[ Tim Cook may be Apple ’s chief operating officer these days , but he continues to take part in the company’squarterly conference call with Wall Street analysts , just as he did when he was chief operating ship’s officer . Here ’s an edited copy of some of the things Cook had to say , as Apple announce record net income and sales for its financial fourth quarter of 2011 . ]
On Steve Jobs’s passing
This is our first lucre call since the passing of Steve Jobs . The world has lost a seer , a originative genius , and an awe-inspiring human being . Steve was a corking drawing card and mentor and inspire everyone one at Apple to do sinful thing . HIs spirit will always be the basis of Apple and we are dedicated to continue the amazing work that he loved so much . Only Apple brings together software and hardware experiences into such a powerful and structured experience for its customers . As we move forward we will continue doing that with relentless focus . I ’d like to take this chance to express our gratitude to all of the condolences we ’ve received since Steve ’s passing .
On the iPhone 4S
We ’ve gotten off to a great start with the 4S. We ’ve sold over 3 million only three daylight after launch so we are thrilled with the start that we ’ve had . We ’re confident that we will have a large supply , but I do n’t require to predict when provision and need might balance because the demand is obviously super high properly now . I ’m surefooted that we will set an all - sentence record for iPhones this quarter .
If you look on a sell - through fundament , the sequent comparison is down 2.4 million units … That 2.4 was much less of a step-down than what we were expecting and was a big factor in our receipts exceeding our steering by over $ 3 billion . We expected to be greater than 2.4 because we knew that there was great expectation of a June or July raw iPhone since that was the pace we had been on in the last several years . And as we predicted that sell - through did occur in the quarter , but not nearly to the extent that we thought . We significantly beat our guidance . The reducing happened significantly in the back quarter as the [ iPhone 4S ] speculation hit utmost senior high school . However , we are thrilled to be shipping the new iPhone 4S and iOS 5 and iCloud , and we are very confident that we will set an all - time record in the December fourth for iPhone sales . In our wildest dream , we could n’t have dumbfound off to a start as great as we have on the 4S.
On China
The China progress has been awe-inspiring . If you take care at our China revenue it represented just 2 percent of Apple in our fiscal year 2009 , and in this fiscal year we just ended it calculate for 12 percent . And if you just see at the one-fourth we just end , it accounts for 16 [ percent ] . It ’s our fastest produce major region by far . It delivered $ 4.5 billion revenue of our current quarter and that ’s up almost four times or 270 percent year over twelvemonth . That brought the total taxation for the financial year to over $ 15 billion . To further put that in context of use , a year ago in [ 2010 ] , we were mightily above $ 3 billion . It is uprise at a feverish pace .
We have place new retail store there . We now have six in greater China . Our online store opened at the remainder of last year — we have n’t had our one year anniversary yet . We have over 200 mono - mark stores which we call APR , which are resellers and are a premium shopping experience . We are now up to 7000 points of sale on the iPhone in greater China . We are proceed to make investment in this .
How far can it go ? In my lifetime I have never seen a country that has as many people rising into the midway course that aspire to buy product that Apple make . And so it ’s an area of tremendous opportunity . It has apace become number two on our list of top taxation land very quickly , and we ’re obviously placing additional investment and building more stores there as well as doing quite a few other things to continue to extradite neat products to the people of China .
We ’re also placing additional stress on other areas that have show enceinte hope over this fiscal , such a Brazil which was up 118 percent year over class and went over the $ 900 million fool . Russia is beginning to look more and more bright , and , as I mentioned on the last call , the Middle East . So there are several of these markets that Apple has historically not been strong in that the iPhone has really opened up , and introduce Apple to a whole stage set of client that get emotional about other products we have . The iPad will be doing the same . In China , the sky is the limit there , but I would n’t discount other places I ’ve cite as well .
On manufacturing strategies and margin flexibility
We have an outstanding team in this area and a track record that is unparalleled in the industry . We keep on endeavor to improve it all the time . We use our balance sheet in a favourable way to do strategical deal on different parts that we feel are very important to Apple across a series of products . As we get larger , there are some areas where we ’ve elect to diversify some . However our approach has been [ and ] I think will always be to do clientele with as few hoi polloi as we can , so we can be very abstruse with them and do great innovational stuff together . You ca n’t incline to do that when you go out to many people . I think they give us bully quality and sane prices , and that wreathe up helping our margin .
