Cook: Apple Isn't a Hardware Company

Apple may make most of its money from the iPhone, iPad, and Mac, but it isn't a hardware company, according to CEO Tim Cook. Instead, Apple is a platform company, he said during an interview at the Goldman Sachs Technology and Internet Conference on Tuesday.

Apple Stores are part of a platform, not a hardware sales point, according to CEO Tim CookApple Stores are part of a platform, not a hardware sales point, according to CEO Tim Cook

"We aren't a hardware company," he said. "We have other ways to make money and reward shareholders. Last quarter, for software and services, it was US$3.7 billion. If you look at software and services companies, that's an incredible amount of revenue."

Looking at Apple as a platform company instead of a hardware company that also offers software and other services drives to the heart of Apple's "whole widget" philosophy. The company sells its hardware and offers the App Store, iTunes Store and iBookstore -- a "closed garden" that has proven successful so far.

That garden is also helping grow the company's customer base. When asked by Goldman Sachs analyst David Shope about company margins and long-term plans, Mr. Cook responded, "I don't want to get into projecting margins beyond what we do in conference calls, but in general here's what we do: You can always go in and accept a lower margin for strategic reasons, but at the background we always know that this halo effect plays out."

The halo effect comes into play when a new-to-Apple customer buys a product like an iPod or iPhone, then comes back later and buys an iPad or a Mac. Return customers have been a big part of the Apple ecosystem, and the company's retail stores make it easier for new product users to buy more products.

Those retail stores are playing a big part in Apple as a platform company. "Last year, we put major effort into expanding our ecosystem into new markets: App Store, iTunes Store, iBookstore, all in over 100 countries," Mr. Cook said. "Only one major country where we're not selling movies. We advanced significantly last year in getting our infrastructure in place in countries around the world."

He added that Apple isn't slowing down, either. The company has plans to move 20 of its stores to larger locations this year and is adding 30 more, mostly outside the United States.

Customers go to those retail stores not just to buy products, but also for Apple's service -- a gathering place where they can get more from the products they purchase. The stores are also venues for other activities like school field trips and musical performances, which also help enhance the idea that the company is selling platforms.

"I'm not even sure 'store' is the right word anymore," Mr. Cook said. "They are the face of Apple for almost all of our customers."

And that face, he said, is selling platforms, not just hardware.