Apple CEO Tim Cook On China, Wall Street And Innovation

[Music] why don't we do with a poll nella that's become one of the most hated stocks around there was nothing to like about last week's revenue shortfall driven by iPhone weakness especially in China now we've heard a lot of theories about what might be going wrong here at Apple but you know what I prefer to go straight to the source earlier today we snuck out the Cupertino for a long meeting with Apple CEO Tim Cook take a look Tim you know I always say own it don't trade it but right now people are saying Jim give me the investment case for buying the stock well you know I never try to sell the stock I tried to sell a product never has however let me tell you the way I look at it okay we manage the company for the long term the most important things in Apple one a culture of innovation this team is unbelievable in creating hardware and software and services and getting them all to work together it just works second we have a very large active install base it hit 1.3 billion a year ago and we've added about a hundred million the last 12 box third highest customer satisfaction loyalty in the industry so you put those two things together if you got a lot of big active install bags and you got a lot of heavy customers then you have a recurring revenue stream on your product business and then because of our ecosystem that we build which has unbelievable developers in it and an app store to get to get services out there we built a services business that was you know a little over seven billion dollars in 2010 last year the for the calendar year over 41 billion and so and we've said that you know we're going to double the 2016 numbers by 2020 and so we're on a fast clip there and then of course we are shareholder-friendly on our capital allocation so you put all these things together and those are the most important things for us innovation customer satisfaction and that the overall size and and loyalty of our customers okay so most tech companies I think don't innovate nearly as much as you but let me just put it posit what we got yeah you take so many risks that I don't think you get credit for it for instance we had it turned out to be real ridiculous strings around our neck and then we got the ear pods we loved our dumb watch that told time and now we have a smart watch that saves our a lot I love the big fat jack in them about the lighting Jack we love their Sony 2002 our mirrorless camera until we got the iPhone 10 which takes better pictures why do you therefore have a 12 multiple because to me that is one yeah I think it's wrong to but I tell you what I focus on is the the customers and so the customers speak every every quarter they speak every year they speak every day and the the most important thing for us is that they're satisfied and so when I when I read emails and so forth from customers they're telling me how the Apple watch has changed their lie they're telling me how it motivated them to to be more fit be more active they're telling me that they discovered they had afib they're telling me they've found a problem with their heart that they didn't know existed and if they wouldn't have reached out to a doctor they might have died and so these are life-changing things we've got machine learning embedded in our silicon in our phone you know this guy allows us in not only the power efficiency to to have an incredible performance in a very small package but it allows us to manipulate this data on the phone have the transactions on the phone as opposed to letting them out in the world and you know this the whole privacy issue or we've always been on the right side of privacy but the market is now moving and so this is an incredible strength that we've built the photos that you're able to take with your phone as you said I mean these are life-changing things if you like to chronicle your life this morning I was I picked up my phone and I saw a memory from a year I loved them everything you know you see my nephew or somebody that's very important to you and their face just appears and you have a slideshow built for you these things are they're unbelievable and our customers love them that's the most important okay so let's let's unpack that my daughter has the five why because she loves it she said listen yeah dad if you put it though in the washing machine like your wife did I'll get a new one but you can't pry it out on my cold dead hands cuz I love it she is not an upgrade er because she you made the greatest product what do we do about that what do you do the most important thing for me is that she's happy that is the most important thing now if she's not upgrading for another reason maybe maybe it's too much of a hassle for her to upgrade maybe she's worried about the transfer of data all of this stuff we want to help on and you know we've got the store that you're in that's very focused on having the best customer experience they're helping people set up their new phone making sure all their data is transferred and also allowing them to trade in their current phone which begins to look like a subsidy that the carrier may have previously provided and it's offset some of the costs of the new phone okay so these issues are all occurring at the same time that we do have China you were very abject about China and a hundred percent of what we didn't think of the upside that went away there are issues involving perhaps not boycott some you know that's off the table but patriotism in a strange way meaning that you know what if I can get a huawei with a swift the subsidy why should I buy an apple it's conspicuously American how long can that last well I think here's what we saw in China and specifically the the Chinese economy it seemed to us begin to slow maybe in the second half of the year and it was on some sort of rational trajectory we believe based on what we saw in the timing of it that the tension the trade war tension with the US created this more sharp okay downturn I believe that temporary because I think that when you when you really look at it it's in both countries best interest to come to an agreement it is a complex very complex trade agreement and it needs to be updated but I'm as I've said before I'm very optimistic that this will happen and so that Quebec clearly will be good not only for us frankly but III think more about the world in general the world needs a strong us in China economy for