Cook on Product Cannibalization: Don't Worry, Be Happy

Apple is facing the prospect of cannibalizing its own product sales, which has some analysts worried. Company CEO Tim Cook, however, doesn't see that as a problem and instead welcomes the idea.

iPad sales may be cannibalizing other Apple products & that's OKiPad sales may be cannibalizing other Apple products & that's OK

When asked by BOA Merrill Lynch analyst Scott Craig about iPhone and iPad sales cannibalizing Mac sales during the Apple's first quarter earnings report, Mr. Cook replied, "We know iPhone has cannibalized some iPod business. We know iPad has cannibalized some Macs, and that doesn't worry us."

He added that the iPad is eating into the Windows PC market. "It's clear [iPad is] already cannibalizing some [PC sales], and there's a tremendous amount of opportunity [for more]," he said.

Mr. Cook sees what analysts are calling cannibalization of product sales as an opportunity because in many cases it's PC owners buying iPads, and the "halo effect" draws them deeper into the Apple ecosystem. In fact, the company has been seeing evidence showing PC owners buy more Apple products after getting their first iPad.

He said,

If somebody buys an iPad mini or an iPad and it's their first Apple product we have great experience through the years knowing that a percentage of these people buy another Apple product.

Analyst's concerns stem from the idea that if consumers are buying iPads they aren't buying Macs, and Q1 sales might back that up. The company reported selling 4.1 million Macs during the quarter, down from the 5.1 million sold in the same quarter a year ago. Part of that decline, according to Apple, was due to parts constraints that limited how many iMacs they could make.

Mr. Cook pointed out the potential money lost in higher priced Mac sales eventually gets made up in additional product sales as first time iPhone and iPad owners buy more Apple gear, which makes for a more long-term customers. "I see cannibalization as a huge opportunity," he said.

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