"We want iPhone in an as many customers' hands as possible, since we believe it's the greatest phone by far," Cook said. "We aspire to much larger volumes."

That may explain why the iPhone 4S isn't the only offering in Apple's smartphone lineup. The company continues to sell the iPhone 4, which is available for $99 to customers who sign a two-year contract with Sprint, Verizon, or AT&T. The iPhone 3GS remains on the market as well, despite the fact that Apple introduced it more than two years ago. But it's now a free phone so long as you sign up for two years of service with AT&T--a fact that could appeal to feature phone users looking to step up to a smartphone without spending a lot of money at the outset.

Apple can point to a track record of 3GS price cuts attracting new users. In some countries, the price of the iPhone 3GS dropped during the September quarter so that Apple could see what happened in prepaid markets. Cook said the company was "very pleased" with the results--hence the move to offering a free iPhone 3GS in the U.S.