Apple CEO Tim Cook is now speaking at the Goldman Sachs Technology and Internet Conference, participating in a Q&A session with analyst Bill Shope. Apple is streaming live audio of the session on its investor site, and we'll be sharing some of the highlights here in this post.
Question about Apple's cash usage strategy...do you have a Depression-era mentality?
What a way to start! We're making significant investments in a number of areas: supply chain, retail stores, corporate acquisitions, etc. Now, we do have a significant amount of cash, and we're fortunate to have that. We're returning some of it to investors and will continue to have discussions on that.
Thoughts on Greenlight's proposal about unlocking more capital for shareholders?
We welcome input from our shareholders and are discussing a broad array of options.
How about Greenlight's lawsuit regarding your proxy statement?
There are some misconceptions over what this is about. It's not about turning money back to shareholders. It's about corporate governance. So we've decided to eliminate the ability to issue "blank check" shares ourselves. We could still do it, but would have to go to shareholders for approval. So frankly, this seems bizarre to me that we're being sued over something that's good for shareholders.
We wish people involved in this lawsuit would take this money and donate it to a good cause. This is a waste of money for all involved...a silly sideshow. But you're not going to see us sending out a mailing or campaigning for our proposal. It's the right thing to do, and I'm going to vote for it. You're not going to see a "Yes on 2" sign in my front yard.
Question on acquisitions...most of them are small. Is there something in your culture against large acquisitions?
We do a fair number of acquisitions..one every other month. Most of them are for talented people working on smaller projects that we absorb and then move them to our own projects. PA Semi is an example...talented chip folks working on PowerPC and we moved them to iOS device work. We'll do more deals like this.
As for large companies, we have and will continue to look at them. But so far they haven't passed smell test for us. We could do it, but we're disciplined. Not interested in just growing revenue, but if there was a large acquisition that fit our needs, we would do it.
How do we think about Apple's culture of innovation today?
It's never been stronger. It's so embedded in Apple...the desire to make the very best products in the world. It's in the DNA of the company, and so I feel fantastic about it. Now, if you look at some essentials for innovation, there's no formula. But some of the essentials are skills and leadership. If you look at skills, Apple is in a unique and unrivaled position...expertise in software, hardware, and services. Consumers want an elegant experience where technology floats to background and customer is at the center. The real magic happens at the intersection of software, hardware, and services, and we have the ability to innovate and create magic there.
For many year, this idea of "vertical integration" was out of favor. People thought it was kind of crazy, but we never did and we continued to build. This is something you work decades for. I think there are people trying desperately to catch up, and they're finding it very difficult to do.
In terms of leadership, I look around the executive boardroom and see superstars. Jony Ive is the top designer and now turning his attention to software. Bob Mansfield is the leader in silicon. No one better than Jeff Williams at operations. Schiller, Riccio, etc. I've never been more bullish on Apple...we have the talent to pull this off.
Question about law of large numbers. Have we reached a natural limit on iPhone growth?
We don't have the word "limit" in our vocabulary. It's because of that that we've been able to do things for so many years and deliver things people never knew they needed. When I look at smartphone market, I see a market that was at 700 million last year...projected to double over next four years. Over the long-term all phones will be smartphones and there are a lot more people in the world than 1.4 billion. And people like to upgrade regularly. This is an enormous market to get to.
We've sold 500 million as of the end of last year, but over 40% of that happened last year. So there's incredible momentum. And we've built a great ecosystem that is also fueling a developer industry. We've now paid out over $8 billion. Innovation has all moved to tablets and smartphones, so there's so much momentum. When you look at what we're doing in China, it's impressive. There are also areas where we're not doing as well, and we view those as opportunities. When I string all of these things together, I see a wide open field.
Question about opportunities...low-cost and prepaid markets have little access to iPhone given expense. How do you create a quality product accessible to more people?
We wouldn't do anything we don't consider to be a great product. That's just not who we are. That said, if you look at what we've done for people who are price sensitive, we've lowered the price of the iPhone 4 and 4S as of last September, and last quarter we didn't have enough supply of the iPhone 4. It surprised us.
Also take a look at the history of iPod. When we started, it was $399. Now you can get an iPod shuffle for $49. Rather than cheapening, we build new products with a separate experience. For years, people said 'Why don't you have a Mac under $500 or $1000 or whatever?' We worked on that for a long time and came up with the iPad. So we're always trying to reinvent with great new products.
Question about Apple's design choices..focusing on iPhone 5 screen size and how Apple's knows it's right for users.
First of all, I'm not going to talk about what we might do in the future. But look back at the PC industry...companies have historically competed on two fronts: price and specs. But customers are interested in the experience. Do you know the speed of an Ax processor? It doesn't matter. So when we look at displays, there are a lot of factors...and it's all about the experience. There are many details of a display (Retina is twice as bright as OLED), and we sweat all of them to create the best experience, which is always broader than can be defined by a single number.
