This is a user-to-user forum. No one from Apple participates here.
Apple's choice of interface design is to have people pick their time zone by city name, not by time zone name. I do not believe they are saying that "Cupertino" is the name of a time zone. I also do not believe they have ever stated why they have made this decison.
But, the bottom line is, does your phone show the correct time?
Submit your feedback requesting that they offer the abiltiy to chose time zone by time zone name directly to Apple using the appropriate link on the Feedback page:
http://www.apple.com/feedback