the world economy to be strong my understanding is even the hardliners in the white house have moved on this issue now I know the president Truong Klaus yours a friend I know you go back and forth because you're represent the greatest that we have in America and my understanding is is that they're people who feel exactly like you which means it deals possible I think a deal is very possible and I've heard some very encouraging words recently yes yes in very recently and so I don't I don't speak for them obviously I I do talk with them and give them my ideas and pause okay now we gotta talk about some of these people who even a sayers and we've done with them before when the stock was substantially lower a Wedbush analyst says apples clearly the darkest days represented challenging growth Journal it's too soon to call the 10r a flop only after a few months but early indications are of course it's a plop what do you say to people say 10-hour flop what do you say to say darkest days I say baloney I call baloney on that let me give it let me tell you how I view this that here's the truth of what the facts are since we begin shipping the iPhone 10 our it has been the most popular iPhone every day every single day from from we when we started shipping until now but how about relatively and so you know do I want to sell more of course I do of course I'd like to sell more and and you know we're working on that and but in terms of the product itself it's an incredibly innovative product it has a bunch of advanced technologies in from the chip with the knurl engine to security embedded to an edge-to-edge liquid retina just display the first in the industry long as battery life ever in an iphone I mean it it is unbelievable in the photos that you can take of your life and of your loved ones I mean it beats up many many of the standalone cameras that you could buy now that nobody uses it anymore and and so these things are you know give a lot of value to the customer so that's that in terms of the naysayer I've heard this over and over again Jim I've heard it in 2001 I've heard it in 2005 and 7 and 8 and 10 and 12 and 13 you can probably find the same quotes from the same people over and over again and I'm not defensive on it this is America and you can say what you want but I'm giving you my my honest opinion is that there is a culture of innovation in Apple and that culture of innovation combined with these incredible loyal customers happy customers this ecosystem that's virtuous ecosystem is is something that is probably underappreciated well then you were surprised with the market reaction to both when you decided to not reveal you that's n when you reveal the shortfall I'm never surprised by the market to be honest with you because I think the market is quite emotional in the short term and and we sort of look through all of that we think about the long term and so when I look at the long term health of the company it has never been better the product pipeline has never been better the ecosystem has never been stronger the services are on a tear if you look at let me let's just take wearables as an exam sure right wearables is mainly the Apple watch and air pods yes if you look at this and you end on a trailing basis so I'm not projecting on a trailing basis they've or we've already exceeded the revenue from wearables is already more than 50% more than iPod was at its peak now this is a product that everyone I would say I think everybody would say it was an incredibly important product for Apple full of innovation and and probably the trigger for the company getting on a very different trajectory and into other markets and so already exceeded it by 50% at its peak at its peak also if you take air pods and the watch separately and you sort of back these up in a line it to the launch date of iPod as well and you know where all of them have a complement of time you would find that that each one independently is like four to six times ahead of where iPod was at a comparable period of time and so this air pods are becoming ubiquitous out there people love them I get notes every day they're chock full of technology but they just were it's the elegance of them but with significant technology and built right in in an unbelievable user interface keep that books we talked about yeah you should be right back more with Tim Cook insect [Music] all right balance talks for 40 years Tim and you guys are founded innovation my wife said tell him what do they want time travel to do a time travel sounds kind of great because there are companies to sell it 20 to 23 times earnings they are the consumer packaged food companies they're companies that tend to go from 1 to 4 percent if they get 5 percent then they get a 28 multiple and yet the analysts who follow your company continue to look for units of of phones they're not thinking about the revenue and yet if it were Procter and Gamble and they got that many razors with the razor blade they paid 28 times earnings are you followed by the wrong people I I think that our story isn't well understood I think Apple is not well understood in some of the Wall Street if you for example I think I think there are several people that believe the most important metrics is how many iPhones are sold in a given 90 day period or what the revenues is this goes this is far far far down my list because the point is if somebody decides to buy an iPhone a little later if because of the battery a huge discount that we gave they decide to hold on a little longer I'm I'm great with that I want the customer to be happy we work for them and so but the important thing is that they're happy because if they're happy they will eventually replace that product with another and the services in the ecosystem around that will thrive but as long as it's north of 60 percent as long as cell phones are north I don't know how you get people to think even if it's 20 billion in service revenue it's the sixty-two percent it's it is overwhelming and they don't know what to do and I understand the conundrum Tim they don't know what to do because the cell phone is such a big part of the pot yeah but if you started back up and look at Apple in our last fiscal year we had a hundred billion dollars that was not iPhone a hundred billion and in this last quarter if you take everything outside of iPhone it grew at nineteen percent nineteen percent on a on a huge busy that's good company but not