Cook: Apple has "learned not to worry about canibalization of our own product"

Posted:
in iPad edited January 2014
Asked about the potential of the new iPad mini eating into its existing iPad sales, the company's chief executive Tim Cook said it has "learned not to worry about cannibalization of our own product."

The analyst had asked how Apple expects the iPad mini to sell compared to the original iPad, phrasing this as its "cannibalization factor over the older product."

Cook began by answering, "we don't really have an old product. We have only new products. We just announced the fourth generation iPad."

He continued, "The way we look at this is that, we provide a fantastic iPod touch, we provide an incredible fourth generation iPad, iPad mini and iPad 2. Customers will decide which one, or two, or three or all four they would like and will buy them."

Cook seemed to be correcting the idea the full sized iPad was "old," but of course Apple does still sell a variety of "old products," including the iPhone 4 from 2010, last year's iPhone 4S, the previous generation iPod touch as well as last year's iPad 2.

iPads


"We have learned over the years not to worry about cannibalization of our own product," Cook said. "It's much better for us to do that than for somebody else to do it.

"And the far, far bigger opportunity here are the 80-90 million PCs that are being sold per quarter. There's still over 300 million PCs being bought per year.

"And I think a great number of those people would be much better off buying an iPad or a Mac. And so I think that's a much bigger opportunity for Apple. And so instead of being focused on cannibalizing ourselves, I look at it much more that it's an enormous incremental opportunity for us."

Apple's historical fear of cannibalization

In the early 1980s, Apple worried that sales of the Apple III would be hurt by the existing Apple II if it made them cross compatible, so it limited the backwards compatibility of the new model in order to encourage the development of new Apple III-optimized software. This backfired, contributing to the demise of the Apple III, the company's first significant product failure.

Apple's Lisa and Macintosh teams also rivaled for product attention within the company, and after the Mac emerged as a winner, Apple continued its incompatible Apple II line, fostering contention between the two product families championed by the "Apple II Forever" slogan promoted by its chief executive John Sculley.

Rather than backing Steve Jobs' plans to make the Macintosh into a business workstation, Sculley focused the company on profiting from the aging Apple II, a move that helped push Jobs out of Apple, where he developed NeXT, the basis of what would become OS X. Apple continued selling old Apple II systems into the 90s.

At the same time, Sculley was trying to manage the introduction of tablet computing, which was complicated by two warring factions within Apple, one aligned behind Newton, the other a competing concept that was spun off as General Magic. But then Apple worried that Newton sales might eat into its existing Macintosh line, so it purposely limited the Newton platform to PDAs.

After Steve Jobs returned to Apple, he refocused the company on profitable products. After recognizing the trend toward portable systems, he invested in notebooks and allowed them to eat up sales of Apple's desktop models. He also backed the iPod, allowing it to overshadow Mac sales. Jobs' Apple also backed iOS devices over the embedded iPod software, allowing the new iPhone to eat up its iPod sales.

Jobs, and now Cook, similarly avoided any efforts to prevent education and other markets from buying up iPads at the expense of more costly Macs. The result of giving people what they wanted has resulted in Apple selling mostly lighter, thinner notebooks that share iPad design elements, while dropping its Xserve and other products that people weren't showing much interest in buying.

At the same time, Mac sales overall have grown dramatically, from less than one million per quarter just five years ago to around 4-5 million per quarter today. Apple is also now selling more mobile Macs (which Apple just noted make up 80 percent of its computer sales).

Whether these numbers have been blunted by iPad sales in some markets doesn't seem to matter, because Apple now sells 14 million iPads per quarter as well.

Cook's suggestion that iPad sales have gnawed on PCs more than the Mac appears to be true, given that Apple continues to outpace the growth of the PC industry (globally, Apple said Macs are up 1 percent, contrasted with an 8 percent decline by PCs in general).
«13

Comments

  • Reply 1 of 42
    irelandireland Posts: 17,616member
    He's right, obviously, but I suspect the iPad mini is priced at also $329 to make the $499 iPad more appealing. They probably kept the iPad 2 around because it's a profit monster.

    But also, pricing the mini at $329 could be a very clever psychological trick, to make it seem more aspirational and thus selling even better, not worse, than if it were priced at $299. This may sound counter-intuitive, but things are not always what they seem.
  • Reply 2 of 42
    Cook is right. If you don't eat your own babies, someone else will.
  • Reply 3 of 42
    charlitunacharlituna Posts: 7,215member
    Folks assume that are going to buy the iPad Mini would eventually have given in and bought a full size one. But that is really only true perhaps half the time. The rest they do without.