On tablet competition and the Kindle Fire
We had an salient quarter prepare the record doing over 11 million , at the same time determine a Mac record which is phenomenal in itself . We ’ve project several competitors coming into the market to try and contend with the iPad over time . Some had unlike manikin ingredient or different price points , and I opine it ’s reasonable to say that none of these have advance any adhesive friction thus far . And in fact , as all of the competitors came into the market , our shares went up , such that in the June quarter , IDC reported that we were responsible for three out of four tablets sold . I think when you really value this affair and look at iOS 5 , iCloud , the ecosystem with iTunes , and the App Store , books and movies , and the fact that we have 140,000 native apps for iPad versus the hundreds for the other guys , I feel very confident about our power to contend and passing confident in our merchandise pipeline .
On the tablet market
We thought from the starting time that it would be a huge market and it has been even greater than we thought . We ’ve now betray 40 million on a accumulative basis . It ’s pretty clear to me that if you forecast out in the time , that the pad of paper market will still be larger than the PC market . That ’s not a guidance bit , that ’s just something I very much believe . There will be many more people who can access it and the ease of use is so phenomenal that it is off the chart and is a huge chance for Apple over time .
On iPhone 4S velocity
We ca n’t secernate you with precision how many units we would have sold had there not been hearsay and multitude were n’t anticipate an raw iPhone . I certainly believe it was substantial . That ’s the reason that we called it out . I think anyone monitoring the press have sex this , you could probably talk to a mathematical group of client and get the same solution . I think the 4S is off the chart . If you do a comparison of the three Day after launching of last year on the iPhone 4 we came in at 1.7 million ; this twelvemonth we were over 4 million in the same time material body and so that ’s the female parent of all uplifts . We ’re thrilled with how we ’ve gotten started . The feedback we ’re getting from customers is fantastical , so I could n’t be more pleased with where we are .
On Siri
The figure of people using it already is amazing . The demand it head and so forth and the personality it has it unbelievable . We see this as a unsounded innovation , and I guess over clip that many people will use it in a substantial mode . What percent of their input will be by that and what percent of the searching , I do n’t know . It is material and an unbelievable conception , and that ’s the feedback we ’re getting from customers .
Issues in Thailand
Our hearts go out to all the people in Thailand that have experienced this devastation of life and dimension due to the monsoon and flooding . Like many others , we source many part from Thailand and have multiple manufacturing plant that issue these constituent . There are several factories that are not useable , and the recovery meter is not known at this point . The conditions has n’t really allowed an ability to assess that . From the oeuvre that we have done , our master exposure is on the Mac . The act of drive components that are source in Thailand is a important portion of our worldwide drives . I ca n’t give you a precise account statement , but it is something I ’m concern about . I ’m almsot certain there will be an diligence shortage ; how it affects Apple I ’m not indisputable .
On patent disputes
I do n’t want to comment on any especial litigation . It ’s our policy not to do that . We pass a spate of time and money and imagination in come up with unbelievable innovations , and we do n’t like it when someone else takes those . And that ’s why we unfortunately have been pushed into the court of justice arrangement as a remedy to that . I do n’t require to comment about any particular case .
On iPhone price reductions
We did it because we wanted to make the iPhone more accesible to a broader market and so not only did we take the 3GS to discharge on a post - pay basis , but we also lour the cost on the iPhone 4 to $ 99 . We ’ve done both of those because as we looked at it , these are still fantastic Cartesian product and we call back that we can do reasonably well selling those in the post - pay market . It also has the advantage of having a lower Mary Leontyne Price in the pre - pay marketplace , not free and $ 99 , but lower than those entry points were antecedently . Both of those market are very important to us . It has been our cerebration for a while to do that .
On overseas market and the iPad
We are in 90 commonwealth on iPad . We have about 40,000 points of sale around the world . To put that in context , we have about 50,000 on iPod and 120,000 on iPhone , so you could get a feel for the extent of the rollout there . There are still countries left to do , but we are in the main countries with iPad . Do I think there was a slow down on iPad ? With the iPhone numbers , it ’s crystal clear that there was a retardation — that is not the cae with iPad .
