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Tuesday, February 12, 2013, 11:31 am PT (02:31 pm ET)

Apple CEO says company "making moves to make things more affordable"

Apple will move to lower costs and remove barriers to entry for its ecosystem, chief executive Tim Cook said Tuesday, but company will not sacrifice quality to do so — even for products that will target emerging markets.

Morgan Stanley Data

In an interview at Tuesday's Goldman Sachs Technology Conference, Cook was asked how the company plans to create a great user experience for customers who find the price of the existing iPhone offerings too rich for their blood and must instead rely on prepaid phones and plans.

"This is a popular question. […] We wouldn't do anything we wouldn't consider a great product," he said. "There are other companies that do that, and that's just not who we are."

Cook pointed to Apple's recent strategy with the iPhone, where its kept the legacy — but proven — iPhone 4 and iPhone 4S on the market at reduced prices while rolling out the enhanced iPhone 5, rather than create a cheaper, crippled version of the handset outright. Results of this initiative recently shocked even the company's most informed forecast analysts.

"If you look at what we've done to appeal to people who are more price sensitive, we lowered the price for iPhone 4 and iPhone 4S, and in the December quarter, we didn't have enough supply of iPhone 4, so it surprised us as to the level of demand we had for it."

In the December quarter, we didn't have enough supply of iPhone 4, so it surprised us as to the level of demand we had for it."Cook also recalled how the original iPod carried a $399 price tag and noted how today consumers can buy an iPod Shuffle for $49.

"We are making moves to make things more affordable," he said. "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. The same thing, but in a different concept in some ways."

Similarly, Cook said that his team struggled several years ago to figure out a way to build a cheaper Mac. "We concluded we couldn't do a great product, but what did we do — we invented iPad," he explained. "Now all of the sudden we have an incredible experience and it starts at $329. Sometimes you can take the issue and you can solve it in different ways."


Cook gave no word on when consumers and investors could expect to see a more affordable iPhone. Piper Jaffray analyst Gene Munster, though, followed Cook's speech with a note to clients in which he predicts such a device will be brought to market sometime during the September quarter of this year.

"We continue to believe Apple will have a cheaper phone product to address the emerging markets, which may or may not be similar to the existing iPhone," Munster said. "Additionally, we note that over time, something like the rumored smart watch could be an option in addressing emerging markets with a lower cost product through a different form factor (iPad as cheap Mac)."