Tim Cook verbatim: In defense of the Apple Watch

Tim Cook
Apple CEO Tim Cook introduces Apple Watch , which he is wearing on his wrist, on Tuesday, Sept. 9, 2014, in Cupertino, Calif. (AP Photo/Marcio Jose Sanchez)
Photograph by Marcio Jose Sanchez — AP

Sales of the Apple Watch may have exceeded Apple’s expectations, but they fell short of Wall Street’s. The issue came up in Tuesday’s conference call with analysts.

Piper Jaffray’s Gene Munster: Any thoughts that you have for investors who may say that the category is just not taking off as fast as they would have hoped?

Apple CEO Tim Cook: Let me talk about the Watch some. As you know, we made a decision back in September, quite several months ago, not to disclose the shipments on the Watch and that was not a matter of not being transparent, it was a matter of not giving our competition insight that’s a product that we’ve worked really hard on. However, let me give you some color so to avoid reaching sort of a wrong conclusion. If you look at the other products category and look at the revenue in this category, it would not be an accurate thing to just look at the sequential change or the year over year change and assume that were the total Watch revenue because the aggregate balance of that category, both sequentially and year over year, is shrinking. Obviously iPod is a part of that, but there are other things in there, accessories and so forth, that are shrinking.

Secondly to provide a bit more color, sales of the Watch did exceed our expectations and they did so despite supply still trailing demand at the end of the quarter. And to give you a little additional insight, through the end of the quarter, in fact the Apple Watch sell-through was higher than the comparable launch periods of the original iPhone or the original iPad. And we were able to do that with having only 680 points of sale. And as you probably know, as I had reviewed earlier, the online sales were so great at the beginning, we were not able to feed inventory to our stores until mid-June. And so those points of sale pretty much, the overwhelming majority of the low numbers of sales were not there until the last two weeks of the quarter.

And so as I look at all of these things, we feel really great about how we did. Now our objective for the quarter wasn’t primarily sales. Beyond the very good news on sales, we’re more excited about how the product is positioned for the long term because we’re starting a new category. And as I back up and look at this, we have 8,500 apps. We’ve already announced the next operating system, watchOS 2. It will bring native apps which are going to be killer to the Watch. Even though the store layout was delayed, we’ve learned a lot about the buying experience. Based on that experience, we’re now planning to expand our channel before the holiday because we’re convinced that the Watch is going to be one of the top gifts of the holiday season.

Now most importantly of all of this is that customer sat is off the charts because we’ve constantly seen if you can get the customer sat off the charts you can wind up doing fairly well over time. We’ve also learned a lot about managing quite an assortment and so forth. And so I sort of back up and look at this and I feel fantastic about what the team has done and delivered and I know I never go anywhere without the Watch and it’s not because I’m the CEO of Apple. I’m that attached to it and I get lots of notes from a lot of people that feel the same way. And so that’s how I look at the Watch. (link)

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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