Apple CEO Cook: 'We're unrivaled' in innovation

Apple CEO Cook: 'We're unrivaled' in innovation

Summary: Tim Cook, CEO of Apple, said he has never been more bullish about the company's ability to innovate.

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Apple CEO Tim Cook defended the company's cash hoard, said that innovation is in the corporate DNA, added that the smartphone market may be the best ever and outlined his acquisition strategy. He also knocked the PC industry's focus on specifications and noted the iPad is the "poster child" of the post-PC era. 

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Cook, speaking at the Goldman Sachs Technology and Internet Conference in San Francisco, addressed Wall Street analysts and investors for the second consecutive year. Generally speaking, Cook has been much more open with investors than former CEO Steve Jobs.

The overall theme from Cook was that Apple doesn't buy the limits of large numbers and has existing markets---namely tablets and smartphones---that can continue to grow. 

RelatedApple, newfangled iWatches and becoming a mature company

Cook covered the following topics as he repeatedly noted that Apple can continue to grow:

  • According to Cook, the tablet market is a huge opportunity for Apple and the iPad is the poster child for the post-PC era. "It creates an experience that's draw dropping," said Cook. He added that more iPads were sold than PCs. "We're in the early innings of this game," said Cook. "You can see the whole of Apple (with the iPad."
  • Cannibalization. Cook said he has been asked about cannibalization of products repeatedly. Whether it's the iMac killing the PowerBook or iPad killing the Mac. "If we don't cannibalize someone else will," said Cook. He added that the iPad can poach share from the Windows ecosystem for years to come. "If companies worry about cannibalization it's the beginning of the end," said Cook. 
  • The PC market competed on two things---spec and price. "Customers want a good experience, quality and an aha moment," said Cook. Companies that talk about the specification of something are hiding the fact their products don't deliver a great experience. He added that no one cares about Apple's chip speeds, pixels in a display and other specs. The display comments were a knock on the OLED spec war. "The only religion we have is that we must do something great," said Cook. "We won't make a crappy product."
  • "The age old model of everyone doing a sliver of something is over. Apple can do integration better than anyone," said Cook, referring to the PC market's partner model. 
  • Can Apple do platforms around the world? Cook was asked about whether Apple can do cloud services in emerging markets, which limit content and music purchases. "Our App Store is operating in 155 countries," noted Cook. iTunes, iCloud and iBooks also operate in numerous countries. "I really feel like we advanced significantly last year in building our infrastructure around the world," said Cook. "Our intention is to have our ecosystem everywhere."
  • The retail strategy. Cook said Apple continues to grow its retail footprint. "There's no better place to discover and explore our products than retail," he said. "It's the best retail experience. You realize the experience is there not for selling but serving. It helps you get more out of your products." Cook said store isn't the right term. The retail outlets are the core of Apple, not the headquarters in Cupertino. Apple will also retool and expand stores as well as add to the retail roster, he said. 
  • For Apple, innovation is embedded in the culture. "Innovation is strong as ever and in the DNA of the company," said Cook. "Apple is the center of innovation." He added there's no set formula for innovation and if there were one companies with a lot of cash would acquire it. Innovation is about skills and leadership. "Apple has skills in software, hardware and services. The model that grew the PC industry where companies specialized. That model is not working for what consumers want today," said Cook. "Consumers want this elegant experience." The real magic happens at the integration of hardware, software and services. "I think we're unrivaled in that," said Cook. 
  • Apple has paid developers $8 billion, up from the previous mark of $7 billion.
  • Would Apple do a large acquisition? "We've averaged an acquisition almost every other month (for the last three years)," said Cook. Those companies typically had engineers and intellectual property. PA Semiconductor was a prime example of a good Apple acquisition. PA Semi became the engine of iPhone, iPad and iPod Touches.
  • On the laws of large numbers, Apple doesn't believe in limits. "It's because of that Apple has been able to do so many things over the years," said Cook. He added that when he zooms out he sees a growing market that Apple can address with smartphones and tablets. "All phones will be smartphones," said Cook. He called the smartphone the best market ever and noted Apple has a lot of upside in China, the app ecosystem and global expansion. "The iPhone is only available to 50 percent of the world's subscribers," he said. 
  • Regarding cheap phones, Cook said "our North Star is great products." "We wouldn't do anything we considered a cheap product," said Cook. "That said we have done things to appeal to people more price sensitive." An example is the lower pricing for iPhone 4 and 4S. Cook added that Apple ran out of supply for iPhone 4. "We have made moves to make things more affordable," he said. 
  • Cook said that Apple aimed for a less expensive Mac but couldn't deliver a great product. Apple solved the sub-$1,000 PC issue with the iPad.
  • He countered the argument that Apple had a depression mentality about cash---a charge leveled by investor David Einhorn's Greenlight Capital. Cook said Apple is investing in R&D, stores, supply chain and is also financially conservative. "A company investing a pair of 10s over two years ($10 billion in capital expenses) doesn't have a depressionary mindset," said Cook. "We do have some cash, but it's a privilege to be in this position to seriously consider returning additional cash to shareholders." Cook added that the board is in deliberations.
  • Cook added that the cash debate is about the rights of shareholders. Apple is looking at things to improve governance further, said Cook, responding to hubbub over the company's preferred shares practices via Greenlight's lawsuit. He said Greenlight's lawsuit over Apple's cash is "a silly sideshow" and the money used for pay for lawyers should be given to a better cause.

