Tim Cook

Tim Cook on the 55 million iPads sold to date:

This 55 is something no one would have guessed. Including us. To put it in context, it took us 22 years to sell 55 million Macs. It took us about 5 years to sell 22 million iPods, and it took us about 3 years to sell that many iPhones. And so, this thing is, as you said, it's on a trajectory that's off the charts.

via Transcript: Apple CEO Tim Cook at Goldman Sachs - Apple 2.0 - Fortune Tech.

That gave me an idea. Here is a plot of each major computing product Apple sold throughout its history shown as a cumulative total since product launch.

The iOS platform as a whole reached 316 million cumulative units at the end of last year. The iOS platform overtook the OS X platform in under four years and more iOS devices were sold in 2011 (156 million) than all the Macs ever sold (122 million).

The iPad and Mac businesses both grew well in the last quarter. Tim Cook said they are observing some cannibalization of Mac from the iPad but much more switching to iPad is coming from the Windows PC market.

The evidence is still hard to pin down directly but the fact that PC sales (excluding the Mac) are down gives credence to the claim. Mac growth, in contrast, is largely unaffected. The following chart shows the the iPad volumes vis-a-vis Mac volumes and the Mac growth through recent history.

The iPad has out-sold the Mac since inception and is now about three times the volume. However, the growth rate in the Mac has not changed much.

The impact on the PC market has been discussed recently and the data in the following chart is an update given more precision on the units from Apple:

The new data shows that the iPad alone would be the largest PC vendor and Apple with iPad and Mac combined is selling 5 million more units (or 30%) than the top PC vendor.

The impact of the iPad is not specific to any single vendor (Apple included). It competes for time and purchase decisions across all computing alternatives and though many times it's additive, it is also substitutive and will become increasingly so.

Tim Cook mentioned on the earnings conference call that Apple sees the iPad as addressing a market larger that the PC market:

I truly believe, and many others in the company believe, that there will come a day that the tablet market in units is larger than the PC market. In fact, it's interesting to note that in the U.S., it's clear from the IDC's recent data on desktop PCs in the U.S., that tablets exceeded desktop PC sales last quarter in the U.S.

 

Tim Cook explains that there was no material impact from the Japanese disaster:

"Regarding our global supply chain, as a result of outstanding teamwork and unprecedented resilience of our partners, we did not have any supply or cost impact in our fiscal Q2 as a result of the tragedy, and we currently do not anticipate any material supply or cost impact in our fiscal Q3. To provide a bit more color on this, we sourced hundreds, literally hundreds of items from Japan, and they range from components such as LCDs, optical drives, NAND Flash and DRAM to base materials such as resins, coatings and foil that are part of the production process at several layers back in the supply chain. The earthquake and subsequent tsunami and the associated nuclear crisis caused disruption for many of these suppliers, and many unaffected suppliers have been impacted by power interruptions.

But since the disaster, Apple employees have literally been working around the clock with our supplier partners in Japan, and have been able to implement a number of contingency plans. Our preference from the beginning of this tragedy has been to remain with our long-term partners in Japan. And I have to say, they have displayed an incredible resilience that I personally never seen before in the aftermath of this disaster. So while we do not anticipate -- currently anticipate any material impact to our component supply or cost in our fiscal Q3, we do need to caution everyone that the situation remains unpredictable"

via Apple Management Discusses Q2 2011 Results - Earnings Call Transcript - Seeking Alpha.

Still, the message did not get through to everyone:

However, the supply chain impact on Apple from Japan’s earthquake, tsunami and nuclear power crisis is the culprit behind the only product line that came in below expectations – iPad. Apple sold 4.7 million units of iPad, vs. analysts’ expectation of 6 million.

The Rise and Rise of Apple: Time For A Split? - Seeking Alpha

The shortfall in iPad units was explained by Tim Cook as ramp-up challenges:

"Let me mention a few things for you to consider, Toni. First off, product transitions are never simple. And as you can probably appreciate, we are in a position that we have to call them for many, many weeks in advance in terms of how many of the current product we want to produce and the dates at which we will announce the new product. We drew the channel down on the current product or the original iPad, I should say, by 570,000 units during the quarter. And we added at the end of the quarter 170,000 of the new iPad 2s although most of that was in transit at the end of the quarter. And so the net reduction was 400,000. And so our sell-through was above 5 million for the quarter. And again, this has to be planned quite a ways in the future. I think the key point here is --

[also the dates, just to remind you, we set out an invitation to the event toward the end of February. We had the event in early March. We placed the unit on sale in the United States on March 11 and our quarter ended about 2 weeks thereafter. And so there was some expectation of a new product, and we would have obviously factored that into our thinking about the product transition as we plan the number of the original unit to build.]

And so I think the key point here is that I'm extremely pleased with the progress that we were making on the manufacturing ramp. We have gotten off to a materially better start and produced a lot more units than we did on the original ramp of the first iPad. And when we're so confident with our ability to supply that we've already put on 25 additional countries at the end of March, and we'll be placing on 13 more next week and we'll do even more as we stepped through the quarter."

In last year's third calendar quarter earnings call (October 20, 2009) Tim Cook was asked:

“So when you go from exclusive to multiple, you don’t change the charge to the carrier?”

Cook answered: “Correct.”

In this year's third calendar quarter earnings call (October 18, 2010) Tim Cook was asked again whether the future iPhone non-exclusive subsidy will affect the iPhone revenues and again Tim Cook repeated that it won't.

Chris Whitmore - Deutsche Bank

And what is your experience then when you've gone non-exclusive from a subsidy and margin standpoint on the phone, have you had to give anything up in the past?

Tim Cook

We don't give specific information out on the margins. But I think you can look at our ASPs and see that they've generally stayed above $600, and that's despite opening up several markets from an exclusive market to a non-exclusive market.

The recurring assumption that the loss of AT&T exclusivity will cause iPhone price erosion is wrong and has been evident in the sales data for over a year now. Not only did Cook state clearly that there is one price for iPhone to the channel regardless of exclusivity but the price data shows that as Apple moved to non-exclusives in many regions of the world, the ASP remained fairly constant:

Over the period when the blue line has been flat, Apple moved a number of markets from exclusive to non-exclusive.  There are three main countries where iPhones have a contractual exclusive relationship. That is the United States, Germany and Spain. (China and Japan are exclusive due to network technologies). All these markets will go to non-exclusive next year. I don't expect any change in the ASP as a result.

The final data point comes from AT&T themselves when they revealed the price they paid for the iPhone was roughly the same as the ASP shown above.

Tim Cook confirmed at a Goldman Sachs press conference yesterday that Apple is calling themselves a "mobile device company" officially. The "traditional model" of having companies sell different things -- hardware, software, peripherals -- just doesn't work on today's world, according to Cook. So Apple is no longer a computer company, or an OS maker, or a media giant. Its main focus is mobile devices.

link: Tim Cook: Yes, we're a "mobile device company"