Apple CEO Tim Cook on Android growth: 'Success is not making the most' - Page 5

Originally Posted by Lemon Bon Bon. 
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Great post! You should be CEO instead of Tim Cook :D

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Originally Posted by Marvin 


Back in Summer 2000, the Indigo Blue iMac was $799. Apple's quarterly reports for q3 and q4 2000 noted their gross margins were 29% and 25%. Apple's gross margins today are around the 38-45% mark. That includes the iOS line and services but it's safe to assume the gross margins on Macs are up.

If Apple had gross margins of 29%, the current $1299 iMac would be roughly $1099, basically $200 off. A $200 average off every Mac sold would result in a $1b hit to their quarterly profits (which are around $13b) if they didn't increase shipment volume. They should increase shipment volume to some extent. If the net margins on the Macs are 25% and the average selling price drops to $1100, they make $275 per Mac. So they'd have to ship 3.6m more Macs or 70% more per quarter. This should be achievable but not trivial and would put them into the top 5 worldwide PC manufacturers. Also additional Mac sales means more peripheral sales as well as more software sales.

edit: most likely their net margins would drop if they just cut the prices without finding ways to cut the expenses so it would be more like 15% net margins. The average selling price probably wouldn't drop $200 as they'd take more off the higher models so say it's $1200 average = $180 profit per Mac, which would require 100% more per quarter. The premium PC market has limited volume and it's not likely that a $200 price cut would result in a 100% increase in sales. As I say though, there will likely be increased software and peripheral sales. Someone who buys an iMac might get an iPad or iPhone instead of an Android device or buy software on the Mac App Store.

Say Apple aimed for 50% more Mac sales at $200 average less to offset the $1b, that's about 2.5m Macs = ~$450m. The Mac App Store sells at least 100 million apps per year at an average price of $11 so an increase of 50% can generate over $165m for Apple. If 25% of those Mac buyers got an iPad, each with a profit of $100, that's $63m. Those iPad buyers then buy apps. They could get ~$700m in sales in the first year.

At first glance it doesn't seem like a sensible idea for them to purposely make ~$300m less than they already do. They've already worked their way up to the prices they have and it would be undoing some of that but I think they're just slightly on the wrong side of the volume/profit balance with the Macs and more people in the eco-system means more sales beyond the first year. I think the Minis are mostly priced fine, which is their high volume audience but they don't have cheap peripherals to go with them. The Macbook Air is no good starting at 64GB, it's $100 for the 128GB model so they can absorb that cost. I'd rather they dropped the 11" line though and just brought the 13" one down $100 to $1099 and you get 128GB and the 13" screen at the entry level. Maybe a 64GB 13" at $999.

They can do price cuts gradually and monitor the change in volume. If it doesn't have the desired effects, they just adjust it at the next revision.

Again, why should Apple cut prices? Not one person I know who purchased an Apple product (including myself) has ever said 'I bought it anyway even though it was too expensive'. All I ever do hear is 'wow, this is a really cool [enter device]'. When I do ask them about price (as I do with new Apple people all the time), I ALWAYS here, yeah, but it's worth it due to [enter reason]' 

Therefore I am at a loss as to why Apple needs to charge less when everyone I have ever known to own an Apple product raves about its quality, features, ease of use, etc. etc. etc. (with the exception of PC tech guys which seem to hate Apple)

Why does Apple need to sell more when they have a hard enough time meeting demand now? They are selling everything then can make. I have never heard in the last 10 years that Apple has pallets of product in warehouses waiting to be sold. I do hear often on new releases that people standing in lines for hours were not able to get products due to running out. I do see videos and videos of people coming out of Apple stores holding up their new product with great joy. 

When demand is there, price is not the factor. 

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Originally Posted by jungmark 


When life gives you lemons, you crush the hell out of them.

I prefer to zest them first :) 

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Originally Posted by Slurpy 

 

Why? Why do they need a tablet cheaper than $329? 

 

When the first iPad came out everyone was predicting it would be between $800-$1200. People were shocked at the $499 price. It was a device from science fiction. Now, only a couple years later, we have the iPad mini, a tablet that is infinitely more capable than the original, MUCH lighter, thinner, faster, more portable, with 2 cameras, an almost infinite library of apps,etc- for $329. Why have we become so synical, so spoiled, as to not have a sense of history and context, and consider this "expensive"? Because cheaper tablets can be found, which are shittier in every single sense? I'm amazed daily at my iPad mini, which I use for a variety of tasks such as reading, browsing, emailing, gaming, and everything else under the sun, in a form factor that is infinitely versatile, portable, and flexible- and which cost merely $329. It doesn't need to be cheaper, it needs to retain the same pricepoint while becoming even more capable. Apple didn't get to where it is today by cutting corners and going for marketshare by releasing bargain bin products. This will do nothing but chip away at brand value and decrease useability and satisfaction. Maybe good for some short term slaes, but catastrophic for the long term. We have enough shitty electronic gadgets produced by every company on the planet, with limited shelf-life and no long term vision. We don't need more. 