Topics: Tech Industry, Apple, Apps, iPhone, iPad, Mobility, Smartphones

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228 comments
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  • If I were Tim

    I would slap that investor with a stick on his mouth and say shoo, shutup, you got yours already, enough!
    adacosta38
    • The investor is right

      Einhorn is right. But he deserves everything he gets.

      He retains a huge exposure to Apple and has been talking up Apple stock for his own self-serving purposes. Perhaps he did it for so long he began to believe his own hype. People like him pushed Apple stock into grossly over-valued territory. We're now in the process of an inevitible correction which is wiping hundreds of billions off the value of Apple and losing huge chunks of money for die-hard investors who tied themselves to the deck of a sinking ship when the storm began -- because the captain and his first mate told them it was unsinkable.

      How ironic, therefore, that after talking-up Apple for so long, Einhorn is now losing out along with all the investors he persuaded to buy or hold APPL stock. He should have got out sooner, and he should have advised others to get out sooner, but greed got in the way. And now he wants a share of Apple's cash stockpile and a nice big dividend to soften the blow -- ROFL!

      It's poetic justice for both Apple and Einhorn -- they deserve eachother.
      Tim Acheson
      • Apple CEO Cook: 'We're unrivaled' in innovation

        Einhorn wants to become the richest person on this planet and that is why he hypes Apple so much so that he wanted to impress all his nice young girl fiends with billions more. He may be licking his wounds for a while as Apple stock may be ready for another unexpected detour on the downside as Samsung releases galaxy IV and may divert lot more high end consumers from iPhone to Android platform.
        commonman13
      • APPL

        Very well said +1 . The share price valuation correction was long overdue APPL rise and fall in share price / valuation unfortunately perfectly demonstrates the current Wall st. 90 day mentality and herd mentality.
        The above actually somewhat states the case for Dell going private (risky though).if the investior/lenders eventually become impatient what ever happened to Blue chips.
        preferred user
        • I'm not an Apple Fan

          not by any stretch. I have an iPhone 4s, that work paid for (I wanted to try it for a year or so), and it's got it's pluses (easier settings that android, though still has some things that aren't intuitive) and clearly their Facebook app is superior to Android's. However, aside from email, FB and occasional web, I find I use it far less than I used my android device.

          Nevertheless, the stock is currently in the buy range, but when it was over 600 it was well beyond the buy range (though still worth holding). So talking it up at 700 was dumb, but talking it up at 460, it's worth a look.

          What I don't buy into is the whole iPad is a PC replacement. It's not. Typing on an iPad (or any other tablet) is not as efficient as a computer. You can't do as much on it as you can on a similarly price PC (especially since there's a decent chance you've got monitor you're happy with). For a grand, you can easily build a PC with a 256GB SSD drive, BD Burner, $300.00 CPU (if you're so inclined), quality MB, 32GB of ram and a brand new aesthetically pleasing, and quiet, case. You could spend 100 less on the CPU and not notice a difference for years. Most could drop to 8GB of ram and be good for the life of the system, but the price of 32GB is often as little as $100, so who cares?

          iPad is nice, but let's not pretend it's a PC replacement. It's an expensive tablet for those with extra cash. Unless there's research that shows those people don't have a desktop and/or laptop at home, it's not replacing anything.
          notsofast
      • Tim strikes again - what a surprise! He no likey Apple? Heh.