a tech give the best tech consumer package good and say you know what we're just we want to be covered by other people I don't think we get too thick hey we're going you could get some ideas way I spoke to some people at Walmart yesterday yeah an arrangement with Walmart Flipkart to take over India with a budget phone rather than to eat piecemeal for us we're about making the best product that enriches people's lives and so we're not about making the cheapest okay right we we want to make a great value but but that's not necessarily the cheapest and so for us what we've seen is there's enough people in every country in the world that we play in that we can have a really good business by selling the best phones now the best phone we knew that as we went to the ten and then the follow-on of the 10s and the tennis max that everybody would not want to spend a thousand dollars for the phone and so we've made the iPhone 10 RR and we put as many of the advanced technologies as we could in that part to this subsidy and we priced it right between the eight and the eight plus of the year before and so on but but in India in general we're all in it is a major focus if you look at how we've done over the over the years we've gone from a you know hundred two hundred million dollar business to last year we had we exceeded 2 billion okay that two billion was flat year of a year after rapid rapid growth and so we have more work to do we'd like to put stores there we would like some of the duties and so forth that are put on the products to go away and we're working closely with the with the team there and I I I believe that we'll have better results at some point in the future I'm not I'm not in the forecasting moment here today but okay it's an important market for you have people who are naysayers one of the naysayers not an analyst its Qualcomm Qualcomm keeps telling me over and over again you're gonna come to the table you have to watch the suit in Germany Wall Street and China that wait till you see them cave are you gonna cave no look the truth is we haven't been in any settlement discussions with them since the third calendar quarter of last year that is the truth so I'm not sure where that thinking is coming from the the the issue that we have a Qualcomm is that they have a policy of note no license no chips this is in our view illegal and so many regulators in many different countries agree with us and then secondly they have an obligation to offer their patent portfolio pipette for low Forleo on a fair reasonable and non-discriminatory basis and they don't do that they charge exorbitant prices and they have a lot of different tactics they used to do that and that's not just us saying that I mean you can see what's coming out of the FTC trial here in the United States and obviously I have a issue with with some of their other tactics that I'm sure you've read about right that they say your large settlement talks all the time well not just not just that but the paying somebody to write fake news and then promoting it this is stuff that should be beneath companies this is not how things should operate all right so let's talk about competition on the other company that I think of is innovation I always have to talk about is Amazon and they do great voice you have voice it's a bit of a contest in house if you through if you have unlimited capital and you throw it at voice would it make it Siri even better well we're putting a ton of investment in Siri and so if you look at Siri today Jim we have about a bit over 500 million devices that are using Siri out there Siri enabled it's series used over ten billion times a month and it's in 21 different languages in 30 something countries and so we we've tried to do we tried to create a global product we're not in every country yet we want to be and if you want something that is something that it's been created on your device Syria is the best place to do that and I think I get more and more great things every day the quality is is going up you know voice is a never ending journey we all speak a little bit differently I have a southern dialect not as southern as I used to but there's there's a lot of stuff to do there but I'm highly confident in our ability to keep innovating like crazy there okay last question because there gonna be some wrath healthcare if you hooked up with different could you make it so that I can sync I need to sync I need the handshake with my doctor okay and payments it can be huge if you look into PayPal they've got a thirty multiple master card 30 ma can you layer it layer either one those on to be able to jump even though it's huge the service dream take it so that it's forty percent your company by doing more in payments more in health on services you will see us announce new services this year there will be more things coming I don't want to tell you what they are material I believe they'll be material over time okay I'm not gonna forecast right precisely the ramps and so forth but there are things that we that we feel really great about that we've been working on for multiple years on the healthcare in particular and sort of your well-being this is an area that I believe if you zoom out into the future and you look back and you ask the question what was Apple's greatest contribution to mankind it will be about health because our business has always been about enriching people's lives and as we've gotten into health care more and more through the watch and through other things that we've created with research kit and care kit and putting your medical records on the iPhone this is a huge deal and it's something that is very important for people we are democratizing it we are taking what has been with the the institutions and empowering the individual to manage their health and we're just at the front end of this but I do think looking back in the future you will you will answer that question Apple's most important contribution to mankind has been in hell great thank you for having to you well now you know the story behind just the units of the cell phone in the book co-op oh yeah Jim Cramer here from there buddy thanks for watching see me see you on YouTube click here to subscribe and get the jump on my exclusives with CEOs Plus wanting news investigate vice and a whole lot more

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Id: lHUz63xFyyw

Length: 22min 14sec (1334 seconds)

Published: Tue Jan 08 2019