Cook: We've learned over the years to not fear cannibalization. We'd rather do it ourselves than let someone else do it.
by Roger Cheng
Cook: The big opportunity is the PC market. A great number of people buying a PC are better off buying an iPad or Mac.
by Roger Cheng
Cook: I don't look at it as cannibalizing ourselves, but the broader market as an opportunity.
by Roger Cheng
Cook: We sold 1.3 million Apple TV units.
by Roger Cheng
It was almost double the previous year, he says. The business continues to do well, but the revenue size is quite small.
by Roger Cheng
Cook still labels Apple TV as a hobby, but a beloved one.
by Roger Cheng
We still believe there's something there and sees where it takes us, Cook says.
by Roger Cheng
Next question from Gene Munster from Piper Jaffray. Asks about the iPad slowdown.
by Josh Lowensohn
Cook: The first thing to note there is that the June quarter contained 1.2M increase in channel inventory, so the actual sell through sequentially looks very different than the sell-in numbers.
But the actual result actually beat out what we thought it would do. Normally we would see a seasonable reduction in the Sept. quarter versus the June because K-12 typically buys in June but not September because it's a higher education buying habit (they buy mostly notebooks, Cook says).
by Josh Lowensohn
Cook: All that's versus the quarter right after we announce the new product in March. Also, it's clear people delayed purchases due to new product rumors, and these intensified in August and September. SOme of that was anticipated, and some of that I wish would not occur, but it did occur. So that would explain the sequential difference.
by Josh Lowensohn
Cook: Year over year, with the channel inventory build as we stock everything to the proper level, it actually grew 44 percent year over year. We continue to feel great about how iPad has done, and with announcing the 4th gen iPad this week and adding iPad mini to the family we think it's going to be an incredible holiday season.
by Josh Lowensohn
Follow up on margins: as these devices become more expensive, would you be okay with passing on increases to customers?
by Josh Lowensohn
Cook: It's a hypothetical question. We think we made great choices on the products and the prices, and our longstanding customary practice is to just guide for this quarter, so I wouldn't want to talk about what we'd do beyond that.
by Josh Lowensohn
From JP Morgan: How does iPad revenue growth work with sequential revenue growth forecast?
by Roger Cheng
Oppenheimer again focuses on that extra 14th week for next quarter.
by Roger Cheng
Oppenheimer: We have just announcement amazing new products, and we expect huge sequential increases. We are thrilled about the outlook.
by Roger Cheng
Follow-up question on how the devices will be launched.
by Roger Cheng
Cook: We planned a roll out initially across 30 initial countries with two different dates.
by Roger Cheng
Cook: As we go on, we plan the launches in advance, but it's not a precise science. We plan those with several weeks of notice. Occasionally, it can be different than what we think (in regards to product roll outs across different countries).
by Roger Cheng
Next question comes from UBS on iPad pricing. Can you talk about pricing philosophy?
by Josh Lowensohn
Oppenheimer: When we set out to build the mini, we didn't set out to build a small, cheap tablet. We set out to build a smaller iPad that delivered the full iPad experience. The result is that the difference is "profound"
Now going over specs like the 7.9-inch screen, dual cameras....
by Josh Lowensohn
And other specs like A5 chip, dual-band Wi-Fi, and "fit and finish" of the "breathtaking" unibody enclosure.
"So that's what we've done," he says. It has a higher cost, and the gross margin is "significantly below" and "at the height of the cost curve," however that's something the company is trying to bring down.
by Josh Lowensohn
As Apple works to lower the costs associated with the iPad Mini, you can expect a more aggressive discount over time.
by Roger Cheng
Cook adds: One of the things we try to do is create a product that people will love for months and years and continue using it in a robust way. SO that's what iPad mini has been designed to do. You can see that more broadly on the iPad by looking at the usage stats. Like I said earlier this week more than 90 percent of the Web usage comes from the iPad. That's versus competitors tablets where people buy it and stop using it.
I would encourage you to use an iPad mini, and I don't think you'll use anything else than an iPad mini after.
by Josh Lowensohn
Follow up question about enterprise. Cook says Apple has almost all of the Fortune 500 using iPads, and is pushing for the Global 500. Above 80 percent for both iPhone and iPad, Cook says. "There's clearly much more to do,but I'm feeling pretty good about it."
by Josh Lowensohn
Bank of America: Wants details on the component environment and possible constraints.
by Roger Cheng
Cook: On iPad and iPhone, I don't see a component shortage that would hurt numbers given in the guidance.
by Roger Cheng
Cook: We solved some challenges there and feel good about it.
by Roger Cheng
Cook: The iMac will be constrained.
by Roger Cheng
There will be a short amount of time in the quarter to manufacturer and ramp up the iMac, he says, warning of significant shortage.
by Roger Cheng
We are extremely bullish on demand with our guidance, he says.
by Roger Cheng
Next question from ISI group's Brian Marshall about iPhone growth versus iPad.
by Josh Lowensohn
Oppenheimer says iPhone average sale price were flat in the quarter. They were down for the iPad, but this was due to the iPad 2.
by Josh Lowensohn
Follow-up on international sales being so big.
by Josh Lowensohn
Cook says: We launched the iPhone 5 in the U.S. during the quarter, but the bulk of the world did not get the launch. I would have expected to see bigger growth in the U.S. versus the rest of the world.
by Josh Lowensohn
Bank of Montreal: Clarification on iPhone 5: Will it launch in mainland China in December? Cook: Yes.
by Roger Cheng
Follow-up: Will you end December quarter with a back log?
by Roger Cheng
Cook: I feel great about manufacturing ramp, and output is much higher. I'm confident we'll supply quite a few. In terms of when that balance occurs, I can't tell at this point. "Demand is very robust," he stressed again.
by Roger Cheng
Next question comes from Chris Whitmore and it's about the iPad. What's your feel around the emerging model where vendors can subsidize their hardware with advertising, content or services?
by Josh Lowensohn
Cook: We've seen low cost challengers before, and iPad continues to beat every other tablet on the market at any price. We think customers are very smart, and have very high expectations, and want a device that can do more. We are confident that our vision of making the best product will win at the end of the day.
by Josh Lowensohn
Follow up on supply -- you've made some changes on your supplier list, perhaps for strategic reasons . Is that adding complexity, and cost structure?
by Josh Lowensohn
Cook: I'm not sure what you're trying to get at there, but I Wouldn't say there's been a significant change in our supplier partners. There's been some change, but I wouldn't describe any of them as significant, and I wouldn't say any of them changed costs.
by Josh Lowensohn
Whitmore: I was specifically asking about you and Samsung.
by Josh Lowensohn
Cook: I wouldn't say that LCD changed any costs, and Samsung, we continue to be a customer of Samsung, and continue to have a commercial relationship.
by Josh Lowensohn
Next question: What did you learn over the last couple of years that led you to believe the time was right for iPad Mini?
by Roger Cheng
Cook: We would not make a 7-inch tablet. We don't think they're good products. We would never make one.
by Roger Cheng
Cook: One of the reasons is size. The difference in just the real estate between the 7.9 vs. 7 is 30 percent. When you look at the usable area, it's greater than that.
by Roger Cheng
Cook: The iPad Mini has the same number of pixels as iPad 2.
by Roger Cheng
Cook: The iPad Mini is not a compromised product. "It's in a whole different league."
by Roger Cheng
Over 80 percent of revenue will come from products just introduced in the last few weeks, Apple says.
by Roger Cheng
Apple working to get the cost curve down, as it has in the past.
by Roger Cheng
