Cook on iPad mini canibalization, Microsoft’s Surface and Apple’s position on tweener tablets

By , Oct 26, 2012

Apple CEO Tim Cook during yesterday’s conference call with Wall Street analysts briefly touched on Microsoft’s Surface tablet, which hit store shelves today, canibalization of its own products by the iPad mini and more. He also addressed his predecessor’s public dissing of smaller tablets two years ago, insisting that Apple’s position on the matter remains unchanged and stressing that the iPad mini, which has a 7.9-inch display, is “in a whole different league” than other seven inchers. Apple in fact, he said, “would never make” a seven-inch iPad…

On Microsoft’s Surface, Cook commented:

I think one of the toughest things you do with each product is to make hard tradeoffs, and decide what a product should be. And we’ve really done that with the iPad. And so the user experience is absolutely incredible.

He must be referencing tradeoffs mentioned in Surface reviews by The Verge, Wired, CNN and other publications.

I think one of the toughest things you do with each product is to make hard tradeoffs, and decide what a product should be. And we’ve really done that with the iPad. And so the user experience is absolutely incredible.

I suppose you could design a car that flies and floats, but I don’t think it would do all those things very well. I think people, when they look at the iPad versus competitive offerings, are going to conclude they really want an iPad. And I think people have done that to date. And I think they will continue to do that.

I love the car that flies and floats analogy. It’s in line with Cook’s earlier toaster-refrigerator dilemma and close to Jobs’s analogy of PCs being like trucks.

In response to analysts’ concerns that the iPad mini will canibalize Apple’s other products, Cook said:

We don’t really have an old product. We have only new products. We just announced the fourth generation iPad.

The way we look at this is that, we provide a fantastic iPod touch, we provide an incredible fourth generation iPad, iPad mini and iPad 2. Customers will decide which one, or two, or three or all four they would like and will buy them.

As for the iPad mini, four out of each ten respondents want one, with the entry-level $329 16GB WiFi model being by far the most popular one.

We have learned over the years not to worry about cannibalization of our own product. It’s much better for us to do that than for somebody else to do it.

And the far, far bigger opportunity here are the 80-90 million PCs that are being sold per quarter. There’s still over 300 million PCs being bought per year.

So as more PC users transition to tablets, Cook is confident Apple will benefit from the tablet craze. The philosophy also echoes the company’s position that the iPhone has a tremendous opportunity as all cell phones eventually become smartphones.

And I think a great number of those people would be much better off buying an iPad or a Mac. And so I think that’s a much bigger opportunity for Apple. And so instead of being focused on cannibalizing ourselves, I look at it much more that it’s an enormous incremental opportunity for us.

He’s, of course, referring to the so-called ‘halo’ effect where pleasing experiences with an Apple product entice first-time buyers to consider other Apple products in the future.

Cook and Apple’s finance chief Peter Oppenheimer also defended the iPad mini’s $329 price point by saying Apple wanted to “create a product that people will love for month and years after they purchase it and continue using it in a robust way”, as opposed to cheap tablets that don’t see very much use and end up collecting dust in drawers.

Right after Tuesday’s iPad mini announcement, Apple’s worldwide marketing chief Phil Schiller also touched on the $329 price. He said Apple doesn’t want to scrape the bottom of the barrel by compromising the user experience, adding that buyers understand they’re paying for a high-quality, integrated product.

Cook was then challenged to explain Apple’s position on so-called tweener tablets after the late Steve Jobs had publicly dissed them two years ago as being inadequate. He responded by re-iterrating Apple would never make a seven-inch tablet because it doesn’t think they’re good products.

The comments that I think you’re referencing are comments that Steve had made before about seven inch tablets. And, let me be clear: we would not make one of the seven inch tablets.

We don’t think they’re good products, and we would never make one. Not just because it’s seven inches, but for many reasons. One of the reasons, however, is size.

I’m not sure if you saw our keynote, but the difference between just the real estate size between the 7.9 – almost 8 – versus 7 is 35 percent. And when you look at the usable area, it’s much greater than that – from 50 to 67 percent.

The iPad mini is a fantastic product. It is not a compromised product like the seven inch tablets. It’s in a whole different league.

Google and Amazon, of course, both produce seven-inch tablets that begin at just $199. Pictured below: the seven-inch Nexus tablet by Google. A ten-inch version is allegedly in the works.