Absolutely on the button!

If the world "needs" a cheaper phone than an iPhone (though almost every other teenager I see seems to be using an iPhone) then there are already many many companies supplying them. Apple does not need to go there.

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Originally Posted by Jony0 

 

Marketshare is worthless without profits. Just follow the money.

Wrong on the first sentence, right on the second.  You oversimplified your response.  You underestimate mindshare/branding which is directly correlated to marketshare (of some sort).  Apple does indeed need to sustain and grow marketshare.  Marketshare does NOT equal profits.  But marketshare is a vital factor in obtaining profits.

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Originally Posted by SolipsismX 

This is all by design and this is why they are winning, not in spite of.

 

I agree that Apple was winning.  And that in the past, it was by design.  But the future is now.  I agree with Mstone and Lemon, but I wouldn't go as far to say that Apple has gone down the wrong path.  But I would say that Apple is beginning to go down the wrong path if they don't revise into something closer to what Mstone and Lemon advocate.

 

 

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Originally Posted by Richard Getz 

So when you take away capacity, capability, and screens, the price lowers naturally. It is NOT an attempt on Apple's part to make cheaper iPods, but to make different iPods for different lifestyles. 

If you think that Apple does not study/research/consider price points as and end point, you are dead wrong.

Price point is not the only factor, and there are compromises made in order to provide proper UX, but don't be misled...price points are hugely important.

Quote:

Originally Posted by SolipsismX 

Finally and most egregious, is your comments about the iPhone following the iPod model of a larger HDD-based device, a small screened device, and a no screen device that only uses Siri to communicate without any consideration for the App Store ecosystem that is a huge part of the success for the iPhone, iPod Touch, and iPad.

...the App Store ecosystem?...Stop saying this as if it's an end to all perceivable conclusions.

A mobile phone with a smaller screen (like the iPod nano) would appeal to an entirely different UX/form, to which the App Store may not be very relevant.

I would agree that a (successful) computing device with absolutely no screen is many, many years away from us.

Quote:

Originally Posted by Richard Getz 

 

Again, why should Apple cut prices? Not one person I know who purchased an Apple product (including myself) has ever said 'I bought it anyway even though it was too expensive'. All I ever do hear is 'wow, this is a really cool [enter device]'. When I do ask them about price (as I do with new Apple people all the time), I ALWAYS here, yeah, but it's worth it due to [enter reason]' 

 

I would argue that this was the case in the past, but far less so today.  Same with the apple being a luxury brand...  I don't see it as "true" going forward, at least not in the two big market segments they're currently concentrating on (phones and tablets).

When the iPhone came out it was leaps and bounds better than the competition. It was hardly competition, and paying $200 more for an iphone vs a blackberry was a no brainer.  Apple was wiping the floor with their competitors at the time, and their products warranted the price difference.  Even when the iPhone 4 came out, apple was leaps and bounds ahead of Android (blackberry was mostly dead by this point, and android had started taking off) at the time.  Particularly when it came to how fluid and integrated the system was. Additionally, the phone hardware was better than anything else out there.  It would be difficult for anyone to argue otherwise, as the iPhone 4 was a game changer.  The high PPI display was awesome, and the entire device wowed people.  That was two and a half years ago.  Since then, iOS on the phone has gotten marginally better, but most of the ecosystem has remained static.  The devices have gotten faster, and the only real "game changer" apple's tried seems to be SIRI.  And although I haven't really tried it (despite my iPad supporting siri), I don't find talking to a computer as a leap forward.  Also,from the demos I've seen, it doesn't seem particularly useful.  Especially if you have to say things multiple times for it to understand you.  Aside from that, what else has changed since the iphone 4 days?  A slightly larger display that android forced apple to adopt, check.  The iphone now syncs with "the cloud", and the whole icloud experience.... Isn't that something most android users have done since day one with their google accounts?   I will admit the iphone 5 looks sexy, and the alluminum frame is cool.  The battery life is pretty awesome, and all around it is a GREAT phone.

However, unlike when the iphone 4 was released, the iphone 5 is not leaps and bounds ahead of the competition.  If anything, it's neck and neck with what the competitors have to offer.  Since the iphone 4 was released, android has made huge strides.  The marketplace has become much more useable, the phones are now more fluid, and the interface works quite well.  In fact, after using an android phone, I'm sure most iphone users would love to have "widgets" on their app screens to show the weather, stock tickers, news feeds, rss feeds etc.  These things just make sense.  Overall, the android experience has improved remarkably in the past few years, and although it might not quite match the ios experience, it's pretty damn close for most people, and it keeps getting better.  This is going to impact apple in the coming years, because unless apple can release another "game changing"' device years ahead of everyone else, they're going to have a hard time convincing consumers to pony up the extra money for an iphone.

