We have gone to a streaming model on Apple TV. It’s complete streaming. So all the content is rented from the iTunes store, or is streamed from your computer, or soon to be streamed from your iPhone or iPad with AirPlay. And so how our new model of Apple TV doing? Well, I can report that in just a very short amount of time we’ve already sold a quarter million of them. Over 250,000. And we’re thrilled with that. I think that it’s a great product, and I think that its $99 price point is very enticing, and I think that when we get the AirPlay stuff in place before the end of this year, it’s gonna give another big reason for people to buy it. So we’re happy with how it’s turned out.
[Q: Biggest risks?]
Our goal is to make the best devices in the world, not to be the biggest. As you know, Nokia’s the biggest. And we admire them for being able to ship the number of handsets that they do. But we don’t aspire to be like them. They’re good at being like them. We want to be like us. And we want to make the best ones.
So, you know, in our part of the market Android is our biggest competitor. They outshipped us in the June quarter as we were transitioning to iPhone 4, they outshipped us for the first time according to Gartner’s numbers, which we think are pretty accurate. And so we’re waiting to find out what happened in this quarter. And we’ll find out—I don’t know how we’ll find out, but Gartner will put out some new numbers, and maybe others will, and so one of these days we’ll eventually learn. And I imagine we’ll be competing with them for quite some time, but we have very different approaches. And we believe in our approach very strongly: providing users products that just work. And we think there’s lots of users that want that, in the world. And their approach is very different from that. And there may be lots of users that want their approach as well, but we’re going to pursue ours, and we think that’s the winning approach in the end.
[Q: Market share question.]
Nokia makes $50 handsets, and we don’t know how to make a great smartphone for $50. We’re not smart enough to have figured that one out yet, but believe me I’ll let you know when we do. And so our goal is to make really breakthrough great products, make the best products in every industry that we compete in, and to drive the cost down while constantly making the products better at the same time. That’s what we did with iPod. We updated our products many times every year with better functionality, often times at same price and sometimes at a lower price. And it was the relentless improvement at in some cases a lower price, that was able to beat our competition and yield the market share that it did.
And as you know we have a very low market share in the phone market, in the single digits, in terms of all the handsets. And we have a very high market share now in tablets, because we’re the first mover. But we don’t think about it that way.
The reason we wouldn’t make a seven-inch tablet isn’t because we don’t want to hit a price point, it’s because we don’t think you can make a great tablet with a seven-inch screen. We think it’s too small to express the software that people want to put on these things. And we think, as a software-driven company, we think about the software strategies first. And we know that software developers aren’t going to deal real well with all these different sized products, when they have to re-do their software every time a screen size changes, and they’re not going to deal well with products where they can’t put enough elements on the screen to build the kind of apps they want to build.
So when we make decisions on seven-inch tablets, it’s not about cost, it’s about the value of the product when you factor in the software. You see what I’m getting at? So we’re all about making the best products at aggressive prices. And that’s what we will do. And that’s what we’ve done with the iPod, and that’s what we will do with the iPad as well.
You’re looking at it wrong. You’re looking at it as a hardware person in a fragmented world. You’re looking at it as a hardware manufacturer that doesn’t really know much about software, who doesn’t think about an integrated product but assumes the software will somehow take care of itself. And you’re sitting around saying, well, how can we make this cheaper? Well, we can put a smaller screen on it, and a slower processor, and less memory, and you assume that the software will somehow just come alive on this product that you’re dreaming up, but it won’t. Because these app developers have taken advantage of the products that came before, with faster processors, with larger screens, with more capabilities that they can take advantage of to make better apps for customers. And they’re not… it’s a hard one, because it throws you right back into the beginning of that chicken-and-egg problem again, to change all the assumptions on these developers. Most of them will not follow you. Most of them will say, “I’m sorry, but I’m not going to write down a watered-down version of my app just because you’ve got this phone that you can sell for $50 less, and you’re begging me to write software for it.”
[Q: Why not return some of your cash to shareholders?]
We strongly believe that one or more very strategic opportunities may come along, that we are in a unique position to take advantage of because of our strong cash position. You know, we’ve demonstrated a strong track record of being very disciplined with the use of our cash. We don’t let it burn a hole in our pocket, we don’t allow it to motivate us to do stupid acquisitions. And so I think that we’d like to continue to keep our powder dry, because we do feel that there are one or more strategic opportunities in the future. That’s the biggest reason.
[Q: Why do you think you have an advantage on the price point for iPad versus PC manufacturers?]
I think part of it is because we engineer so much of it ourselves. The A4 chip inside it is an Apple creation. Everything from the battery chemistry to the enclosures. And we’ve learned a lot from the miniaturization we’ve done on iPods and iPhones, and we’re a very high-volume consumer electronics manufacturer. So I think we’ve learned a lot, we’ve developed a lot of our own components where others have to buy them on the market with middlemen, you know, getting their cut of things. And I think we’re systems architects and known how to build systems in a very efficient way. So I think this is a product we’ve been training for for the last decade.