Apple's Tim Cook talks iPad dominance, hard drive shortages

Apple's Tim Cook talks iPad dominance, hard drive shortages

Summary: Apple's CEO posits that the iPad is cannibalizing both Mac and Windows PC sales.

SHARE:

Apple posted record sales numbers for its iPhone, iPad and Mac units -- but CEO Tim Cook talked up these and then some during the quarterly conference call with investors on Tuesday. Here's a rundown:

See also: Apple: 37.04 million iPhones sold in Q1 Apple's Q1: The iPhone 4S will carry the day

iPads

Cook didn't exactly have fighting words for any tablet competitors, but it didn't seem like Apple is really worried about anyone else just yet -- even with the success of Amazon's Kindle Fire, the $199 tablet released in November.

In response to a question about whether or not Apple is actually benefiting from lower-cost tablets on the market (meaning, are prospective iPad customers not finding what they want on sub-$200 tablets, so they opt to pay more for the iPad), Cook said that there "was no obvious change" based on looking at U.S. data in the last month.

However, PC makers might be in the firing line. Reaffirming that the iPad presents a "huge opportunity for Apple over time," Cook posited that "there will come a day when the tablet market is larger than the PC market."

"There is a cannibalization of Macs by the iPad, but we continue to believe there is more cannibalization of Windows PCs by the iPad," Cook argued, "You can see it beginning to appear virtually everywhere.

Also boasting that the "ecosystem for the iPad is in a class by itself," Cook explained that "people really want to do multiple things with their tablets, so we don't see these limited-function tablets and e-readers being in the same category."

Hard drive shortage

On the same day that it was announced that Apple became the leading semiconductor company in 2011, talk about the hard drive shortage also inevitably popped up.

On the surface, it would seem based on Mac sales last quarter (approximately 5.2 million units) haven't been tainted just yet by the worldwide shortage following flooding in Thailand last year.

“For the December quarter, there was not a material supply or cost impact to any of our product lines,” Cook said. "For the March quarter, we’re not expecting any impact, but hard drive area prices have increased, and we included those increases in our guidance."

Cook also noted that Apple "did receive better costs than we had enrolled in our guidance, particularly on displays,NAN flash and DRAM" than expected, affirming that "those prices trends should continue to be favorable this quarter."

iPhones

The heroes of the quarter, led by the iPhone 4S released in October. Sales toppled an incredible 37.04 million iPhones sold -- a 128 percent increase over the first fiscal quarter of 2011. The global roll out for the iPhone 4S was faster than any of its predecessors (already available in 90 countries), and first quarter results don't even include China as the 4S just made it there this quarter.

Cook commented that Apple execs thought they might have been too bold entering the first quarter as to what the demand would be.

“As it turns out we didn't bet high enough,” Cook said, explaining that Apple was short of supply throughout the quarter and did end with a significant back log in certain "key geographies." However, Cook did not specify as to where, but 4S sales were strongest in the U.S. and Japan.

He did point out that Apple "made correct decision to go with a broad range of iPhones." Thus, we can probably see the continuance of the iPhone 3GS and iPhone 4 for some time to come.

Side notes:

  • iPods: Although analysts seem worried about this unit -- which is not surprising considering it was the only one that saw a decrease in sales -- Apple doesn't seem to be giving up here just yet. The iPod still leads as the top MP3 player brand in the world, and there are a few products here that really fulfill some voids (such as the iPod shuffle.) Cook also touted, "There's really no comparable product to the iPod touch out there."
  • Apple TV: This little guy was a bit forgotten this quarter, although it, too, posted a record number for sales at 1.4 million units during the last quarter. Unfortunately, what we all really want to hear more about is the future of Apple TV and if/when we are going to see that fully-fledged television panel from Apple, rumored to be unveiled in late 2012 or 2013. As for anything else Apple TV-related, Cook had "no other comment."

