By Dan Moren

April 29, 2022 1:31 PM PT

The Back Page: Tim Cook, now with absolute candor

Luca: …and with that, let’s open the call to questions.

Operator: Our first question comes from Jan Key from Key Blur Financial. Go ahead.

Jan: Thanks for taking my question. Tim, you said that you’re facing a lot of headwinds in the next quarter. Can you talk about what impact that might have on gross margin?

Tim: Jan, this is Tim. You know we don’t provide specific guidance for gross margin. But what I can tell you is: yes, we expect to lose exactly 200 basis points in the next quarter, dropping our gross margins to about 33 percent.

Jan: … Uh. What?

Tim: 33 percent. That’s 5 percent less than this quarter. Not great, if you ask me.

Jan: That is very specific.

Tim: You’re welcome.

Jan: And you’re not concerned about that?

Tim: Of course I’m concerned. That’s 5 percent less! That means hundreds of millions of dollars of profit, poof. Real bummer.

Jan: Um, yes. Yes it is? Thanks.

Operator: The next question will come from Frank Lee-Mydear at Bank of Liechtenstein. Go ahead.

Frank: Hi, Tim. Mac sales are doing very well over the last several quarters. You said a lot of that is driven by strong MacBook sales—I wonder if you could give us a little more color on that.

Tim: Hi Frank, this is Tim. I’d love to give you more colors. Green. Blue. Red. Orange…are you getting it?

Frank: What?

Tim: Colors, Frank. Six of them.

Frank: Wow. I mean. Thanks, Tim. Just a quick follow-up. What about silver?

Tim: Of course silver. But it’s not really a color. Next question!

Operator: The next question will come from Belle Ringer at Ring-a-Ding-Ding Capital.

Belle: Hi, Tim. I must say, this call is very refreshing. Can you lay out your strategy for Services a bit more? What’s your ultimate goal here?

Tim: Hi Belle, this is Tim. Our ultimate goal? I’d say it’s to make a whole lot of money. Billions, hopefully.

Belle: Well, sure, obviously. But what about bringing in new subscribers? How do you pick programming for Apple TV+ to target the demographics you’re looking for?

Tim: Do they have a credit card? A pulse? Honestly, that second one is optional. Look, we love to surprise and delight our customers. But we also love to surprise and delight ourselves. Preferably with very large amounts of money.

Operator: The next question will come from Rob Eweblind at Pyramid Investments. Go ahead.

Rob: So, Tim, you’re selling tens of millions of iPhones every quarter. Do you still see the potential for growth in the market? Maybe you could talk a little bit about where you see the iPhone going from here.

Luca: Uh, why don’t I take this one, Tim—

Tim: No, no, I’ve got it. Hi Rob, this is Tim.

Rob: Yes, I know.

Tim: Look, the iPhone is a phenomenon. Everybody’s got one. You’ve got one. I’ve got one. I mean, I’ve got several. Quite a few. My office is lousy with them. But there are millions of unfortunate souls out there who don’t yet have any iPhones. So we’re going to do whatever it takes to sell them one. Make a big iPhone 14? Sure, let’s do it! Make a small iPhone SE? Why not? Make a foldable iPhone—we’re going to give it our best whack. Because if we stop making iPhones, we will literally go out of business.

Rob: Thanks, Tim. As a followup, can you tell me if the next iPhone has a notch?

Luca: We don’t really talk about future produ—

Tim: Notchurally, Rob. Notch. U. Ra. Ly.

Operator: The next question comes from….Meen Junster at Jiper-Paffray?

Meen: Tim, just one question…was the Apple Television ever real? I NEED TO KNO—

Operator: It appears we’ve been disconnected. A replay of today’s call will be available at Apple.com for thirty days. This concludes the call.

[Dan Moren is the East Coast Bureau Chief of Six Colors. You can find him on Twitter at @dmoren or reach him by email at dan@sixcolors.com. The latest novel in his Galactic Cold War series of sci-fi space adventures, The Nova Incident, is available now.]