During Apple’s earnings conference call on Tuesday, company COO Tim Cook was asked about the iPad’s competition and offered some frank views on the subject, saying: “If you look at what is shipping today there is not much out there.” Later, another analyst queried him on a US$3.9 billion component supply contract that was revealed during the initial presentation, and he hinted that it could be tied to Apple’s Next Big Thing.
On the subject of tablets, Mr. Cook said: “Generally speaking, there are two kind of groups today. The ones that are using a Windows-based operating system are generally fairly big and heavy and expensive. They have a very weak battery life. They require keyboard or stylus as an input device. And from our point of view and what we have seen customers, frankly, just are just not interested in them.”
And the second group? “Then you have the Android tablets,” the COO continued. “And the variety that are out shipping today, the operating system wasn’t really designed for tablet. Google has said this, and so this is not just an Apple view by any means. So you wind up having a size of a tablet that is less than what we believe is reasonable, or even one that would provide what we feel is a real tablet experience. So basically you wind up with kind of a scaled-up smartphone, which is a bizarre product in our view.”
He also offered his thoughts on the Android tablets unveiled during CES: “Generally they lack performance specs, they lack prices, they lack timing. And so today they are vapor. We will assess them as they come out; however, we are not sitting still, and we have a huge first mover advantage. We have an incredible user experience from iTunes to the App Store and an enormous number of apps and a huge ecosystem. So we are very, very confident with entering into a fight with anyone.”
Like the iPhone, iPod touch, and new MacBook Air, the iPad uses Flash storage, and Mr. Cook looked back on the $1 billion flash supply deal secured at the end of 2005, which was obviously used to lock in a critical component for products that are now a large part of Apple’s business. He recalled the company did so “because we anticipated that Flash would become increasingly important across our entire product line, and increasingly important to the industry, and so we wanted a secure supply for the company.”
Speaking of that recent $3.9 billion component supply contract, Mr. Cook explained: “In the past several quarters we have identified another area and come to some recent agreements that [CFO] Peter [Oppenheimer] talked about in his opening comments. And these payments consist of both prepayments and capital for process equipment and tooling. And similar to the Flash agreements, they are focused in an area that we feel is very strategic.
“And in fact, I prefer not to go into more detail about what specific area it is in. But it is the same kind of thinking that led us to the Flash deals.”
Let the speculation begin.