Related:

Topics: Apple, Enterprise Software, Hardware, Processors

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

26 comments
Log in or register to join the discussion
  • Haven't seen it myself yet

    "we continue to believe there is more cannibalization of Windows PCs by the iPad"<br><br>I can't point to a single person who bought an iPad INSTEAD of a PC and I've actually tried to convince a few people to do exactly this. Everyone I know who purchased an iPad purchased it as a device to complement their PC (invariably a Windows PC). While they use their PC far less frequently than they used to (as do I) it has been a hard sell to have the iPad completely replace a PC. I know that I've been unable to do it yet.
    toddybottom_z
    • RE: Apple's Tim Cook talks iPad dominance, hard drive shortages

      @toddybottom_z I agree with you. Tablets and PCs are two different tools that share some functionalities.
      themarty
      • RE: Apple's Tim Cook talks iPad dominance, hard drive shortages

        @themarty Wow! I just read the leaked iPad 3 feature list and release date, and I must say it's pretty amazing. Can't wait to pick mine up!

        If you guys want to check out the leaked iPad 3 information, just check the link below -

        http://ipad3leak.com.nu
        SincerelyHis
    • RE: Apple's Tim Cook talks iPad dominance, hard drive shortages

      @toddybottom_z
      "While they use their PC far less frequently than they used to (as do I) it has been a hard sell to have the iPad completely replace a PC."

      Using less frequently means replacing less frequently since the PC will last longer. That will cut into sales = cannibalizing
      THavoc
      • Not from what I've seen

        @THavoc
        PCs tend to become obsolete long before they break down from usage. Again, I can only go based on what I've personally witnessed but if there has been a trend of replacing PCs less frequently, that trend started before the iPad was released. Even before the iPad came out, we would constantly hear about people who were happy still running XP on really old PCs.

        Has there been a slowdown in the sale of new PCs? Yes, I would say that I've seen that, especially in businesses that are extremely happy with their old XP PCs that were inexpensive and have lasted forever. Microsoft really did a fantastic job with XP. I don't believe any of that has to do with the iPad though. Everyone I know who wanted to buy a new PC did so regardless of whether they also purchased an iPad.
        toddybottom_z
      • Then that works in refernce to future iPad sales, also

        @THavoc
        Since people still have PC's and they will last longer, then that would mean that they will continue to use the PC as opposed to the iPad where it makes sense, thus they are using their iPad less.

        This means that iPads will last longer, thus cutting into salesof iPads = cannibalizing
        :|
        Tim Cook
      • @THavoc gets it in one. Goes right over NonZealot and Mister Spock.

        @THavoc

        The decline and flatlining of the PC with the introduction points to a slowdown and not a drop off. A small handful of people will purchase a tablet (I will use the generic term and not iPad) and extend the life of their PC by 2-3 months. A quarter or so.

        The tablet does not replace all the functions of a traditional desktop/laptop but it will replace many of the day to day uses making the need to upgrade an aging PC less critical. Several million being impacted by this really will slow down PC sales measurably.
        Bruizer
      • Peter Perry gets it in one, goes right over Bruizer

        That there is a slowdown is undeniably. This started happening before the iPad came out. It is based on several factors, one of which being that Microsoft did such a fantastic job with XP that people's old computers are still doing the job they were originally purchased for.

        Remember, up until a couple months ago, most couldn't even practically use an iPad without iTunes. iTunes requires a computer.

        In fact, this is the 2nd time in 2 days that Bruizer provides his own counter evidence. Yesterday he tried to convince us that DOS / Windows had both no competition when it came out while also remembering that DOS / Windows killed all the competition that was there when it came out. Today, Bruizer blesses us with a chart (he links to it below) clearly showing the PC dropoff beginning years before the iPad came out.

        Thanks Bruizer, it always makes it so much easier when you provide your own proof to kill your own arguments.
        toddybottom_z
      • @toddybottom_z: Still misses the mark

        "Yesterday he tried to convince us that DOS / Windows had both no competition when it came out while also remembering that DOS / Windows killed all the competition that was there when it came out."

        Nice try at a lie. I said that DOS/Windows had no competition WHILE it was out and that it killed all competition WHEN it it came out.