    And even in those cases, they are staying within Apple which is always better than going elsewhere.
  • Reply 4 of 42
    As usual, DED, good article. I think TC really enjoyed the opportunity to make those incisive remarks personally. It was both a good capper to Apple's remarkable efforts to get these new products to market, and it was free ad and prelude to a staggeringly good holiday season for Apple and its customers.
  • Reply 5 of 42
    cash907cash907 Posts: 893member


    Considering their iPad sales are already being cannibalized by the market anyway, why would he worry about this? I do think it's odd that he priced the thing at 329 instead of 299, considering how natural a progression it would have been going from that to 399 for the iPad 2, and 499 for the iPad 4. I think the market critics would have been much kinder as well, which is silly, since 30 dollars doesn't really make that much of a difference for a product that's already 300+ dollars anyway.


     


    Going to be interesting to see how well these things sell though, considering the pricepoint, and the inferior screens compared to the Fire HD and the new Nooks. That's the other confusing thing to me: why didn't they make the screen Retina? Even if I were in the market for something this size, I'd be holding off until next year, when Apple invariably upgrades the screen, replaces the iPad 2 with the iPad 4, and introduces the iPad 5 with similar unibody construction and slimmed down screen tech featured in the iPhone 5, the new Touch, and the Mini.

  • Reply 6 of 42
    rogifanrogifan Posts: 10,669member
    One thing I was thinking about regarding the iPad mini pricing...I keep hearing people say they're going to pick up a Fire or Nexus because of how cheap they are. It seems to me like this is more of an impulse buy, or someone is buying it because of the price and not the quality of the device or ecosystem (if you don't like it you're not out that much money). In my mind Apple doesn't want your products to be thought of as disposal. Something where you use it for a while and then stick it in a drawer or on a shelf to collect dust.

    Every "hands on" review of the iPad mini that I've seen so far has mostly good things to say about it' especially how thin and light it is and that it has a premium feel to it. I figure, let Google and Amazon play around in the cheap; let Microsoft compete with its hardware OEMs on Windows 8 devices. And Apple will continue to play with itself.
  • Reply 7 of 42
    analogjackanalogjack Posts: 1,068member
    @ireland, it's 329 because it's worth it due to the better quality of manufacture and design, not only that but Apple is not interested in the bottom feeders, never has been and never will, it's not their model.

    Better to drag the riff raff up to a more enjoyable level of life. Aesthetics is not a small matter, whether one realises it or not.
  • Reply 8 of 42
    slurpyslurpy Posts: 5,154member

    Quote:

    Originally Posted by charlituna View Post



    Folks assume that are going to buy the iPad Mini would eventually have given in and bought a full size one. But that is really only true perhaps half the time. The rest they do without.

    And even in those cases, they are staying within Apple which is always better than going elsewhere.


     


    True, at this point the higher bid order is that they get invested in Apple's OS and ecosystem- whichever device gets them in the door is irrelevant. Because they tend to stay, and usually upsell down the line. 

  • Reply 9 of 42
    rogifanrogifan Posts: 10,669member
    cash907 wrote: »
    Considering their iPad sales are already being cannibalized by the market anyway, why would he worry about this? I do think it's odd that he priced the thing at 329 instead of 299, considering how natural a progression it would have been going from that to 399 for the iPad 2, and 499 for the iPad 4. I think the market critics would have been much kinder as well, which is silly, since 30 dollars doesn't really make that much of a difference for a product that's already 300+ dollars anyway.

    Going to be interesting to see how well these things sell though, considering the pricepoint, and the inferior screens compared to the Fire HD and the new Nooks. That's the other confusing thing to me: why didn't they make the screen Retina? Even if I were in the market for something this size, I'd be holding off until next year, when Apple invariably upgrades the screen, replaces the iPad 2 with the iPad 4, and introduces the iPad 5 with similar unibody construction and slimmed down screen tech featured in the iPhone 5, the new Touch, and the Mini.
    On Apple's investor call this afternoon Peter Oppenheimer said the mini has significantly reduced margins compared to their other products. If that's the case, you throw retina on this product and it would be way more than $329. I don't think anyone can fairly judge the screen until they use it and then compare it to a Fire, Nook or Nexus. I would have preferred the $299 price point but if they're already taking a hit on margins at $329, $299 is surely out of the question,
  • Reply 10 of 42
    slurpyslurpy Posts: 5,154member

    Quote:

    Originally Posted by Cash907 View Post


    Considering their iPad sales are already being cannibalized by the market anyway, why would he worry about this? I do think it's odd that he priced the thing at 329 instead of 299, considering how natural a progression it would have been going from that to 399 for the iPad 2, and 499 for the iPad 4. I think the market critics would have been much kinder as well, which is silly, since 30 dollars doesn't really make that much of a difference for a product that's already 300+ dollars anyway.