The same is now becoming true with tablets.  When the ipad was released, there was no real competition for it.  Same when the ipad 2 was released.  The early android tablets were pretty poor in quality, and there were some big improvements needed in android to make them competitive, and the apps weren't up to speed. Those early tablets just lacked compared to the ipads at the time.  When the ipad 3 was released, the same thing was true,and it wasn't until the nexus 7/10 were released that I'd say android tablets were close to parity with apple's ipads.  Additionally, the kindle fire, and kindle fire HD have improved greatly, and although not as nice as an ipad, they're great devices for significantly less.  Going forward, it will be difficult for apple to establish itself as being so much better to justify its higher price. Of course, ipads aren't nearly as overpriced as iphones as they don't have carrier subsidies.  

But going forward, I can see multiple issues coming apple's way.  They have the popularity now, but I think much of that is riding in off prior success.  As more and more people have good experiences with android devices, apple will have a difficult time justifying their higher prices.  It's just the way the market works.  Apple's ipad and iphone is no longer the BMW in a world of ford fiestas.  It's more like they're the BMW, and android has the mercedes, lexus, toyotas,hondas, fords, etc.  BMW can price itself over the fords, but they have to compete with the mercedes and lexuses out there. 

Phil

Originally Posted by cgr111 
If he can't do his job without my help…

This is precious. I'm pretty sure the most successful and efficient COO of all time can do his new CEO job without your help.

Originally Posted by cgr111 
If he so great, why has the stock tanked, folks?

How about the corollary? If Apple just made the fourth highest quarterly profits of any company, ever, while continuing to create products desired by hundreds of millions of people, while continuing a history of unparalleled customer satisfaction and product quality, and while operating the most efficient inventory of any large company, why has the stock tanked?

Originally Posted by cgr111 
Precious? Who said he was the most successful and efficient COO of all time? You!

Yep, and I don't see you refuting me.

Originally Posted by cgr111 
Why? Because the stock has tanked! That's why!

 

Who. Gives. A. Frick? There's nothing to "turn around" when they're more successful than they have ever been. What would you have them do? What magical nonsense can happen to "change" their success to make the stock turn around? If this is your money you're worried about, get out of the stock market and get a savings account somewhere. 

Originally Posted by cgr111 
…in discussing production, his supposed area of real expertise…

STOP. MAKING. THINGS. UP.

What sentence would this be? Why does this matter? Do you speak how you write? I do, but I write well. That leads to people thinking my speech outmoded. If he had been perfectly on a mark, you'd complain about how he was "reading from a script" and "didn't actually care or have passion" about what he was saying.

Don't actions (profit, revenue, desirability, etc.) speak louder than words? 

Originally Posted by cgr111 
Verbatim from the transcript:

Tim Cook - Chief Executive Officer
But Bill, let me make one additional point on this, I know there has been lots of rumors about order cuts and so forth and so let me just take a moment to make a comment on these, I don’t want to comment on any particular rumor because I would spend my life doing that but I would suggest it's good to question the accuracy of any kind of rumor about build plans and also stress that even if a particular data point were factual it would be impossible to accurately interpret the data point as to what it meant for our overall business because the supply chain is very complex and we obviously have multiple sources for things, yields might vary, supply performance can vary.

Thanks. So your point is what?

Originally Posted by cgr111 
Please.....

You don't understand what he's saying and you think this is somehow "failure" on his part. That's all I'm getting here.

Ever diagram a sentence? Go through that process here. Find the main point.

So now we have a core sentence. How about the rest? What of the other information?

Is it really hard to understand? He's talking here, not writing; there's plenty of leeway in sentence construction. Your first step is listening to it again. You've listened to it enough to transcribe it (or at least find a transcription). Then you go through and do this. It's the same with any information about any topic; if you don't understand it, you break it down to something that makes sense.

interesting about the pricing: Normally, it is based on two key factors: (1) willingness to pay value - your target customer at estimated market size and (2) cost recovery - that including development, marketing, R&D and future platform implementation.  For any mature products, the majority cost already recovered.  To expend the target customer base by lowering price need  to match the new customer needs (it may not be the same as your original target as per design.  ex. the new one may not down load you-tube that much, etc.).  you need to price it right for the function that new user would be thinking as "value".  If you already covered a majority of "willingness to pay" base, it is hard to reach the "willingness not to pay" - some of those only willing to fork  over "zero" at carrier contract.  ;-).