        If you are trying to tie your financial future to the long term health of the traditional PC market then you will find your job to be more and more squeezed by competition while the rest of the world shift to a "Post-PC" world. This started in 2007 (just prior the economic down turn) and accelerated with the quick rise of Android and now the iPad.

        PCs will always have a place just like CAD workstations and mainframes still have a place but many of their functions will be supplanted by tablets and other portable devices. Simply look at the Motorola Atrix. Last year, Motorola announced a product that truly is the direction the industry is heading; it was just announced too early and before all the usability issues were worked out. Conceptually, however, it was as the most innovative cell phone announced since the iPhone was announced in 2007.

        The naysayers will point to antidotal evidence like:
        "The slowdown in PCs is because of harddrive shortages"
        "The PC slowdown is a result of the economic downturn."
        "I didn't behave this way and I have 3 friends that did not behave this way"
        "Our company just did a refresh with new PCs"

        and ignore the data placed in front of them thinking people are "cooking the stats". They will ignore the local yogurt chain that shifts from putting in PCs with games and internet to putting in iPads with games and internet. They will ignore a continuous decline in PC sales while expensive mobile devices are seeing explosive growth. In just under 2 years, the iPad alone accounts for:

        1.8% of the world's internet traffic.
        1.7% of Europe's internet traffic.
        3.1% of the US's internet traffic.
        3.5% of the UK's internet traffic.
        4.3% of Australia's internet traffic.

        Add in iPhones, iPod Touches, Symbian (Yes, Symbian is growing in Africa at an amazing rate) and Android devices and it is even more striking. There is a sea change happening within the computer industry and most of the tech community is missing it.

        These are the same type of people that think evolution is a baked idea because it conflicts with their pre-conceived religious views. They are unwilling to look at data rationally because it will shatter their world view. Newsflash: The world is going mobile. People are shifting finances from traditional PCs to mobile solutions with higher monthly costs. Disruption looks like a slow process while it is happening but looks obvious in hindsight. Just ask William Orton:

        "??? This 'telephone' has too many shortcomings to be seriously considered as a means of communication." -William Orton after this guy called Bell tried to sell Western Union the right to this device that allowed voice communications.
        Bruizer
      • Please don't lie

        "I said that DOS/Windows had no competition WHILE it was out and that it killed all competition WHEN it it came out."

        You said that DOS/Windows was terrible and that the only reason it was successful is that people had no choice but to buy it. Yet you also had to admit that DOS/Windows killed the competition after it came. Therefore you have to admit that when DOS/Windows came out, there was a ton of competition and all those consumers bought DOS/Windows instead of that competition. That makes your claim that "DOS/Windows was only successful because people had no choice" a garbage claim that you yourself disproved.

        "In just under 2 years, the iPad alone accounts for:
        1.8% of the world's internet traffic."

        Where have I denied that iPads are being used to perform tasks (like browsing) that used to be reserved for the PC? In fact, I wrote it in my first post:
        "While they use their PC far less frequently than they used to (as do I) it has been a hard sell to have the iPad completely replace a PC."

        What part of this are you finding so hard to understand? We are both in a way arguing the exact same facts. There is a decline of PC sales. There is an increase in iPad usage. This is undeniable and I don't deny it. I even highlighted it in my first post.

        What I claimed in my first post is that in my personal experience, WHEN a person has decided to buy a new PC (which happens less and less considering how fantastic MS's OSs have been and how long PCs in general are lasting) that they STILL go ahead and buy a new PC even if they already had or were planning on buying an iPad.

        Through my discussions with people, and my own decision process, the decision to buy (or not buy) a new PC has been a separate process from the decision to buy (or not buy) an iPad.