     


    Going to be interesting to see how well these things sell though, considering the pricepoint, and the inferior screens compared to the Fire HD and the new Nooks. That's the other confusing thing to me: why didn't they make the screen Retina? Even if I were in the market for something this size, I'd be holding off until next year, when Apple invariably upgrades the screen, replaces the iPad 2 with the iPad 4, and introduces the iPad 5 with similar unibody construction and slimmed down screen tech featured in the iPhone 5, the new Touch, and the Mini.



     


    There's a ton of reasons why they didn't change the resolution, the most important of which is that it would have introduced yet ANOTHER resolution for developers to code for, not to mention the pricepoint. I'm sure it will happen down the line, but for now 1024x768 at that size is very acceptable. 

  • Reply 11 of 42

    Quote:

    Originally Posted by Rogifan View Post



    One thing I was thinking about regarding the iPad mini pricing...I keep hearing people say they're going to pick up a Fire or Nexus because of how cheap they are. It seems to me like this is more of an impulse buy, or someone is buying it because of the price and not the quality of the device or ecosystem (if you don't like it you're not out that much money). In my mind Apple doesn't want your products to be thought of as disposal. Something where you use it for a while and then stick it in a drawer or on a shelf to collect dust.

    Every "hands on" review of the iPad mini that I've seen so far has mostly good things to say about it' especially how thin and light it is and that it has a premium feel to it. I figure, let Google and Amazon play around in the cheap; let Microsoft compete with its hardware OEMs on Windows 8 devices. And Apple will continue to play with itself.


     


    People who use the Fire, Nexus and the like seem to hit the wall on performance pretty quick... The word on the street is that the returns on these products are pretty high.

  • Reply 12 of 42
    gary54gary54 Posts: 169member

    "And the far, far bigger opportunity here are the 80-90 million PCs that are being sold per quarter. There's still over 300 million PCs being bought per year.


     


     


    They have never been successful denting that market. That war was lost two decades ago. Unless they make some big changes, they aren't going to dent it now. The reason why is obvious. The only mac that competes in the sub 1000 price range is the mini. They are pitting the mini against those millions of desktop boxes which can be mix and match configured to suit the style and budget of the customer. Any PC fan will start rattling off hardware specs for the dollar sending the mini into nowhere'sville. The synergy of hardware and software that Apple products deliver doesn't mean much to those people.


     


    Not to mention how many people and companies up against the wall of making the software transition which is still a big obstacle and a threat to IT pro's whose jobs depend on Windoze. Mr IT manager who is a MS Cert pro whose job it is to maintain his companies network, together with all the database and accounting and sales software is going to recommend to his corporate CEO that they go Mac and he/she is out of a job? Don't hold your breath.


     


    On an everyday level, you get used to a given software to do a job or invest a lot of time accumulating data with a given program or files created with and its a pain if not an outright cost to change. That's true with any software, even within the Apple software ecosystem. Let alone across a platform where equivalents may not be available at all.


     


    That's been the story for decades. 


     


    In the 1-2000 range, now you are out of the typical consumer or corporate box price range, there are simply lots of people who do not want an AIO. Or the specs of Apple's AIO. As nifty as they are, I'd never buy an iMac. I have my reasons, other people have theirs.


     


    Then there are the market savvy customers who are well aware what the going rate for commodity items like drives and memory are and know full well what Apple charges for those commodity items is highway robbery. If they have the utter gall to charge highway robbery for those items, it's a safe bet they are charging highway robbery for not so commodity items. A large chunk of buyers are not as stupid as Apple seems to think they are.


     


    Right at this moment, Apple is asking 300 bucks for 16 gigs of memory in the mini. As an upgrade option. I just bought 16 gigs of the same type name brand Apple cert. memory for 85. Who is kidding who? They do the same thing with drives. So by extrapolation, it's not far fetched to assume they do it to everything. So even when they are competitive, like with the monitors, their products are easy to dismiss.


     


    If they want to go after the 300 million PC's a year market segment with Apple desktops, they need to get serious about addressing the price/performance/options issues with their desktop line to bring those customers in. 


     


    They need a marketing campaign to pit the mini against the sub 1000 price range PC's to sell why its better, the proverbial X-Mac, a configurable desktop box in the 1-2000 price range positioned between the Pro and the mini and finish bringing the Pro up to date. And stop raping their customers with commodity items like memory and drives.


