Tim Cook is quite the talker. Just two months ago the Apple (NASDAQ:AAPL) CEO made the rounds in the media with a pair of interviews with NBC and Bloomberg Businessweek, and this morning he spoke at the Goldman Sachs Technology and Internet Conference.
Not only is Cook himself more willing to engage with the press than his predecessor, the entire company is more talkative under him. Apple surprised investors just last week when it promptly responded to Greenlight Capital's David Einhorn after the hedge fund star publicly called for the company to issue a share class of perpetual preferreds that yield 4%.
What else did Cook have to say at the conference?
Jumping right in
Goldman Sachs analyst Bill Shope jumped right in and immediately brought up the Einhorn situation with Cook. Einhorn had accused Apple of harboring a depression-era mentality that has led to the company hoarding more cash than it could possibly need for a rainy day. Cook dispels this notion by saying Apple simply "makes bold and ambitious bets on products and we're conservative financially."
However, Cook does acknowledge that Einhorn's idea is "creative," but that the lawsuit that he is bringing against Apple to unbundle a proposal within its proxy is a "waste of shareholder money and a distraction." Cook has said time and time again that he hates litigation. A recent Reuters report even said he was against suing Samsung from the get-go, and that's a case that had significant implications on Apple's intense competition with its South Korean frenemy.
You can only imagine how peeved Cook must be about Einhorn's suit, especially since it appears that Einhorn's scorn was misplaced when it comes to the proposal. The whole reason why Einhorn opposes the proposal in question is because it seemingly eliminates Apple's ability to issue preferred stock. The proposal actually only eliminates the company's ability to issue preferred stock without shareholder approval; Apple will still be able to issue preferred shares if shareholders approved such a move.
Cook adds, "We feel so strongly for Apple that shareholders should approve any issuance of preferred stock." This is why he called the whole ordeal a "silly sideshow."
What did you expect?
If investors were specifically looking for some big announcement on a beefier dividend, they were destined to be disappointed. After Cook finished speaking, shares were down by as much as 2.5%, which might indicate some level of investor disappointment.
Regarding the dividend, Cook reiterated what Apple said in its statement last week in that the company continues to "actively" discuss returning "additional" cash to shareholders. No surprises there.
If Apple were going to increase its dividend, which seems inevitable at this point, it would most certainly announce such a move on its own terms instead of at a conference hosted by a third party.
When the discussion turned to larger screen sizes, Cook points out how Apple has shifted the basis of competition away from mere specifications -- previously unthinkable for a consumer electronics company. Once upon a time, vendors primarily advertised things like hard drive capacity or processor clock speed; Apple is perhaps the only smartphone vendor that doesn't publicly advertise the speed of its mobile processors, a figure that takes some digging to ascertain.
Instead, Apple has been able to shift the focus to the overall experience, says Cook:
Do you know the speed of an A-X processor? Does it really matter at the end of the day? You want a fabulous experience when you use the product. If you look at displays, some people are focused on size. There are a few other things about the display that are important.
Cook emphasizes not to take his comments as indications of what Apple will or won't do in the future, leaving the possibilities of more affordable iPhones and larger iPhones on the tablet.
He didn't say no
When it comes to an affordable iPhone, Cook says that Apple isn't focused on hitting specific price points and instead just wants to make a great product. It has many ways to do this to appeal to consumers that are more price sensitive, but it won't compromise on quality.
By his estimates, the iPhone is only available to about 50% of mobile subscribers in the world, so there's plenty of opportunity still within the smartphone market even without a lower-cost device.
Whenever Apple introduces a new product, investors and analysts tend to fret over cannibalization. Apple has never worried about cannibalization and Cook's philosophy is that if use cannibalization as a major determining factor when deciding which products to pursue, then that signals the beginning of the end, since the company is losing sight of what really matters.
That's why Apple isn't worried about the iPad Mini eating into iPad sales, and also hints that it wouldn't be too concerned about an affordable iPhone grabbing some flagship iPhone sales. Ultimately, so long as Apple maintains a similar gross margin profile, investors shouldn't worry, either.