Not only are Apple's three primary businesses each doing extremely well, but each retains significant potential for growth, Tim Cook, the Cupertino company's chief operating officer said yesterday.
In a wide-ranging question-and-answer session at the Goldman Sachs Investment Symposium in Las Vegas, Cook fielded queries about "missing" iPhones, the possibility that the iPod market has become "saturated," why the Mac's market share has seen explosive growth and what Apple hopes to achieve with the Apple TV.
Much of what Cook had to say wasn't new, although it was far more engaging than the sleepy, redundant comments he and CFO Peter Oppenheimer serve up to analysts during those quarterly earnings conference calls. Frequently he sounded very much like the Apple cheerleader he is paid to be, but at times Cook offered clues about Apple's broader strategies.
Let's look at what Cook said by category (he switched among topics frequently during the session, which you can hear for yourself here):
The iPhone: Cook said the iPhone has received the highest customer satisfaction ratings of any product Apple has ever shipped, a notable achievement for a company that routinely scores very highly in customer satisfaction.
When asked a question that has been buzzing on the Web for weeks – what's become of the million or so iPhones Apple said it has sold but have never been activated – Cook acknowledged most of them have found their way to countries in which the iPhone is not yet available.
Without addressing the shared revenue Apple loses from its partner carriers when an iPhone is unlocked for use on another network, Cook said the company "smiles" at the problem. "It means there's great demand for the iPhone," he said.
The company will apply the lessons it has learned from selling the iPhone in the U.S. and three European countries as it proceeds with plans to expand availability of the product elsewhere in Europe and in Asia this year, Cook said.
Most intriguingly, he said Apple is not "married to any business model," suggesting Apple could deviate from having one exclusive carrier per country. Cook explained that different market conditions could require a "different business model," and in some places "being exclusive might not be in our best interests."
This may be the first public indication that Apple is considering different approaches to the iPhone-carrier model, at least in some nations. However, Cook only had nice things to say about Apple's relationship with AT&T, a disappointment to those hoping for a re-evaluation of the exclusivity deal in the U.S.
Cook indicated Apple expects the issue of unlocked iPhones to diminish as the device becomes available in more countries, and ominously hinted at a "series of actions" aimed at thwarting iPhone hackers (presumably those unlocking it, not those installing software on it).
Better news for iPhone owners was Cook's frequent references to the week-overdue announcement and release next Wednesday (March 6) of the iPhone SDK, which will permit developers to write software legitimately for the iPhone and iPod Touch.
The iPod: Cook reiterated Apple's position that the iPod Touch is a fresh platform for the company and that developing that platform is a priority. He artfully answered a question about flat iPod sales in the holiday quarter by pointing out that while unit sales increased by only 5 percent, revenues increased by 17 percent, primarily due to the higher margins on the iPod Touch, introduced only last fall.
Meanwhile sales of the low-end, lower margin Shuffle slipped 17 percent worldwide. Cook said Apple cut the price on the Shuffle to $49 Feb. 19 because "we believe there's elasticity in the market," whatever that means. He added that the price drop should boost sales a bit in "emerging markets" (such as China and India) as well as in the U.S.
The Mac: "The ceiling for the Mac is nowhere in sight," Cook said in discussing the Mac's market share. He noted that Apple sold 7 million Macs in a PC market of 260 million, leaving a lot of room for further growth.
In responding to a question asking why the Mac has become more popular with customers – he said the platform grew 44 percent in the last quarter alone – Cook described the Mac's gains as "almost a movement." He continued: "I think it's gone, in many people's minds, to asking not why buy a Mac, but why not?"
He cited two statistics showing the Mac's resurgence in the education market. One was Student Monitor's annual survey of college students conducted each summer asking which type of computer they planned to buy; this past summer those who said they were buying a Mac rose to 44 percent, 20 points higher than the previous year. Cook gave no source for the second statistic but said the company learned Monday that "Apple has surpassed Dell as the number one supplier of portables to higher education for 2007."
Apple TV: Cook waffled a bit on the Apple TV, last year described by CEO Steve Jobs as a hobby and the low sales of which led to some Apple critics deriding it as a failure. "We say no to a lot of things," he said in explaining why Apple expended resources on developing Apple TV. "We do products where we can make a difference and where we control the primary technology."
Later Cook acknowledged Apple TV is a "niche product," but said the company thinks that "something cool cold come out of this product." He essentially admitted the company had erred in treating video like music, expecting customers to buy video as they buy music at the iTunes Store.
Somehow Apple missed that most people watch movies just once and would rather rent than buy them (wasn't Blockbuster a big enough hint?) The availability of movie rentals combined with the recent changes to Apple TV – essentially releasing it from the bonds of the PC so it can download movies directly from the Internet –sets up the video realm as "an area that could be big for us," Cook said.