        OMG it's this Tim Acheson character again who finds anything and everything bad to say about Apple he possible can regardless of actual facts or merit. An agenda driven fsckwad. Take your tech racism elsewhere jerk. You and Android deserve each other with you both being mediocre examples of your respective categories.
        pgentry53
        • This makes me laugh

          When the ceo of a company has to come out and tell people that they are innovative you know there is something going on.
          I for one have been reading a lot in comments about iphone users complain that their devices are not being upgraded much , especially the new iphone. It is not all about processor speed and an extra 1/2 and inch or so in the size of the display, it is about innovation, you know, new tech new ideas new functionality.

          Now one thing i have to say before the apple fanboy's start romping around, i think Apple created the smartphone market as it is today, i honestly believe that if it was not for apple we would not be sitting in such a comfortable situation, with android and windows8 and up and coming smartphones os's .
          Apple started it all, and yes they did have innovation in those first few devices, but now as everyone is saying apple needs to pull their finger out of their butt and start putting some of that innovation into the next device they release, no more simple speed and screen upgrades , no matter how nice they have been, the competition is running away with the prize of the market share apple used to control, because they are innovating, not just giving their screen more pixels , which they are still doing by the way, but by trying out new tech, NFC and wireless charging. Nokia and their new camera technology, and new camera tech coming from others too. New screen tech with faster and more sensitive screens, where a stylus can be used as well as a normal glove and the experience is still amazing.

          Apple is floundering and not using any of the billions they have in the bank to do real innovation.

          The first smartphone took an existing platform added a few of the existing technologies, improved some and just directly copied others and put i together in an amazing package. Everyone wanted an iphone or something similar.
          Now Android has taken the lions share of the market from apple, and although people will have many different reason for apple losing market share, i think the biggest is the fact that apple is a walled garden , yes you can do what you want but it feels like you can do the bare minimum and nothing more. You cannot change the home screen as much as you can on android you do not have access to the functionality you have on android , and now Microsoft is coming to the market with an amazingly robust and stable system that almost everyone that tries it wants it .

          I can understand Tim coming forward and wording things the way he has, he needs to appease the investors, he needs to make excuses and try to hoodwink those that have seen through the curtain that is being pulled in from of everyone's faces.

          Apple stopped innovating a few years ago, i am not saying they have not released some good phones but nothing close to what the competitors are releasing, apple is playing catch up when they were the first to the market.

          I suspect this is because they do not want to spend money on improving something that they are not going to charge much more for, i mean they cant charge much more as they are at the upper bracket of what people are prepared to pay, so to put something into the iphone like wireless charging and nfc would cost them a little more in profits as they could not really charge people for that.

          Apple is all about how much they can get per unit sold, they are proud of the fact that their profit margin is the biggest in the industry, something that does not really make sense but it works for some reason is encouraging people to buy iphones , and buy them in there millions every time a new version is released.

          I suspect that apple would be more than happy holding 5% of the marketshre, they were happy with this in the pc arena for many years, doing nothing to encourage Windows users to jump ship.

          Thanks tim for the laughs but apple is flailing and the only reason is because there is not enough innovation , there is not enough of a change to the way people use there phones , there is not enough to justify buying a new device every year.And this is not me saying this, this is what i have been reading since the release of the iphone 5, where people have been saying that they give apple until the next release to start competing again, before they jump ship.
          wunderboy
          • I agree with your post, except for...

            I think the post by wunderboy is excellent except I would argue that Research in Motion probably launched the smartphone era with the Blackberry! When released, this device was all the rage and it continued to do very well until the iPhone was introduced. Then Apple started chipping away at the consumer market while Blackberry became the defacto business smartphone. The rest, as they say, is history!
            number cruncher
    • slap the investor. ..

      Wow...really? Slap one of the people that will invest his/her money into the company so that they can afford development, etc...
      Sure! Why not? *Face Palm*
      Cory Ducey
  • Misplaced arrogance

    Apple's CEO: "We're the best innovators!

    This is a characteristically arrogant statement from Apple, but it could not be more out of touch with reality at a time when Apple's stock is a train wreck and a key reason for that is their lack of innovation since iOS under Jobs.

    Apple's value and stock price is bombing -- for clear reasons which are readily apparent to investors and everybody else.

    E.g. Apple's financial results are overwhelmingly dominated by, and dependent on, one product: iOS. But iOS is very old news, now, and consumer trends are consistent with a growing realization that there are superior products available at an equal and often lower price.

    E.g. Apple is losing market share in by far their most important segment, mobile, which defines the company and it's success in recent year. And again, their quarterly results are dominated by mobile.

    E.g. Apple is not an essential aspect of Apple products. Other companies like Samsung make their components -- all the cleverest stuff is from outside Apple. All Apple does is essentially put a shiny case on it and stamp on their designer-label before selling it to you.

