Apple CEO Tim Cook talks iPad mini and product cannibalization, slams Surface, and more

Apple CEO Tim Cook Comments

Following the release of Apple’s (AAPL) Q4 2012 financial earnings, CEO Tim Cook fielded questions that ranged from defending the iPad mini’s $329 price tag to gently slapping Microsoft’s (MSFT) Surface tablet. Since he officially took over the chief executive role, Cook has made a concerted effort to be more transparent about Apple’s business operations. A soft-spoken guy, Cook cut his teeth for Apple securing components and ensuring its supply chain was always on top of things. While he’s not quite as charismatic as the late Steve Jobs, he’s every bit as tough and aggressive. Calm and extremely calculated, Cook is capable of throwing a hard jab when the occasion arrises. Here are the six most interesting nuggets that Cook revealed on Thursday evening’s earnings call.

1. Defending iPad mini price:

Cook, like SVP Phil Schiller, believes the iPad mini is priced perfectly at $329 because the tablet offers “the full iPad experience.” Cook boasted about the iPad mini’s 35% larger screen compared to competing 7-inch tablets, its two “great” cameras, and of course, the “precision enclosure.”

iPad ecosystem and Apple’s premium design aside, Cook also revealed that “the iPad mini has higher costs and gross margin is significantly below our corporate average,” suggesting the company couldn’t have priced it any lower or it wouldn’t be able to turn a profit. Unlike Amazon (AMZN) and Google (GOOG), Apple doesn’t compete for low margins. If it can’t build a product because components are too expensive to turn a decent sum, it’ll wait until it can.

“One of the things we try to do is to create a product that people will love for months and years and continue using,” Cook said. “That’s what iPad mini is designed to do. You can see that more broadly on iPad by looking at the usage statistics. Over 90% of web traffic from tablets is from iPads. Apple will not make a product that somebody may feel good about for the moment, but then won’t use when they get home. That’s not the experience we want our customers to have. I would encourage you to use an iPad mini and I don’t think you’d be using anything other than an iPad once you do that.”

2. Product cannibalization:

When asked how well the iPad mini would sell compared to the original iPad, Cook said, “We don’t really have an old product. We have only new products. We just announced the fourth generation iPad.” Cook went on to say that the company carries a variety of products that range in size and pricing. He strongly believes Apple now has a product that hits all price points.

But even more telling is how he’s not losing any sleep over product cannibalization, so long as it’s the company’s own products that are doing the cannibalizing.

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

3. Microsoft’s Surface:

As we said in our own Surface review, Microsoft’s tablet has all the hallmarks of a well-built device, but Windows RT might turn off a lot of consumers who are long accustomed to Windows 7 and earlier versions. Cook’s two cents? “I haven’t played with the Surface yet, but what we can tell is that it’s a fairly compromised confusing product. You could design a car that flies and floats, but I don’t think it would do any of those things particularly well.”

4. iOS 6 Maps app update:

As many users soon found out after iOS 6 was released, Apple’s decision to drop Google Maps for its own inferior mapping solution wasn’t a wise one. From “melting” bridges and roads to the complete obliteration of national landmarks such as the Statue of Liberty, Apple’s Maps has been nothing short of awful. It’s so sub-par that Cook had to apologize for it. Despite a few small improvements, Apple Maps remains largely broken.

According to Cook, “We have made a number of improvements to Maps in the past months and will work non-stop until Maps reaches our high standards.”

The situation doesn’t appear to have changed much since Cook’s apology about a month ago. As Cook probably knows, fixing Maps won’t happen overnight. It’ll take years and possibly thousands of employees to match Google Maps.

5. The difference 0.9-inches makes:

Steve Jobs once said that the company would never make a 7-inch tablet because the screen would be too small to comfortably use to consume content. But times have changed and the iPad mini is the company’s first tablet with a screen smaller than 9.7-inches.

To clarify Jobs’ statement, Cook said the company “doesn’t think [7-inch tablets] are good products and would never make one.” According to Cook, the iPad mini is not a 7-inch tablet because its screen is 0.9-inches larger, which gives it 35% more screen estate than competing 7-inch tablets — even though it is “pixel-poor.”

6. New iMac shortages:

One of the things that makes Cook different from Jobs is that he’s a much more calm and collected executive. Whereas Jobs would have never publicly said that there would be shortages of an unreleased product, Cook doesn’t seem to mind talking about the company’s production woes. In particular, Cook revealed that there will be a “significant shortage” of new iMacs “for the full quarter.”

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