'Apple Is Not A Hardware Company'

tim cook new ipad

Photo: Associated Press

“Apple is not a hardware company,” CEO Tim Cook just said at the Goldman Sachs Technology and Internet Conference in San Francisco.It was such an important point, he repeated himself: “Apple is not a hardware company.”

The topic, in a keynote interview, was Apple’s gross margins, and whether they were under pressure.

“You could go in and accept a lower margin at any time, for strategic reasons,” Tim Cook said. “We know this halo effect plays. We have confidence in our ability to manage supply chains and work down cost curves.”

In other words, Apple can play the price game if it wants to—but it may not have to, because of consumers’ perception of its brand value.

But then Cook said something really interesting.

“Because we’re not a hardware company, we have other ways to make money and reward shareholders,” he said.

Cook pointed out that Apple’s software and services business—iTunes, the App Store, iCloud, and other all-digital offerings—was $3.7 billion in the most recent quarter. That’s large even compared to most pure-play software and services companies, he observed.

“There are other things we could do to have revenues and profits flow,” Cook said.

That seems like an oblique reference to Amazon’s strategy of selling the Kindle Fire at a low price and making money on sales of digital media to play on the tablet.

So, reading between the lines, Cook is saying Apple could definitely take a page from Jeff Bezos’s low-margin, make-it-up-on-volume playbook. He’s just not sure Apple has to do that.

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