Recently, the tech conference was hosted by Goldman Sachs in which different companies presented their future directions. Among those companies, Apple Inc. (NASDAQ:AAPL) also presented its case. Normally, these sorts of conferences are good in two manners for investors:
1) Given that companies present their cases, it is a good ‘contact point’ for investors. Normally, investors only find such detailed discussion on the company on the earnings conference call.
2) As most of the major companies belonging to a specific sector/industry present in the conference, these presentations help the investors to sense the general trajectory of the sector (whether it is growing, stabilizing or declining in the future).
CEO Tim Cook discussed many topics that were top of mind for investors and was clearly optimistic on the company’s growth prospects. Moreover, the company appeared much more flexible in returning additional cash to shareholders as it responded to recent shareholder activism on this front.
On Capital Allocation
Cook noted that the company will continue to heavily invest in R&D, new products, the supply chain and acquisitions. Nevertheless, he also stressed that Apple Inc. (NASDAQ:AAPL) is in a position to seriously consider returning additional cash to shareholders, though it will be thoughtful and deliberate. With regard to the recent Greenlight proposal for perpetual preferred stock, Cook noted that the company will consider it, though he was clear that Proposal 2 on its recent shareholder ballot did not preclude the issuance of such a security, but rather just required a common shareholder vote.
On Innovation
Cook noted that he had never been more bullish on innovation at Apple Inc. (NASDAQ:AAPL). Innovation is deeply embedded in the culture of the company. In particular, Cook highlighted Apple’s ability to simultaneously innovate on software, hardware and services, which enables the company to deliver a truly elegant and integrated experience for consumers relative to competitors that can only do one of those components. While skeptics have doubted the benefits of vertical integration over time, Apple continues to believe in controlling the primary technology in its products.
On New SKUs and Price Points
Although Cook did not give any specific indication of new product plans, the company appeared much more flexible in its willingness to expand its product lines and covered price points, noting that the only thing Apple Inc. (NASDAQ:AAPL) would never do is make “a crappy product.” The CEO reminded investors that Apple’s TAM expansion has not always been driven by the addition of SKUs within a product family (such as the addition of the shuffle, nano and touch to the iPod family), as in some cases the company has addressed new price points and customers by creating entirely new markets (such as the iPad in response to demand for lower cost Macs). While product innovation remains at the core of Apple’s strategy, the company did remind investors that with regard to gross margins, the halo effect, Apple’s supply chain prowess as well as its ability to monetize software and services, act as buffers that are often under-appreciated by investors.
On Growth and Share Gains
With regard to the company’s growth potential, the management remained optimistic. The smartphone market is projected to double in three years, and the company believes that all mobile phones will eventually be smartphones. Meanwhile, the company noted that the iPhone is currently only available to 50% of subscribers in the world. In addition, the company continues to view its ecosystem as a key source of competitive differentiation, revealing that it has paid over $8 billion to developers to date.
