Tim Cook and Peter Oppenheimer defend iPad mini pricing

By , Oct 26, 2012

You had to know this was coming: during the Q&A portion of Apple’s conference call yesterday, analysts grilled Tim Cook and CFO Peter Oppenheimer about the higher-than-expected pricing on the iPad mini.

As you would expect, the two defended the tablet’s $329 price tag, stating that they didn’t want to build a small, cheap tablet. “iPad mini is a fantastic product; it’s not a compromise like the other 7-inch tablets.”

Here’s the question that sparked the conversation from UBS analyst Steve Milunovich (via Seeking Alpha):

Thank you very much. Regarding the iPad, you said that, you priced it very aggressively. I think many people on the street seem to have a slightly different view. Could you maybe talk a little about your pricing philosophy or was it driven by cost or is it just more to keep up a premium brand, given the quality of your products?

And here’s Peter Oppenheimer’s response:

 “Steve, it’s Peter. When we set up the bill, the iPad Mini, we didn’t setup the bill the small cheap tablet, we set up the bill of the smaller iPad that offers the full iPad experience as our customers would expect. As a result, the difference between the iPad Mini and the competition is profound. Our iPad Mini begins with a 7.9 inch display, which is 35% larger than 7 inch tablets, providing a much better experience. We are shipping two great cameras, FaceTime HD front a 5 megapixel of 1080p iSight rear camera versus typically a one from our competition. We are shipping our fastest communications with dual-band Wi-Fi and it included A5 chip, which has higher performance in our competitors. And then finally, the slick end finish of our precision, unibody aluminum closure is breathtaking when held in your hands.

In addition, Oppenheimer says that the iPad mini costs more to build and has significantly lower gross margins than the cooperate average. He also notes that Apple is working to fix that by improving its manufacturing process.

Tim Cook added:

“Steve, one of the things we tried to is to create a product that people will love for month and years after they purchase it and continue using it in a robust way. So that’s what iPad Mini has been designed to do and you can only see that more broadly on iPad by looking at the usage statistics, as I had mentioned earlier this week, over 90% of the web traffic from tablets are from iPad. And so, Apple will not make a product that somebody may feel good about it for the moment that they’re paying for and then when they get it, they really ever use AVR, that’s not what we’re about, it’s not a kind of experience we want our customers to have. And I think when you – I would encourage you to use an iPad Mini and I don’t think we’ll be using anything other than maybe another iPad or something app that you do there.”

So basically what Cook is saying is that Apple’s not trying to compete with the $100 Android tablets out there right now. Because people don’t tend to use them after a while due to poor user experience, or build quality.

The 7.85-inch tablet, which was unveiled on Tuesday, starts at $329. That’s just $70 less than the full-sized iPad 2, and more than $100 than competing tablets from Amazon and Google. And it’s drawn some criticism.

Initially, iPad mini rumors pegged the tablet’s price tag between $200 and $250. But obviously, Apple didn’t feel it could make them at that price, otherwise it would have. After all, that’s the business it’s in. Selling things.

Pundit and analyst opinions aside, the true test will be how consumers react to the iPad mini’s higher pricing. And we shouldn’t have to wait long to find out; the tablet became available for pre-order this morning.

  • Share:
  • Follow:
  • http://www.facebook.com/profile.php?id=44203201 Zakarij Wallace

    See, I don’t want a full size iPad. It’s too big for what I would want to use it for. I’m more likely to buy an iPad mini because of it’s size, over anything else!

    • http://www.facebook.com/madmankadz Kadeem Kadz Dulice

      im tryin to win mine from IDB

  • Appletiser

    even if they do manage to improve the manufacturing process they won’t pass any cost benefits on to the consumer (edit: i’m not saying they should, its business, but mentioning reduced costings leads the casual reader to thinking the retail price will also be lowered accordingly)

  • http://twitter.com/Mathi_111 Voldemort’s Nase

    Ask them why they didn’t include a Retina Display.

    • Joe

      How much more expensive did you want it, read the article on the screen prices

    • http://twitter.com/imapolyglot P

      Perhaps, they took battery life into consideration when they chose IPS display. It has to last as long as the 4th gen iPad with smaller battery. And of course, the price.

    • Kaptivator

      They are saving the Retina Display for the update in 6 – 12 months. Im not bashing Apple because I have 3 iPhones, an iPad 3 and pondering the MacBook pro 13 retina or 15 non retina. But as a business it makes sense for them to hold their cards close to their chest and give the customer what they need for the moment and what they want down the line. Just my opinion.

