Comment: Doing the math on Apple's formula

Tim Cook, Apple's chief operating officer, provided one answer when he fielded a question Wednesday (Jan. 21) on how the company would move forward if chief executive Steve Jobs was not able to return from his current medical leave. Cook shared a corporate credo he said is deeply embedded in the company, not just in Jobs' head.

"We believe that we are on the face of the earth to make great products. We believe in the simple, not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution," he said.

"We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. And frankly, we don't settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we're wrong and the courage to change," he added.

Impressive an affirmation as this is, I'd suggest it is a partial answer to the reason Apple is currently defying gravity with its latest quarterly report.

Apple certainly has developed customer loyalty with a handful of well engineered products focused on simple but satisfying user experiences. And it does not carry the costs of competitors who maintain a full product portfolio.

Implicit in these values is the fact that Apple aims to capture a high-end slice of mainstream markets. It refuses to play the industry's race-to-the-bottom game of delivering the lowest cost MP3 player, phone or computer.

Indeed, that's why Apple is not participating—so far—in the current netbook craze, the latest in ultra small and cheap laptops pioneered by Taiwan's AsusTek.

Cook said Apple is "watching the space and we have some ideas, but right now we think existing products won't satisfy customer needs." That's because today's systems are underpowered, have poor software and cramped keyboards, he added, possibly pointing to a high end mini Macbook in the lab. Think bigger volumes, higher margins.

It's in that light I see Cook downplaying the AppleTV which he said Apple "still considers a hobby," although its sales have tripled. But "we fundamentally believe there is something for us there in the future," Cook added.

I suspect Apple engineers are tinkering with many prototypes for a bigger volume, pricier, snazzier iTV on the horizon.