Highlights of Tim Cook Speaking at Goldman Sachs’ Conference
Yesterday we were treated to a never before heard of event. Whilst Tim Cook has spoke at Goldman Sachs’ Internet and Technology conference in past years (2007, 2008, 2009, 2010 and 2011) this year marked the first time that Apple has opted to offer a stream of the interview on its investor website.
Listening in first hand was the treat many expected it to be, that is if you went in with the understanding that this wasn’t an open interview between Bill Shope and Tim Cook, in fact it was more of a structured Q&A that offers a wide ranging State of Apple.
Much of what was discussed during the 50 minute session wasn’t terribly new, there were no big surprises and despite the customary warning about forward looking statements there were actually very few. What was of interest from hearing Tim Cook talk was his clear passion for Apple. Spending time making jokes (primarily aimed at Google) and carefully ruminating over how to structure an answer, Cook came across much less the one-dimensional character we often hear on financial conference calls and more a human leader of Apple; a true successor to Steve Jobs.
Cook covered a number of topics ranging from employee working conditions, to the the potential iPhone market to the cannibalisation of Mac sales by the iPad.
Here’s what I think were some notable quotes from the conference talk:
On employee working conditions
The first thing that I would want everyone to know is that Apple takes working conditions very, very seriously, and we have for a very long time. Whether workers are in Europe or in Asia or in the United States, we care about every worker.
And we’ve begun to manage working hours at a very micro basis. As an example, in January, we collected weekly data on over half a million workers in our supply chain. And we had 84 percent compliance. Now this is significantly improved from the past, but we can do better. And we’re taking the unprecedented step of reporting this monthly on our website, so that it’s transparent to everyone what we’re doing.
On the sales of 37 million iPhones last quarter
As I see it, that 37 million for last quarter represented 24 percent of the smartphone market. So there’s 3 out 4 people that bought something else. And it represented less than 9 percent of the handset market, so 9 out of 10 people are buying something else. The smartphone market last year was a half a [billion] units; in 2015, it’s projected to be a billion units. The handset market is projected to go from 1.5 [billion] to 2 billion units. And so when you take it in the context of these numbers, the truth is that this is a jaw-dropping industry. It has enormous opportunity to it, and so up against those, the numbers don’t seem so large anymore.
On making the iPhone affordable in emerging markets
Now, in the emerging markets, there are very big differences in the go-to market. For example, in most of the developed markets, the carrier owns most of the distribution themselves, but in the emerging markets, the retailer has a significant portion of the distribution. And so, the whole go-to market has to be changed significantly as you go in there.
Last year, as you know, we covered price points in the subsidized markets from zero on up. And of course, that doesn’t translate to 0 to prepaid markets. But it does translate to lower in the prepaid market, and so we’re covering more price points there.
But I would come back to the paramount thing is the product. It is the focus. And of course, distribution, we’ve recognized the differences there. We’ve recognized the difference in purchasing power. And, by the way, unlike probably many people, I don’t subscribe to the premise that a prepaid market is a prepaid market is a prepaid market.
On the future of the tablet market
You know, we started obviously in Apple using the iPad well before it was launched. Of course, we had our shades pulled and everything so nobody could see us. What I started noticing about my own personal behavior, it quickly became 80 to 90 percent of my consumption and work was done on the iPad.
But I strongly believe the tablet market will surpass the unit sales of the PC market, and it’s just a matter of the rate and speed and time that that happens. It’s too much of a profound change in things not to, I think. Anyway, that’s my opinion—people can always disagree. I feel strongly about it, if you can’t tell.
On cheaper products and Apple pricing
Price is rarely the most important thing. A cheap product might sell some units and somebody may get it home and you know, they feel great when they pay from their wallets, but then they get it home and use it, and the joy is gone. And the joy is gone every day that they use it and that’s why they’re not using it anymore! You don’t keep remembering “Oh, I got a good deal,” because you hate it!
But the customers that we’re designing our products for, are not going to be satisfied with a limited function kind of product. I think the real catalyst to the tablet market will be innovation and pushing the next frontier. Honestly, we’ll compete with everybody. I love competition. As long as people invent their own stuff, I love competition.
On Apple’s cash
Now, in terms of our approach on cash, I’ve said since becoming CEO, I’m not religious about this. I’m not religious about holding it or not holding it. And we’re in very active discussions at the board level on what we should do. But I think everyone would want us to be deliberate and really think through, and that’s what we’re doing. We’re not going to go have a toga party or do something outlandish, and so people don’t have to worry it’s going to burn a hole in our pocket.
On Apple TV
We sold 1.4 million last quarter. It’s clearly ramping. But the reality, the reason we call it a hobby, is that we don’t want to send a message to you or our shareholders that we think that the market for it is the size of our other businesses, the size of the phone business, the size of the Mac business, the size of the iPad business, or the iPod business. We don’t want to send the signal that we think the leg of that stool is of equal length as those others. And so that’s the reason we messaged it as a hobby.
On Siri and iCloud
I would view iCloud not as something with a year or two product life; it’s a strategy for the next decade or more. I think it’s truly profound.
…all of a sudden Apple comes out with multitouch on the [MacBook Pros], and this was really cool, and then extended that into phones and tablets. So this has completely has changed those industries in total. But Siri is another profound change in input, and it’s something that we’ve always dreamed of. I think all of us wanted this to work. It’s sort of like having a video call with FaceTime—it was “aha, it can work!” Siri, it’s hard to imagine it’s jut a beta product. I’ve never felt I couldn’t live without a beta product before, but now I feel like I can’t live without one.
On being CEO
There’s no better thrill than to look out at an audience and see people using iPhones, or go to the gym and see people using iPods, or go to Starbucks and seeing people use the iPad. These are the things that bring a smile to my face, and there is no replacement, or no substitute, for that.