Apple [AAPL] CEO, Tim Cook, came out with strong stuff during his speech at a Goldman Sachs conference yesterday, as has been widely-reported, he stoutly defended the company's commitment to better working conditions in its factories, hinted at a share buyback for investors, and more.
[ABOVE: The Cook doctrine.]
The smell of opportunity
Cook also dropped a few tantalizing hints about Apple's future product strategy. Discussing the sheer scale of the mobile phone market Cook drew an important distinction between the smartphone and handset markets.
Despite sales of 37 million iPhones in the last quarter, the CEO looked at the billions of phones analysts expect will be sold by 2015 and said:
"What seems large to me is the opportunity. So what we're focusing on is the same thing we've always focused on, which is making the world's best products. And we think if we stay laser-focused on that, and continue to develop to the ecosystem around the iPhone then we have a pretty good opportunity to take advantage of this enormous market."
"Laser-focused?" "Develop the ecosystem?" What can this mean? I won't speculate too much, except to observe that as iCloud services are continuously improved and Siri becomes more effective, Apple has options for mobile devices beyond the iPhone.
Take the iPad. Cook talked about that product's impressive sales numbers, and noted that part of the secret of its success was the company's existing infrastructure.
"The iPad has stood on the shoulders of everything that came before it. The iTunes Store was already in play. The App Store was already in play. People were trained on iPhone, and so they already knew about multitouch. And so there was lots of things that became so intuitive when someone began to use a tablet, that -- I mean, I gave one to my mother and she knew how to use it like this from just watching the commercial."
This is an interesting insight into Apple's product strategy: to iteratively build out its empire on the bedrock of its existing solutions.
When it comes to the low-end handset market, Apple's Cook talked briefly about the estimated 2.5 billion such handsets analysts expect to see sold in 2015. 37 million iPhone sales may be impressive, but what can the company do to invade this low end market?
This existing developed iPhone ecosystem could be transported into other iOS devices, surely? Wearable computing? Rubber-clad iOS devices? Domestic gadgets? An iPod phone? An Apple TV?
Apple TV -- no longer a hobby?
Cook did mention the Apple TV. Declining to discuss future products, it's interesting to take a look at the tenses he used in his discussion: "...we messaged it as a hobby," he said. "Despite the barriers to market, for those of us who use it, we've always thought there was something there....if we kept following our intuition and kept pulling the string, then we might find something that was larger.....
Then he released the cracker: "But we need something that could go more main market for it to be a serious category. But if you don't have one, you should get one, because it's a really cool product."
Does this mean anything?
Not really. At this stage I think most expect Apple to introduce some kind of Apple-branded iTunes-savvy television set. What I think Cook's underlying messaging is that the company has moved forward with its Apple TV philosophy, because he expressed some of the company's existing thoughts on the product in the past tense. This suggests the company has upgraded the status of the project -- or shelved it, facing too much market resistance.
Siri and iCloud -- building the future
Siri and the iCloud are vitally important to Apple's product strategy. We know Siri uses technology licensed from Nuance, a company which is itself now engaged in offering voice recognition solutions for medical and other markets.
We also know that cloud computing as an industry is surging this year, driven partly by enterprise users seeking solutions for the emerging mobile enterprise. And we know voice recognition is driving new opportunities in many markets: there's work taking place to develop intelligent voice-activated X-ray scanners which can grab the image and send it for diagnosis by an artificial intelligence doctor hosted in the cloud.
Not one to miss a trend, Cook naturally talked about Siri and iCloud. "I think Siri and iCloud are profound," he said. "I would view iCloud not as something with a year or two product life; it's a strategy for the next decade or more. I think it's truly profound." He disclosed 100 million users of the service and added, "Siri is another profound change in input."
"They're not these things that will not mean anything a year or two from now. They're things that you will look back at, that you'll talk to your grandkids about, that were profound changes."
It will take time before investors truly accept that the passing of Steve Jobs will not derail the company he founded, and Cook naturally took this chance to stress his commitment to innovation at Apple.
"Steve grilled in all of us, over many years, that the company should revolve around great products, and that we should stay extremely focused on few things. Rather than try to do so many that we did nothing well. And that we should only go into market where we can make a significant contribution to society, not just sell a lot of products in a market."
"We're always focused on the future," he said. Reading between the lines of what he said yesterday, the future sees the company continue in its iterative path in defining new product categories.
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