Tim Cook: “Winning for Apple Is Not about Making the Most”

| Analysis

Apple CEO Tim Cook Apple CEO Tim Cook

Apple CEO Tim Cook didn't offer a lot of specifics at his company's 2013 annual shareholder meeting, but he was crystal clear about one thing: "Winning for us is not about making the most. We want to make the best."

The comments came in response to a shareholder who wanted to know why Apple wasn't using its vast hoard of cash—more than $137 billion as of January's quarterly conference call—to wage "total warfare" on Android.

Speaking first during the question and answer session with Mr. Cook, the shareholder expressed concern that Apple has lost market share in the smartphone market. He didn't understand why Apple's R&D hasn't grown at a faster rate and wanted Apple to use its money to take back share and beat companies like Samsung.

Tim Cook responded saying that Apple, "doesn't constrain R&D [spending] for the sake of cash." He also made a vague argument disputing the relevance and validity of market share number in the first place. It was one of the least precise comments we've heard Mr. Cook make as CEO.

Moving on from there, Mr. Cook told the shareholder that Apple doesn't measure success by who makes the most devices. "Dell is a company that wants to make the most," he said, making it clear which company he believes does the better job.

Dell's market cap is US$24.2 billion, and that includes a recent spike caused by Michael Dell's efforts to take the company private. Apple on the other hand, is the world's most valuable corporation, with a market cap of $417.5 billion.

Mr. Cook said that total market share was less important than having enough customers to bring developers to the platform, something he believes Apple does better than anyone. He noted that Apple has paid out some $8 billion to developers from the App Store.

At the same time, he also said, "We don't have our heads stuck up..." At that point, he paused, looked embarrassed, and said "stuck in the sand."

The almost-gaffe earned him a big round of applause and laughter from the shareholders in attendance, but the point he was making is that Apple pays attention to the market, and is constantly looking at how it approaches the smartphone and other businesses.

"There's a button or two we could push this afternoon to make the most," he said, but that's not Apple's goal. Instead, he said, Apple would continue to focus on making the best products it can, products that "enrich our customers' lives."

Shares of $AAPL closed lower on Wednesday, ending the day at $444.57, down $4.40 (-0.98 percent), on heavy volume of 20.9 million shares trading hands.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

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Comments

Mário Pereira

Nheeee… money is no problem for Apple!
Can’t wait to see what they’re doing with the new MacPro! smile

Bosco (Brad Hutchings)

So what you’re saying is that Cookie confirmed that Apple is out of good ideas about what to do with its cash. I have to give Cook some credit for not throwing money at bad ideas like trying to take market share from Android. The whole widget model is not a sustainable market dominator. It lines up too many people against you.

webjprgm

Bosco said:
“The whole widget model is not a sustainable market dominator. It lines up too many people against you.”

It also skews direct comparisons. Samsung gets credit for shipping tons of phones, but it mostly just makes hardware (and modifies Android a bit).  Google gets credit for Android being all over, but it only makes the OS not the hardware.  Apple ships tons of hardware running it’s own OS, but whenever compared it’s OS-to-OS or hardware-to-hardware and does not weight Apple’s success based on competing in both markets.

That’s kinda beside Bosco’s point, I guess.  It’s true that both hardware people AND software people will want to destroy Apple, rather than just one or the other, because Apple doesn’t share it’s hardware for other people to sell OSs on or it’s OS for other people to put on their hardware, so they have to fight against both even if they’re only in one of the two markets.  Interesting.

Long-term Apple’s phones and tablets will likely be small market share because Apple doesn’t like to compete on price or on selling the most, as Tim Cook just said. Instead they want to sell the best.  Well, if that’s still the way they think then they’ll be back to making the BMWs for the 4% like Mac OS was 10 years ago.  It just takes a little time for copy-cat competitors to make products that are good enough and sell them for cheaper.  If they have some features that Apple doesn’t then there’s extra reasons for people to choose the cheaper one (and in this case they do).

But Apple should survive long term by pumping out further innovations.  If it can.  The iPhone, iPod, iPad, etc. all broke new ground and shattered previous markets.  So with competitors catching up to Apple on existing products AAPL plummets, but they’ll keep the value up if they come out with new stuff.