Where I think we are with supply and need point of view : Somewhere during the quartern we recruit a supply - and - demand balance and remained there for the equipoise of the quarter . In the last call , I articulate we were do into correspondence in a few countries and sometime thereafter I mean we went into SD balance around the universe . And you could calculate at the portion numbers that third party have reported , and we are doing extremely well there . We could n’t palpate better honestly . The extend of the usage , the Comscore chemical group that 97 pct of the web usage of pad in the U.S. is from the iPad . It ’s mind bowl over . We palpate very good about that .
In terms of other countries outside China , we have already set campaign in the place that I mentioned . It ’s not something we are start next hebdomad it ’s something we ’ve already done . Obviously we would n’t have done over $ 900 million in Brazil with no effort . There are some countries in the world that have protectionist type structures where the prices of the goods are extremely mellow if there ’s not local content involved so we will asess each of those and will determine what ’s in our best stake . The canonic approaching are the same as the game plan we used in the China . It ’s just a thing of the charge per unit and stride of the rollout and whether to involve every one of the thing we did in China . In China , we picked everything that we get laid to do , we are building retail , we depart in with an online store building , we are establish an APR channel and a third - party channel . We ’re doing important advertizing , everything we do in the U.S. , we ’re doing in China . We would not be doing that in each of the country I make . We would be doing portions of that and have already start to achieve numbers we did last year .
On iPad cannibalization
I do believe that we are seeing cannibalization , it ’s showing up in two agency : some people are electing to buy an iPad rather than a Mac . However I believe a expectant numeral of people are electing to buy an iPad alternatively of a Windows - ground microcomputer . Despite this , the Mac had the best twenty-five percent by far last quarter , even having the best fourth part on the iPad , the Mac had its best quarter ever . With cannibalization like this , I hope it continues .
On Apple’s cash flow
Today as you know we wanted to maintain flexibleness . I think that everyone that knows us have it off that cash is n’t burning a hollow in our pocket . We are n’t the type of people to do silly thing with it . We invest it conservatively . If you look at [ financial officer ] Gary Wipfler and his team ’s runway track record , they ’ve done a phenomenal job in a extremely difficult securities industry in the last few year .
We ’ve also taken money and done thing with it that are in Apple ’s better interest . We ’ve acquired several companies , we ’ve acquired IP , we ’ve invested in the supply chain , and we use money to build out our stores and bring home the bacon for a flock of new product tooling . The cash that we do pass , we ’re doing an extremely good job of it , and we ’re very frugal about using it and using it in the right-hand topographic point . That said , I ’m not spiritual about defend cash or not have it , I ’m spiritual about a lot of thing but not that one . We will continually require ourselves what ’s in Apple ’s right interest and always do what ’s in Apple ’s good interset . It ’s a subject for the board on an ongoing basis , and we ’ll continue to discuss it .
I retrieve that anyone from my peak of opinion see to it that cash is always a theme and will close to spend it in Apple ’s best sake . I think that we ’ve done that so far , if you look at where we spend it , I think you ’d agree .
iPhone goals
We want the iPhone to be in as many customers hands as potential because we think it ’s the greatest speech sound by far . That ’s why we live to do that . We aspire to much larger mass than where we are . We think the smartphone market with finally absorb the French telephone grocery . The French telephone securities industry is a immense market , it ’s 1.5 billion handsets , and the smartphone grocery store is a bit over 400 million or so . There ’s a huge emergence in the smartphone market , and we think we can develop with the sphere . The big win will be to exhaust into the 1.5 [ billion ] . you’re able to tell that with the moves we ’ve made latterly .
On Japan
A huge percentage of Japan ’s entire taxation in the year - ago tail was from the iPhone 4 launching , it was the iPhone 4 ’s first quarter . When you do a year - to - year compare , that adversely bear on the revenue equivalence . The Mac , however , had an incredible tail acquire at 48 percent in a securities industry that is barely growing at all . So we earn significant ploughshare on the Mac side of the business , the iPhone was a negative year - over - year equivalence , but we have get off to an unbelievable starting line in Japan — it was one of our first seven countries . It ’s very clear that Japan is another exercise of the delay that we were talk of earlier .
Carriers receptivity of iPhone pricing change
If you face at the channel armory on iPhone that was there at the end of September 24 , there were 5.75 million . Over one-half of that has already sold through . So one portion of the thing driving that is the elasticity question you ’re getting at . What we also did in a very few country last quarter is drop the 3GS cost a bit early , particularly in some of the prepay markets and were extremely proud of with the results . It give us even more judgment of conviction to follow through with the design modification we made over in October .