  • http://sn0wblog.com/ Blend Kransiqi

    Cheaper means more costumers = more sales/money

    • http://twitter.com/ExWoW MiKey

      If you want something cheap you’re wrong with apple. Apple produces things with high quality and thatmeans expensive. If you want something cheap get a plastic Android tablet. They are fast and good but cheap. If you hold an ipad in your hand and an android tablet in the other you’ll notice the difference in quality. I think you just have to choose between Price or Design/Quality

    • Mcsquared

      I’m pretty sure they won’t struggle to get sales by any means, with their iphone 5, everyone said it was very sub-par and yet Apple is scrambling to find enough components to fulfill everybody’s order. Whereas most other companies will build too much of a product that nobody wants to buy.

      For everybody who says they only get anything Apple makes because of the logo, its probably true that they come for the logo, but they most likely stay because of the quality that logo represents.

      • Thorasgard

        Not everyone said the 5 was subpar.

  • iUser2012

    As Apple makes money of hardware based sales more than the software and services it offers, it is highly unlikely that they would reduce the price, even if they reduce the cost. Especially there are tens of thousands of people who are fruit logo fans willing to dump the recently bought gadget regardless of it s being fully functional and capable just for the sake of getting the most recent one.

    And Apple executives should have been asked if it was not the compete with 7″ Android tablets, do they want to compete their own iPad? That’s just marketing crap!

    • shar

      look at the excuse, they didn’t want to build a “small cheap tablet” :)), so by comparison, ipad2 only $70 more would be a “large cheap tablet”, very funny apple!!!

  • Viktor_Zweig

    So, 7.9″ is 35% larger than 7″?!?
    Nice. Must be some internal math in Pete’s brain.
    Good thing the other Oppenheimer did not use it while testing his fireworks… :-)

    • Ernesto Urquidi

      Dude, you should pay more attention to your math classes. That percent means area of the screen not the size of the diagonal. To give you an idea, there could exist two tablets with the same size of the diagonal but one 300% bigger than the other.

      • Thorasgard

        This is why I place a very heavy emphasis on math with my children. I am math challenged like so many others in this country and I want my children to have better opportunities than I do. If we do not fix our science and math education emphasis in our schools, the best we can hope for them is that Foxconn will be willing to warehouse them in China for employment and they will likely just be allowed to sweep the floor.

      • Viktor_Zweig

        Valid point. I read the sentence again and it can be understood that way.
        Pfew! Good thing we have enough people reading this blog…

    • Dan

      seriously?

  • Thorasgard

    The post seems to have many grammatical errors. Did you uses dictation to put it together? I am trying to be overly critical, but it is a very difficult read.

  • Mike

    They should have asked him why the mini doesn’t have the A6X, retina display, or even a GPS while its cheaper competitors have a GPS. It is literally only a $5 component so it will not drive up to cost at all.

    • Viktor_Zweig

      Exactly!

  • http://www.facebook.com/alexander.gardner.73 Alexander Sir-Cheezitz Gardner

    So, they actually believe that the A5 is more powerful than the tegra 3 in the nexus 7? What a joke.

  • Thorasgard

    Apple is giving people choices and is being criticized for it.

    The mini is not for everyone. I have an iPhone 5 and iPad 3. I personally do need need a high end 7 inch class tablet as well. I certainly would not want just a seven inch and not have anything larger. I may consider a basic smaller lighter tab for reading text in bed. It sure would be nice if apple offered one, but they made a business decision not to.

    It is foolish to claim the mini is not a compromise however. The low res screen was a compromise. I understand the compromise, but a compromise non the less.

    • Ernesto Carrillo

      A dumb compromise not to add retina display. Sincerely thats the reason why im not getting a mini for my wife. I have my ipad 3 and i love it. Never will go bak to a non retina display. I’d rather get the kindle fire hd 7″.

  • http://twitter.com/jedediahdaniel Jedediah Kramer

    The business they are in is making money. They offer a premium product and i fully expected it to be a costly product, but the price of 320 really shocked me. I like how Peter instantly referred to the mini being 35% larger than the other tablets, so lets go by that then, 35% more than 200 would have made starting price of 270 for the mini, which would have been more understandable for me, especially given the build of the device.

  • http://www.facebook.com/joe.jonsen Joe Jonsen

    umm… they can defend all they want .. thrice is too dam high for a shrunken ipad 2 in 2012..

  • Mathias Wiklund

    Yeah, well it’s still cheap for people in America buying it, the rest of the world, not so. 329$ is 2300SEK in Sweden, retail at Apple Store is: 2995SEK that means we pay about 429$ instead… Whoppdido!