     


    Or continue the trend of eroding the desktop PC market as a whole with pocket commodity devices and live with the limitations of a small market share of desktop computers.



  • Reply 13 of 42
    apple ][apple ][ Posts: 8,680member

    Quote:

    Originally Posted by Slurpy View Post


     


    There's a ton of reasons why they didn't change the resolution, the most important of which is that it would have introduced yet ANOTHER resolution for developers to code for, not to mention the pricepoint. I'm sure it will happen down the line, but for now 1024x768 at that size is very acceptable. 



     


    I'm not so sure about that. Retina would have meant just doubling the resolution, which would make it the same as the iPad 3/iPad 4, just in a smaller sized display. As it is now, it's the same resolution as the iPad 2, just in a smaller sized display. The Retina mini would have a higher DPI than the iPad 3/4, just like the current iPad Mini has a higher DPI than the iPad 2.


     


    You are correct though, that there are a ton of reasons why the iPad Mini is not Retina. 


     


    (1) Price. I've never seen so many cheapskates in my life whine over a $329 price. I'm glad that there is no retina iPad Mini, because I just couldn't bear to hear all the whining, crying and ignorant moaning coming from those people. A retina iPad Mini would be pretty close in price to the full sized iPad, IMO.


     


    (2) Power. The iPad Retina has a huge battery to power that Retina display. The iPad Mini is a much smaller device, and if Apple could even fit such a huge battery in there, it wouldn't be nearly as thin and nowhere near as light. The iPad 3 also has a huge Quad GPU, and a retina iPad Mini would also need a beefed up GPU. 


     


    There are also other issues such as producing enough displays, and the list goes on. 

  • Reply 14 of 42


    Totally agree. Well put!

  • Reply 15 of 42

    Quote:

    Originally Posted by AnalogJack View Post



    @ireland, it's 329 because it's worth it due to the better quality of manufacture and design, not only that but Apple is not interested in the bottom feeders, never has been and never will, it's not their model.

    Better to drag the riff raff up to a more enjoyable level of life. Aesthetics is not a small matter, whether one realises it or not.


    Totally agree. Well put!

  • Reply 16 of 42

    :

    Originally Posted by Gary54 View Post




    "And the far, far bigger opportunity here are the 80-90 million PCs that are being sold per quarter. There's still over 300 million PCs being bought per year.


     


     


    They have never been successful denting that market. That war was lost two decades ago. Unless they make some big changes, they aren't going to dent it now. The reason why is obvious. The only mac that competes in the sub 1000 price range is the mini. They are pitting the mini against those millions of desktop boxes which can be mix and match configured to suit the style and budget of the customer. Any PC fan will start rattling off hardware specs for the dollar sending the mini into nowhere'sville. The synergy of hardware and software that Apple products deliver doesn't mean much to those people.


     



     


    Ever hear of the "iPad"? It's beating every PC box maker out there. Most people were buying PCs to host a web browser and email client. The iPad does that for them, with less cost and complication. And they can play games and watch movies etc. 


     


    It's also working in a variety of industries as a a tablet system. And in education. It's not just replacing PC sales, but putting a big dent into the demand for DRAM and hard drives and other components.


     


    Also, Elvis Presley died. 

  • Reply 17 of 42

    Quote:

    Originally Posted by Cash907 View Post


    Considering their iPad sales are already being cannibalized by the market anyway, why would he worry about this? I do think it's odd that he priced the thing at 329 instead of 299, considering how natural a progression it would have been going from that to 399 for the iPad 2, and 499 for the iPad 4. I think the market critics would have been much kinder as well, which is silly, since 30 dollars doesn't really make that much of a difference for a product that's already 300+ dollars anyway.


     


    Going to be interesting to see how well these things sell though, considering the pricepoint, and the inferior screens compared to the Fire HD and the new Nooks. That's the other confusing thing to me: why didn't they make the screen Retina? Even if I were in the market for something this size, I'd be holding off until next year, when Apple invariably upgrades the screen, replaces the iPad 2 with the iPad 4, and introduces the iPad 5 with similar unibody construction and slimmed down screen tech featured in the iPhone 5, the new Touch, and the Mini.



    They're NOT inferior screens, you dunce! We don't need another screen size to fragment the platform. As it is all existing apps will run on the Mini without modification. It has the same pixel count as the iPad, which makes it a higher resolution--in the direction of retina, which is a good thing. A retina display would have given you something else to complain about--an even higher price.