I think Mr. Cook made it pretty clear they’re not going to drop the price on the iPhone or iPad to gain market share, and that they’re not going to introduce an iPhone Nano for a cheaper price point.  These are two easy buttons Apple could push right now.  Too bad, but that’s how Apple likes it.

Also I’m waiting to see what Federighi + Ives make of iOS 7.  I think iOS hasn’t improved quite as fast as I’d like compared to Android.  E.g. Samsung’s Knox is a very compelling feature.  I hate corporate IT owning my personal phone, and that feature is an excellent way to keep them out of my stuff yet happy.  Similarly I think the device passcode should apply only to certain apps (like Mail, financial apps, maybe notes) but let me get at the phone and games without the fuss.  And multiple users!!!  Well, this sounds a bit rant-ish, but it’s meant as examples of why I think iOS needs to improve quicker.

Constable Odo

Apple shareholders are going to get slaughtered in 2013, while Google shareholders become rich as kings.  Considering Apple makes far more money than Google does, something just doesn’t seem right.  As an Apple shareholder, I’m resigned to a nice dividend every quarter.  I can see Apple’s share price is going nowhere this year but down.  It’s very disappointing because I thought Apple was doing pretty well last quarter, but I see I know nothing about the stock market.  Apple has continued to lose shareholder value over the last five years and it seems it’s not going to get any better.  The stock has become practically worthless to shareholders and no investors will touch the stock.

ibuck

That’s sarcasm, right Odo? It IS frustrating trying to understand what’s happening with Apple and its stock. Bosco and webjprgm seem to fall into the error of thinking “I think A & B, therefore anyone rational must think A & B.” Despite not having all the info upon which AAPL stock traders base their buying & selling, or upon why consumers buy Apple products. or not, they offer “opinions” on why things happen as they do. No one knows why Apple’s stock and products do as they do, because there are a host of different reasons, some of them emotional, for the behavior of people. There are several camps, however, who seek to sway people to their way of thinking, or just to add confusion (aka FUD) to the situation. Sometimes for their own benefit, sometimes to harm others. So, it’s “interesting times”, in the Chinese curse kind of way, for Apple and its customers, shareholders and others. One would hope that Apple’s next quarterly financial news will clear things up, but unrealistic expectations and hopes may not even allow that. Sigh.

Bosco (Brad Hutchings)

@ibuck: I’m simply boiling down common, time tested analysis about dividends, stock buybacks, and cash hoarding, and what they say about the efficiency and capacity of a company. Dividends, good. Stock buybacks and cash hoarding, bad. The latter indicates a company without ideas proportional to its cash on hand. That said, admitting to not having enough ideas to invest in is way better than pissing the money away. Cookie knows that he can’t buy market share and kill Android with his cash reserves.

RonMacGuy

I sincerely doubt some boiled down common, time tested analysis applies in all cases, especially when you are talking about $137B.  And you are wrong that Apple couldn’t buy market share with its cash reserves.  It would be very easy to do.  No, they wouldn’t kill android, but why would they want to?

As for Odo’s comments, Google 5 years ago was $470 a share and is now $800.  Apple 5 years ago was $125 a share and is now $450.  So explain to me the comments “Apple has continued to lose shareholder value over the last five years and it seems it’s not going to get any better.  The stock has become practically worthless to shareholders and no investors will touch the stock.”

Are you serious Odo?  Could you actually try to do some research before making up data?  Can you do the math on the change in market value on real data?  LOL.  Do you know what the letters CAGR mean?  You should Yahoo it.  Google CAGR is 11.2%.  Apple CAGR is 29.2%.  And yes, a bigger CAGR is better than a smaller CAGR.

The comments posted here never cease to amaze me.

pat

“Apple CEO Tim Cook didn’t offer a lot of specifics at his company’s 2013 annual shareholder meeting, but he was crystal clear about one thing: “Winning for us is not about making the most. We want to make the best.”

Really ? I wish he had applied that to the last release of maps…
He is the CEO, he is responsible for what is released !

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