And so when I back up from all of these, I feel great. That doesn't mean that every quarter--every 90 days--is going to be a number that everybody's thrilled with. But what it means to me is that the trend over time, over the arc of time, that things look very, very, good--that iPad has a great future.
And of course the thing that drives us, more than any of this, are the "next iPads," if you will, the things that are in the pipeline, the things that we can do to make the product even better. And there's no shortage of work going in on that, nor any shortage of ideas.
And so when I back up from all of this, I can't help but still be extremely excited about where we are.
I think we did a reasonable job of explaining what we think the disconnect was between what we had expected--which we hit it at the high end of our expectations--and [Wall] Street's view of this one. And I believe the vast majority of it is that first thing was just channel inventory that...maybe we should have been even clearer on last quarter to take in to account. But I am very bullish on iPad.
On Amazon and Google's business diversification
The key thing that...for us, is to stay focused on things that we can do best and that we can perform at a really high level of quality that our customers have come to expect.
And so we currently feel comfortable in expanding the number of things we're working on. We've been doing that in the background, and we're not ready yet to pull the string on the curtain.
But we've got some great things there that we're working on that I'm very very proud of and very, very excited about.
But for us, we care about every detail, and when you care about every detail and getting it right, it takes a bit longer to do that. And that's always been the case--that's not something that just occurred, you know.
As you probably know from following us for a long time, we didn't ship the first MP3 player, nor the first smartphone, nor the first tablet. In fact, there were tablets being shipped a decade or so before then, but arguably we shipped the first successful modern tablet, the first successful modern smartphone, and the first successful modern MP3 player. And so it means much more to us to get it right, than to be first.
I think you can see so many examples out in the marketplace where it's clear that the objective has been to be first. But customers, at the end of the day, don't care about that, or that's not what they look for from Apple--they want great, insanely great, and that's what we want to deliver. And so that's the way we look at it.
Like, from an acquisition point of view, we have done 24 [companies acquired] in 18 months; that shows that we're on the prowl, I suppose you can say. We look for companies that have great people, and great technology, and that fit culturally. And we don't have a rule that says we can't spend a lot, or whatever. We'll spend what we think is a fair price.
What's important to us is that strategically, it makes sense, and that it winds up adding value to our shareholders over the long haul. We are not in a race to spend the most, or acquire the most. We're in a race to make the world's best products, that really enrich people's lives.
And so, to the tune that acquisitions can help us do that--and they've done that, and continue to do to that--then we will acquire it, and so, yeah, you can bet that we will; you will continue to see acquisitions, some of which we'll try to keep quiet, and some of which it seems to be impossible to keep quiet.
On the general smartphone landscape
There's a lot of moving parts, a lot of acquisitions, a lot of people giving up to some degree and deciding to do other things. But at the end of the day, we see it much like we've always seen it--as the part of the market that we're interested in is the market of people that really want the best smartphone.
And that doesn't mean that they're all at the high-end of the price band; I mean, we have smartphones that go down to a very affordable price (with the 4s) because we're proud to ship this product.
I think that this quarter, if you were unsure, hopefully this quarter demonstrates to you that we can do well in a number of geographies--from emerging markets to developing markets.
Some of the numbers that we've experienced, just to quote some of the more historic pre-paid markets, through the first half of '14, Brazil was up 61%, Russia was up 97%, Turkey was up 56%, India was up 55%, Vietnam was up 262%. I could go on, but the point is that there's a number of markets out there, where we're beginning to really catch on to a number of customers, and I am particularly proud of the results in these markets, because these have not been historic strong points for Apple.
We've been working at China for awhile, and have learned a lot, and I'm very proud of what we've done there, but I think some of these other numbers I just read demonstrates that we're beginning to have really nice success outside of there as well.
On China growth
We did have an all-time revenue record in greater China--just under $10 billion, at $9.8--iPhone sales were up 28%, that's versus IDC's market forecast of 20% growth. So we gained share. Mac units were up double-digits, in particular they were up 13%, and that's far outpacing IDC's PC market forecast of a -8%. So we gained share there as well.
If you look at the iTunes software and services revenue in China, we more than doubled it year-over-year; we were in the triple-digit percentages. And if you look at iPad and you take out the channel inventories and the ins and outs and look at demand instead of sell-in, we grew by 6%. And that compares to IDC's forecast of a flat tablet market in China for last quarter.
And so we literally did well in every single area in China. It wasn't just because we were able to come to an agreement with the world's largest carrier. That was certainly key, but as you can tell from the rest of these numbers, there are other things going on.
Also, I had mentioned this briefly, but I think it's important to point out that if you look at some of the numbers we're seeing on first-time iPhone buyers...People that bought the iPhone 4s: 85% were first-time iPhone buyers. And the 5c: 69% first-time iPhone buyers. So these are extraordinary, and as you would expect, these are also heavily Android-switchers. 62% of the people that bought the 4s switched from Android. 60% of the people that bought the 5c switched from Android. And, y'know, so we're incredibly pleased with this.
For the first half [of the year], including our retail stores, greater China revenue topped 19 billion. So this is up 21% year over year, and it is our fastest-growing region.
And so we're looking at this data and deciding to continue investing in a big way. We plan to triple the number of Apple retail stores over the next two years; we're continuing to expand in online, we're continuing to build out channel. We're up to 40,000 points of sale now on iPhone, but we're not nearly where we need to be on the rest of our product line, and even the 40,000 is a low number in considering the broad land mass and the number of folks in China.
I feel like there's still loads of opportunity there, and feel really, really good about how we're doing.
On the Apple TV no longer being a hobby
The reason that I stripped off the "hobby" label is that when you look at the sales of the Apple TV box itself, and you look at the content that was bought directly off of Apple TV for 2013, that number was over a billion dollars. And so it didn't feel right to me to refer to something that's over a billion as a hobby. Also, from a investment point of view, we continue to make the product better and better. And so it doesn't feel right from that point of view, either.
[On Amazon's deal with HBO] We have HBO Go already on Apple TV, and you have to authenticate in order to use it, but you have to do that with Amazon's service as well from my brief read of their announcement. I think they, in addition to that, got some older content from HBO to put on there, and I haven't had a chance to evaluate exactly what it is, and don't have a personal point of view on that yet.
But if I look broadly at the content on Apple TV, I think it compares extremely favorable to the content that is on the Amazon box. We've sold, now, about 20 million of the Apple TV, and so we've got a pretty large installed base there. And I'm feeling quite good about that business and where it can go.
This story, "This is Tim: Apple's CEO on the iPad, Apple TV, future products, and China" was originally published by Macworld.