    E.g. Apple's success was achieved under Steve Jobs. He is now gone forever, and it is already abundantly clear that Apple is not the same company without him. Apple is no longer perceived as cool, except among the last remaining die-hard supporters comprising middle-aged men and women, Generation X and older Millennials. Ever since Jobs went, Apple has been making one serious mistake after another.

    E.g. Apple is consistently the most expensive way to buy a product or service, from MP3 files and MP3 players with iTunes to tablets with iPad. Like its stock, Apple has been over-rated and over-valued, and a correction is long overdue.

    E.g. Apple is stuck in the naughties, locked in a work-out pattern of releasing slightly upgraded versions of the same old products. Early fears that Apple has nothing more to offer the world are proving justified. Tech is moving on, leaving Apple behind. The company is now just ticking over -- it's boring to watch.

    E.g. Apple engaged in unpopular and immoral practices, including avoiding $1 BILLION tax per week in the US alone, failing to create jobs domestically or even in its most important market territories, unacceptable conditions for off-shore factory workers, to anti-competitive practices, to patent trolling, etc, etc.

    E.g. Apple has a track record as a fringe player. After all these years, Mac has still barely scraped past 5% market share against Windows.

    Hence, recent estimates value Apple at a mere $200 share:
    http://blogs.reuters.com/bethany-mclean/2013/02/06/should-apple-be-a-200-stock/

    Hence the desperate cries of "we're not doomed" from Apple's propaganda machine, now stuck in a pathological overdrive:
    http://www.businessinsider.com/wsj-apple-is-quietly-sending-the-press-more-reports-2013-2

    Hence the desperate stock manipulation attempts:
    http://readwrite.com/2013/02/11/whos-manipulating-apple-stock-with-this-iwatch-story
    Tim Acheson
    • Pretty much...

      I agree with everything you said except I think Apple has 10-11% of the desktop computer market, not 5%...but it probably depends on what report you read and who wrote it. However, they do tend to dominate the education sector and have made inroads into the home of the upper-lower class to middle-class and they also dominate the upper class home market. That being said, the bulk of the world is in the lower-class socioeconomic status.
      ExploreMN
      • LOL

        This is a great example of human arrogance as Mr. Cook tries to pump up the value of Apple stock. They haven't been doing much innovation over the last two years and appear stagnant since he took over. I know I know the Apple faithful are going to start bombarding me with talk about a wrist watch that will end world hunger and war.
        Rob.sharp
        • Apple CEO Cook: 'We're unrivaled' in innovation

          Do you really believe what you write? All your assertion seems to be more focused on the stock price than Apple as a company? Stock prices don't tell much about the company because there is not of speculation. Look at Apple's growth in the last 2 years and look at the products Apple has released? Do you really think consumers are that stupid that they will buy anything Apple releases? get a brain, man.
          commonman13
          • From the people that I have met and seen that purchase apple products

            I would say yes.
            SteveWojo
          • Yep

            I am with Steve on this! You know how many times I showed people what my Android could do and they were like, "Wow, you got a lot more features with your phone than I did with my iPhone"? More often than I have bothered to count.

            Do I think people are dumb, nope, not at all! I think people are lazy and follow fads because it is easier than researching and making a potentially bad decision.
            slickjim
          • Not all of us

            want our phones to cook our breakfasts as well as make phone calls.
            Laraine Anne Barker
          • If you really want a phone

            Buy a Nokia "candybar". Smartphones are WAN connected pocket personal computers, that just happen to have a cellular modem that still does voice (well, sometimes... LTE/4G doesn't do voice, other than VoIP like any network). It's just a historical quirk we still say "phone"..
            Hazydave
          • Not all of us want our phones to cook our breakfasts

            haha - yep that's EXACTLY what we're saying we want our phones to do. In your case, innovation is of no consequence. For many of us, it is. So yes you like your iPhone. But no, there is no innovation. Just be happy with your phone and don't try to argue us out of OUR desires. Please.
            nowend
          • That's interesting because...

            ((I think people are lazy and follow fads ))

            I could be wrong, but I thought everyone was saying that Apple was out-dated and that Android was the latest fad.
            oNutz
          • Yep...

            My poor sister drank deep from the Apple fountain, bought herself an iPhone, then proceeded to regale me with how impressed she was. When at length she asked what kind of phone I had--it being critical to ensure I was part of the tribe, too--I whipped out my Droid X, booted up a Netflix movie, and let her watch a short clip.

            The regret on her face was priceless.
            TaxNerd