Apple's Cook: iPhone Could Evolve, Screen Size Grow

Tim Cook, at a Goldman Sachs conference, said assumptions about Apple shouldn't be made, except about its firm stance on greatness.

Apple CEO Tim Cook, at a Goldman Sachs conference Feb. 12, talked around the topic of Apple's plans to make a lower-cost smartphone for developing markets like China; addressed the controversial issue of the iPhone's screen size; expounded on what he's most proud of about his first year as CEO; and dismissed the lawsuit filed against Apple by investor Dave Einhorn as a "sideshow" and a waste of money that both sides would be better off donating to charity.

Rumors abound that Apple will this summer introduce a lower-cost version of the iPhone 5, likely for prepaid markets. While Cook didn't address this directly, he massaged the concept of a low-cost iPhone, suggesting that while Apple would never make a cheap version of one of its products, there's room to reimagine products in a way that could make them more accessible to more users.

"It's important to understand Apple—our North Star is great products. So when everyone comes to work every day and leaves work, they're thinking about that, front and center," said Cook, according to a transcript from ValueWalk.

Cook said Apple wouldn't make anything less than a great product—that "there are other companies that do that—that's just not who we are"—but with time, and product cycles, a more affordable iPhone could emerge.

"If you take something like the iPod—when we came out with the iPod it was $399. Where is the iPod today? Today you can go out and buy an iPod Shuffle for $49," Cook said. "So instead of saying, 'How can we cheapen this iPod to get it lower?' we said, 'How can we do a great product?' And we were able to do that at a cost that enabled us to sell it at a very low price of $49 and it appealed to a lot more people."

The iPhone 5 was the first iPhone in six product cycles to feature a larger display, but one still significantly smaller than what Apple rivals such as Samsung typically offer. When Goldman Sachs analyst Bill Shope asked Cook how he came to the conclusion that the iPhone 5 has the "optimal screen size" for Apple's customer base and about, "frankly, your confidence in that conclusion," Cook was quick to push back.

"I don't want to say what we will or won't do. Don't interpret anything I say along those lines," Cook replied.

He went on to say that people latch themselves onto numbers—device size specs, processor speeds, camera megapixels—that on their own are meaningless. What has meaning is the user experience and whether the customer has "that ah-ha moment each time they use the product."

Cook continued, "We care about all [of the details] and we want the best display. I think we've got it. I feel great about it. I'm not going to comment about what we're going to do in the future, because that releases our magic. I'm not going to do that. But it's always broader—the customer experience is always broader than that which can be defined by a simple [specification] number."

During its fiscal 2012 fourth quarter, Apple posted earnings below Wall Street's expectations for the third time in a year and half, making it no longer, as one JMP Securities analyst phrased it, a "bulletproof story." With not just Android devices but Samsung alone besting Apple's phone sales, there's talk that Apple's golden age is past.

Apple's stock has lost more than $200 billion in market value, Bloomberg reported Feb. 13. It's trading at a 29 percent discount to the Standard & Poor 500 Index—"near the widest gap since December 2000."

Regarding his first year as Apple's CEO, Cook said he was most proud of Apple's employees, whom he said are doing the "best work of their lives."

"It's a privilege of a lifetime for me to be at Apple at this point in time, and to work with all these people. I'm incredibly proud of the products that we have. We have the best smartphone on the market, we have the best tablet on the market, we have the best PC on the market, we have the best digital music player on the market," he said.

He added, "I'm incredibly bullish about the future and what Apple can do, and more contributions it can make to the world."