Question about the "Apple would never..." religion
The only thing we'll never do is make a crappy product. That's the only religion we have...we must to do something great. Something bold, something ambitious. Something great for the customers, and we sweat all of the details.
Data source: MacRumors (By Eric Slivka)
Thoughts on Greenlight's proposal about unlocking more capital for shareholders?
We welcome input from our shareholders and are discussing a broad array of options.
How about Greenlight's lawsuit regarding your proxy statement?
There are some misconceptions over what this is about. It's not about turning money back to shareholders. It's about corporate governance. So we've decided to eliminate the ability to issue "blank check" shares ourselves. We could still do it, but would have to go to shareholders for approval. So frankly, this seems bizarre to me that we're being sued over something that's good for shareholders.
We wish people involved in this lawsuit would take this money and donate it to a good cause. This is a waste of money for all involved...a silly sideshow. But you're not going to see us sending out a mailing or campaigning for our proposal. It's the right thing to do, and I'm going to vote for it. You're not going to see a "Yes on 2" sign in my front yard.
Question on acquisitions...most of them are small. Is there something in your culture against large acquisitions?
We do a fair number of acquisitions..one every other month. Most of them are for talented people working on smaller projects that we absorb and then move them to our own projects. PA Semi is an example...talented chip folks working on PowerPC and we moved them to iOS device work. We'll do more deals like this.
As for large companies, we have and will continue to look at them. But so far they haven't passed smell test for us. We could do it, but we're disciplined. Not interested in just growing revenue, but if there was a large acquisition that fit our needs, we would do it.
How do we think about Apple's culture of innovation today?
It's never been stronger. It's so embedded in Apple...the desire to make the very best products in the world. It's in the DNA of the company, and so I feel fantastic about it. Now, if you look at some essentials for innovation, there's no formula. But some of the essentials are skills and leadership. If you look at skills, Apple is in a unique and unrivaled position...expertise in software, hardware, and services. Consumers want an elegant experience where technology floats to background and customer is at the center. The real magic happens at the intersection of software, hardware, and services, and we have the ability to innovate and create magic there.
For many year, this idea of "vertical integration" was out of favor. People thought it was kind of crazy, but we never did and we continued to build. This is something you work decades for. I think there are people trying desperately to catch up, and they're finding it very difficult to do.
In terms of leadership, I look around the executive boardroom and see superstars. Jony Ive is the top designer and now turning his attention to software. Bob Mansfield is the leader in silicon. No one better than Jeff Williams at operations. Schiller, Riccio, etc. I've never been more bullish on Apple...we have the talent to pull this off.
Question about law of large numbers. Have we reached a natural limit on iPhone growth?
We don't have the word "limit" in our vocabulary. It's because of that that we've been able to do things for so many years and deliver things people never knew they needed. When I look at smartphone market, I see a market that was at 700 million last year...projected to double over next four years. Over the long-term all phones will be smartphones and there are a lot more people in the world than 1.4 billion. And people like to upgrade regularly. This is an enormous market to get to.
We've sold 500 million as of the end of last year, but over 40% of that happened last year. So there's incredible momentum. And we've built a great ecosystem that is also fueling a developer industry. We've now paid out over $8 billion. Innovation has all moved to tablets and smartphones, so there's so much momentum. When you look at what we're doing in China, it's impressive. There are also areas where we're not doing as well, and we view those as opportunities. When I string all of these things together, I see a wide open field.
Question about opportunities...low-cost and prepaid markets have little access to iPhone given expense. How do you create a quality product accessible to more people?
We wouldn't do anything we don't consider to be a great product. That's just not who we are. That said, if you look at what we've done for people who are price sensitive, we've lowered the price of the iPhone 4 and 4S as of last September, and last quarter we didn't have enough supply of the iPhone 4. It surprised us.
Also take a look at the history of iPod. When we started, it was $399. Now you can get an iPod shuffle for $49. Rather than cheapening, we build new products with a separate experience. For years, people said 'Why don't you have a Mac under $500 or $1000 or whatever?' We worked on that for a long time and came up with the iPad. So we're always trying to reinvent with great new products.
Question about Apple's design choices..focusing on iPhone 5 screen size and how Apple's knows it's right for users.
First of all, I'm not going to talk about what we might do in the future. But look back at the PC industry...companies have historically competed on two fronts: price and specs. But customers are interested in the experience. Do you know the speed of an Ax processor? It doesn't matter. So when we look at displays, there are a lot of factors...and it's all about the experience. There are many details of a display (Retina is twice as bright as OLED), and we sweat all of them to create the best experience, which is always broader than can be defined by a single number.
Question about the "Apple would never..." religion
The only thing we'll never do is make a crappy product. That's the only religion we have...we must to do something great. Something bold, something ambitious. Something great for the customers, and we sweat all of the details.
Picture source: BI
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