        Until iPads can replace 100% of what a PC can do (and for most, in my experience, it isn't there yet) then people will not buy iPads instead of PCs. They will buy a new iPad when they feel the new version is worth it and they will buy a new PC when they feel the new version is worth it. I buy a new bike every few years because technology improves. I buy a new car every years because technology improves. My decision to buy a bike does not make me delay the decision to buy a new car. My car and bike purchases are on 2 different, unrelated timelines. From my experience, people's iPad and PC purchases are on 2 different, unrelated timelines and your graph proves it. The decline in the PC happened long before the iPad came out and was more due to fantastic PC hardware and fantastic Windows OS.
        toddybottom_z
    • You are not a reference

      PC shipments and Windows sales were down last quarter by 2% worldwide. IPD sales were up how many percent? Microsoft blamed hard drive shortages. If there was a hard drive shortage, why were Mac sales up 26%? You not knowing anyone that did something is a religious zealots view of the world. There is no reason Appe did a huge increase in sales using the same components PC vendors use. So, the iPad is a partial explanation. Tom Cook has access to information you can't know and that Steve Balmer has no interest in sharing.
      mlindl
  • Apple TV and the Motorola XOOM

    Apple's hobby device sells more units in the past quarter than all the XOOM tablets Motorola sold in 2011.

    Motorola execs state that the XOOM was only a hobby and are well pleased with it's sales.
    kenosha77a
  • I've seen no evidence that the iPad is cannibalizing either Mac or PC

    People are moving other entertainment budgets out of the way for their iPads... phones, TVs, other less all-round devices perhaps, like digital cameras and game consoles; but not PCs.

    Apple's own sales figures show it - Mac sales are higher than they've ever been.
    Mac_PC_FenceSitter
    • Here is some...

      @rbethell

      A beautiful graph showing the market share of mobile (Post-PC) and traditional devices (PC)...

      http://www.asymco.com/wp-content/uploads/2012/01/Screen-Shot-2012-01-15-at-1-15-8.45.58-PM.png

      Source:
      http://www.asymco.com/2012/01/17/the-rise-and-fall-of-personal-computing/
      Bruizer
      • RE: Apple's Tim Cook talks iPad dominance, hard drive shortages

        @Bruizer You didn't happen to notice that the fall was actually in line with the market crashing did you?

        My Brother has upgraded his PC with a whole new custom built unit, my friend replaced theirs, another friend bought an additional one, I upgraded one and bought another! I know plenty of stories like this and most aren't buying a tablet of any kind so calling it the fall of the PC is dumb!

        Oh and my company just replaced 24,000 units with new Computers (all of them Windows Boxes! Does it really look like the source you provided is anything more than just statistics being skewed to tell a story?
        slickjim
      • @Petter Perry: Nope.

        "Does it really look like the source you provided is anything more than just statistics being skewed to tell a story?"

        Simple answer.
        Bruizer
    • RE: Apple's Tim Cook talks iPad dominance, hard drive shortages

      @rbethell Apple PC Sales are higher than they've ever been because they require you to use their tools to develop for their iOS devices. Honestly, if somebody else comes up with a way to do that on a PC, then you will see the market share push of the Mac Computers Slow Down.
      slickjim
  • RE: Apple's Tim Cook talks iPad dominance, hard drive shortages

    wow... they sold more iPads last quarter than HP sold PCs?
    doh123
  • When Apple targets the enterprise.....

    Will you be ready? Windows sales are in decline, Mac sales in the enterprise are on the rise. SAP is distributing 20k iPads per month to employees for use at work. Apple will have a 30% market share in desktops in markets that count most for profitability. The enterprise network will be reinvented by Apple. App development for Windows will wane in favor of OS-agnostic development. The future is here and the train has left the station. Windows is dying, Linux is useless and far more expensive to deploy crushing the benefits it delivers. The world turns, change is happening. Windows is dying.
    mlindl
    • RE: Apple's Tim Cook talks iPad dominance, hard drive shortages

      @mlindl By dying you mean 525 Million Copies of Windows 7 sold in what, 3 years? Making it the most popular OS in history.
      Windows declines are based on Hard drive shortages. Apple's most popular Mac uses Flash Memory not hard drives.
      Lets not get ahead of ourselves here... :)
      DreyerSmit