As a reference, this is how Jobs commented on smaller tablets during an October 2010 earnings call:

I’d like to comment on the avalanche of tablets poised to enter the market in the coming months. First, it appears to be just a handful of credible entrants, not exactly an avalanche. Second, almost all of them use seven-inch screens as compared to iPad’s near 10-inch screen. Let’s start there.

One naturally thinks that a seven-inch screen would offer 70 percent of the benefits of a 10-inch screen. Unfortunately, this is far from the truth. The screen measurements are diagonal, so that a seven-inch screen is only 45 percent as large as iPad’s ten-inch screen. You heard me right; just 45 percet as large.

If you take an iPad and hold it upright in portrait view and draw an imaginary horizontal line halfway down the screen, the screens on the seven-inch tablets are a bit smaller than the bottom half of the iPad display. This size isn’t sufficient to create great tablet apps in our opinion.

Well, one could increase the resolution of the display to make up for some of the difference. It is meaningless, unless your tablet also includes sandpaper, so that the user can sand down their fingers to around one quarter of the present size. Apple’s done extensive user-testing on touch interfaces over many years, and we really understand this stuff.

There are clear limits of how close you can physically place elements on a touch screen before users cannot reliably tap, flick or pinch them. This is one of the key reasons we think the 10-inch screen size is the minimum size required to create great tablet apps.

For other interesting points from Apple’s earnings call, check out Cody’s post.

Apple yesterday reported fiscal 2012 fourth quarter net profit of $8.2 billion on sales of $36 billion based on shipments of 26.9 million iPhones, 14 million iPads, 4.9 million Macs and 5.3 million iPods. The company in total sold 44 million iOS devices during the September quarter.

It’s important to remember that Jobs famously misled competitors by trashing video on the iPod only to later launch a video-capable iPod. Likewise, the company had been insisting for years it had no desire to enter the mobile phone industry with its own cell phone.

Opinions on Cook’s clarification of Apple’s position on small form-factor tablets?

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  • http://twitter.com/aineelGD ✘✘Aineel Nocum

    you forgot to quote this “I think one of the toughest things you do with each product is to make hard tradeoffs, and decide what a product should be. And we’ve really done that with the iPad. And so the user experience is absolutely incredible” :) nice article anyway :)

  • iUser2012

    It looks like those analysts who were asking questions were mostly listeners and didn’t ask right questions.

    It’s just fun to hear that “ours is not 7 but whole 7.9″. Cut the crap. It’s ppi is lower and it still fits one hand. So what a big difference!!!

    And he claims they do not have old products and still mentions iPad 2. What a contradiction. I would ask why they removed all races of iPad 3 (not some support pages of course) to make iPad 3.5 look like a realy big improvement.

    Jobs (edit: not Cook. thx John Skiklas) said “we think the 10-inch screen size is the minimum size required to create great tablet apps” This should conclude the questions that would be asked. If minimum 10″ is required for great apps than iPad mini app wouldn’t perform as great as they claim!!! Was that a baseless claim or market pressure made Apple give up such high standards.

    They wanted to compete at smaller tablet segment despite the company’s early stand against it. That would be normal, profit matters. But they are not honest to tell it but make up some justifications that are not thought well. They are lucky or arrange it so that nobody asked above questions.

    • http://www.facebook.com/profile.php?id=100000514380051 John Sklikas

      Just a note though. Jobs said that the minimum size for a tablet is 10 inches in 2010, not Cook.

      • iUser2012

        thx. I corrected the name. By the way I have iPad 3 and I like it even though I am not that much satisfied with iPhone. Apple’s tablets are better than its phones (my opinion of course :-))

        I just don’t like these cheap marketing crap. So far every explanation was a chain of words aimed at thwarting questions only.

      • http://www.facebook.com/profile.php?id=100000514380051 John Sklikas

        Yes I agree with you. The reason behind the iPad mini is money, let’s be honest. Apple wanted to enter the 7 inch tablet market so that they will dominate in the whole tablet market. And they made all the previous apps compatible. But what is good for us the customers is that we have another good 7 inch tablet in the market despite silly facts like it’s not 7′ and that it’s 7’9. Though the price is high but this is standard with Apple. You can build a desktop pc with the specs of a Mac Pro and install Mac on it via Hackintosh and pay about 2000$ less…

  • CollegiateLad

    It’s like you combined 40 topics into one… I can’t keep up. Is the last line even a sentence?

  • Appletiser

    Never make a 7″ tablet? (pedantically) speaking they have, its 7.9, it’s in the 7″ category and to try and pass it off as an 8″ device is breaking trade description laws. I’ve never sold the iPad to customers as a 10″ product because i’d be lying.