Internet Conference, streamed on the Apple’s Events page online a couple of hours back. He was asked – in a roundabout way – about all the things we all want to know. Is Apple planning a cheaper iPhone? Will they announce an iPhone with a larger display? Does the company still have what it takes to compete? He answered in the typical Apple style.
1. Does Apple still have what it takes to innovate?
Tim Cook’s belief in his company and its top-level staff is incredible. He used the word “bullish” to describe how he felt about Apple’s ability to continue innovating. Although he doesn’t personally like the term “vertical integration” he acknowledged that this is key to Apple’s success. They have what it takes to keep on innovating new products, ecosystems and services. The “magic” is in this very fact. They can ensure that all the parts of their business, whether it is hardware, software or services works in harmony with each other.
Seemingly, it’s not one part of the team that’s more important than the other, but he did describe Jony Ive as the “best designer in the world“. He heaped similar praise on his fellow executives, including Bob Mansfield. They have the capability to innovate, and the best team to pull it off.
One topic that came up, and one word “limit” in particular came in from the interviewer. Speaking of Apple hitting its peak in terms of sales, growth and market saturation. Tim immediately spoke about Cupertino’s culture and how the word “limit” isn’t in the company’s vocabulary. They don’t believe they have one. They can keep on innovating. They can keep on releasing products that consumers didn’t know they wanted, and eventually become reliant upon.
2. Growth still possible in the smartphone market?
Apple and Android is something of a duopoly in the smartphone/tablet world. I guess it’s right to question whether Apple can keep being competitive. Tim Cook spoke about how they hit 500 million iOS devices sold from 2007 until the end of 2012. Incredibly, 40% of those were in 2012. It’s “one of the best markets of all time”.
That’s not the only positive sign. Consumers are moving away from PCs, and opting for tablets instead. This in turn is leading developers to prioritize developing games and apps for iOS devices instead of Windows PCs. It’s still a “wide open field.”
3. Can Apple aim at the emerging markets with a cheaper iPhone?
The same, classic Apple response: “Our North Star is great products“. In essence, Apple’s engineers don’t start designing products with the main goal being to release it cheaper and target specific markets. Other companies do that, but Apple doesn’t. That’s the way Apple’s always done it, and has served them very well.
With the iPhone, the company drops the price of the previous generations each time a new one is released. This has never been more successful than it has been in 2012. The iPhone 4 was so popular in the final quarter of 2012 that they couldn’t keep up with demand. The question is “how can we do a great product?” Not, “how can we make an iPod cheaper“. With the Mac many people questioned when they would release a sub $500 or $900 Mac. Instead, they innovated with the iPad, which now ranges from $329 – $949, and people love them.
Although he didn’t dismiss the notion that Apple may or may not release a cheaper iPhone, he did state that that was not the aim. He made it clear that we shouldn’t try and pick out the company’s future product plans from what he was saying.
4. Larger screens? Biggest specs?
When questioned on the fact that the iPhone has only a 4-inch display, Tim drew parallels between the smartphone and PC industry. In the PC world buyers were obsessed with specs because that was what differentiated the machines. The software was essentially the same. In the smartphone world that’s not as important as the user experience. Going back to the integration of hardware and software.
He mentioned OLED display technology specifically and talked about how inaccurate the colors were, and how that leaves to a poor experience for the buyer. Apple cares about being the best, not the biggest. Again, he reiterated “I’m not going to comment on what we’re going to do in the future.” In the same breath “the only thing we’ll never do is make a crappy product.”
So – in short – Apple doesn’t set out to be the biggest specced devices. But, there’s every possibility we could see a larger iPhone in the future. Maybe.
5. iPad success and opportunity
The iPad kicked off the new tablet market back in 2010, and it’s still a new market by comparison to smartphones and PCs. It’s a “huge opportunity for Apple“. The support of developers and the great ecosystem come in to play more here than anywhere else. There are more than 300,000 apps custom-designed for the iPad. With other platforms (read Android) there are only a few hundred. Most of them are smartphone apps, stretched to fit a bigger display.
We’re still in the “early innings of this game“. The tablet market size is going to triple over the next four years according to the latest research. And it’s hard to compare how well each manufacturer is doing, since Apple is the only one that actually reports how many units it sells. All the others are numbers of devices shipped, which doesn’t mean much. But when you look at usage, iOS devices are used a heck of a lot more by consumers than any other, particularly in the tablet world.
In short: Apple doesn’t care too much about market share. And it’s confident that it has a bright future. Nearly every Fortune 500 and global 500 company has bought in to the iOS ecosystem with iPads and iPhones. It’s got a huge uptake within education institutes and consumers are buying them by the million. So we’re all good for some time yet.
6. iPad mini pricing and cannibalization
I loved Tim Cook’s response to this. Other companies worry about cannibalization, and it always signals the beginning of the end. Apple’s motto is “if we don’t cannibalize, someone else will“. Even then, the figures show that although iPads are cannibalizing Mac sales, and iPad mini sales will cannibalize iPad with Retina/iPad 2 sales, they’re taking more consumers away from Windows PC. Research shows that 50% of Brazil and China first time iPad buyers don’t own a single other Apple device. “This is a huge opportunity.“