  • Reply 18 of 42

    Quote:

    Originally Posted by Gary54 View Post




    "And the far, far bigger opportunity here are the 80-90 million PCs that are being sold per quarter. There's still over 300 million PCs being bought per year.


     


     


    They have never been successful denting that market. That war was lost two decades ago. Unless they make some big changes, they aren't going to dent it now. The reason why is obvious. The only mac that competes in the sub 1000 price range is the mini. They are pitting the mini against those millions of desktop boxes which can be mix and match configured to suit the style and budget of the customer. Any PC fan will start rattling off hardware specs for the dollar sending the mini into nowhere'sville. The synergy of hardware and software that Apple products deliver doesn't mean much to those people.


     


    Not to mention how many people and companies up against the wall of making the software transition which is still a big obstacle and a threat to IT pro's whose jobs depend on Windoze. Mr IT manager who is a MS Cert pro whose job it is to maintain his companies network, together with all the database and accounting and sales software is going to recommend to his corporate CEO that they go Mac and he/she is out of a job? Don't hold your breath.


     


    On an everyday level, you get used to a given software to do a job or invest a lot of time accumulating data with a given program or files created with and its a pain if not an outright cost to change. That's true with any software, even within the Apple software ecosystem. Let alone across a platform where equivalents may not be available at all.


     


    That's been the story for decades. 


     


    In the 1-2000 range, now you are out of the typical consumer or corporate box price range, there are simply lots of people who do not want an AIO. Or the specs of Apple's AIO. As nifty as they are, I'd never buy an iMac. I have my reasons, other people have theirs.


     


    Then there are the market savvy customers who are well aware what the going rate for commodity items like drives and memory are and know full well what Apple charges for those commodity items is highway robbery. If they have the utter gall to charge highway robbery for those items, it's a safe bet they are charging highway robbery for not so commodity items. A large chunk of buyers are not as stupid as Apple seems to think they are.


     


    Right at this moment, Apple is asking 300 bucks for 16 gigs of memory in the mini. As an upgrade option. I just bought 16 gigs of the same type name brand Apple cert. memory for 85. Who is kidding who? They do the same thing with drives. So by extrapolation, it's not far fetched to assume they do it to everything. So even when they are competitive, like with the monitors, their products are easy to dismiss.


     


    If they want to go after the 300 million PC's a year market segment with Apple desktops, they need to get serious about addressing the price/performance/options issues with their desktop line to bring those customers in. 


     


    They need a marketing campaign to pit the mini against the sub 1000 price range PC's to sell why its better, the proverbial X-Mac, a configurable desktop box in the 1-2000 price range positioned between the Pro and the mini and finish bringing the Pro up to date. And stop raping their customers with commodity items like memory and drives.


     


    Or continue the trend of eroding the desktop PC market as a whole with pocket commodity devices and live with the limitations of a small market share of desktop computers.



     


     


    Jeez, how dense can you get? He wasn't talking about the Mac Mini. He was talking about PC customers becoming iPad customers!


    Get a clue, man!
  • Reply 19 of 42
    gary54gary54 Posts: 169member

    Quote:

    Originally Posted by Corrections View Post


     


    Ever hear of the "iPad"? It's beating every PC box maker out there. Most people were buying PCs to host a web browser and email client. The iPad does that for them, with less cost and complication. And they can play games and watch movies etc. 


     


    It's also working in a variety of industries as a a tablet system. And in education. It's not just replacing PC sales, but putting a big dent into the demand for DRAM and hard drives and other components.


     


    Also, Elvis Presley died. 



    That was my point. "Or continue the trend of eroding the desktop PC market as a whole with pocket commodity devices and live with the limitations of a small market share of desktop computers."


     


    The iPad and the iPhone are eroding the PC market as a whole. Slowly. But if they want to go after those customers directly, and those who will never adopt an iPad, they have to get serious about competing in that space.


  • Reply 20 of 42
    gary54gary54 Posts: 169member

    Quote:

    Originally Posted by DanielSW View Post


     


     



    I suggest you broaden your scope of view instead of slinging insults. You did not read the whole statement. "And I think a great number of those people would be much better off buying an iPad or a Mac. And so I think that's a much bigger opportunity for Apple. And so instead of being focused on cannibalizing ourselves, I look at it much more that it's an enormous incremental opportunity for us." 


     


    "buying an iPad or Mac"


     


     


    300 million PC buyers are not converting to iPads. There will be a continued erosion of that market as a whole and those who will use both kinds of devices. The iPad is a different device, it does not replace a desktop PC, nor will 300 million PC sales be replaced with iPads. A desktop Mac competes with a desktop PC.

Sign In or Register to comment.