By Philip Elmer-DeWitt
October 22, 2014

It hasn’t been a good year for the iPad. Competition is rising. Sales are falling. Laptops are getting lighter, phones are getting bigger, and the opportunities for real innovation are shrinking, which is one of the reasons the new crop of iPads Apple introduced last week are getting tepid reviews.

So our ears perked up during Monday’s earnings call when Tim Cook was asked about “weakness” in the iPad business.

He was a tad defensive — Apple had just reported its third quarter of negative iPad sales growth in a row — and he delivered a long, thoughtful answer.

For students of the company, it was a rare look at how an operations-oriented CEO views the arc of a mobile product in a fast-changing market.

For those who missed it — or missed some of the details — here’s the transcript, via Seeking Alpha:

For iPad, if I take a step back on iPad, and I know that there is a lot of negative commentary in the market on this, but I have a little different perspective on it. Here’s sort of my simple perspective.

If you look at, instead of looking at this thing each 90 days, if you back up and look at it, we’ve sold 237 million in just over four years. That’s about twice the number of iPhones that we sold over the first four years of iPhone.

If you look at the last 12 months of iPad, we sold 68 million. In fiscal year ’13 we sold 71 million. So we were down, but we were down 4% on sell in, and the sell-through was a bit better than the negative 4 because we took down channel inventories. And so, to me, I view it as a speed bump, not a huge issue.

That’s said, we want to grow. We don’t like negative numbers on these things.

And so, looking further in the data, I know that there is a popular view that the market is saturated, but we don’t see that. I can’t speak to other people but I do look at our data deeply.

And in the last market research data we have is in the June quarter, and let me give you some of this — the real data that we’ve got: If you look at our top six revenue countries, in the country that’s sold the lowest percentage of iPads to people who had never bought an iPad before that number is 50%.

And the range goes from 50 to over 70. And so when I look at that number, our first time buyer rates in that area… that’s not a saturated market! You never have first time buyer rates at 50% and 70%. What you do see is that people hold on to iPad longer than they do a phone.

And because we’ve only been in this business four years, we don’t really know what the upgrade cycle will be for people. And so that’s a difficult thing to call.

What we do know is that people always respond for us doing great products and we feel really great about what we introduced last week. We also know that the deeper the apps go in the enterprise, the more it opens up avenues in enterprise and that’s a key part of the IBM partnership. And what I think customers will get out of that — which is more important than our selling — is changing the way people work.

And so I see catalysts going forward. There are obvious cannibalization things that are occurring. I’m sure that some people looked at the Mac and iPad and decided on a Mac. I don’t have research to demonstrate that, but I am sure that will be, just looking at the numbers. And I am fine with that, by the way.

I am sure that some people will look at an iPad and an iPhone and decide just to get an iPhone, and I’m fine with that as well.

But over the long arc of time, my own judgment is that iPad has a great future. How the individual 90-day clicks work out, I don’t know, But I’m very bullish on where we can take iPad over time.

And so we’re continuing to invest in the product pipeline. We’re continuing to invest in distribution. If you look at how we did in emerging markets like BRIC [Brazil, Russia, India, China] countries as an example, we were up 20% for the full year of ’14. And so these numbers are impressive and obviously the BRIC countries are growing as a percentage of our total, as is developing markets. And so, it looks a bit different geography to geography.

And so that’s a long answer to your question, but I thought it was important for you to at least share my perspective and you can judge it as you will.

Follow Philip Elmer-DeWitt on Twitter at @philiped. Read his Apple (AAPL) coverage at fortune.com/ped or subscribe via his RSS feed.

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