Apple CEO Tim Cook

Apple Inc. (NASDAQ:AAPL) CEO, Tim Cook spoke yesterday at a Goldman Sachs conference. Cook was asked many questions by Bill Shope, an analyst at Goldman Sachs. We posted a large chunk of Cook’s speech but found a few other important nuggets from the speech transcript. Cook had some very interesting comments about the growing smartphone market. Below is an excerpt:

Bill Shope – Goldman Sachs – Analyst

We’ve certainly seen this, as I said, in prior product cycles and over the past several decades. One of the byproducts, particularly over the past decade of your innovation and I’d say one of the metrics that investors have appreciated your innovation through is hefty growth and market share gain. We talked last year about the inevitable wild, large numbers. You’ve sold over 0.5 billion iOS devices. I’m pretty sure we can call that a large number. But when we look at last quarter, you shipped 48 million iPhones which is an impressive number by any means. But even adjusting for the 14 week quarter and the prior years quarter, it was about in line with market growth. So, are we getting to a point in your most important category, the iPhone category, where you’ve reached a natural limit on market share gains in smartphones? And how do you think about that?

Tim Cook – Apple Inc. (NASDAQ:AAPL) – CEO

There’s that word — limit. We don’t have that word in the Apple Inc. (NASDAQ:AAPL) vocabulary. In all seriousness, the people I work with don’t view that there are limits. It’s because of that that Apple has been able to do so many things for so many years and done things that people didn’t know the ever wanted and now can’t live without. We don’t really think of the world as limits.

When I zoom out and look at the smartphone market in particular, what I see is a market that last year was around 700 million plus or minus. It’s projected to double in the next four years to 1.4 billion. This is a huge market. I believe that more on a longer-term basis, all phones will be smartphones and there’s a lot more people in the world than 1.4 billion. People love to upgrade their phones fairly regularly. And so I see a market that is incredible to be in, a — maybe one of the best markets of all time.

Apple Inc. (NASDAQ:AAPL) has enormous momentum. The 500 million that you referenced — that 500 million was done over the course from 2007 until the end of last year. Apple hit over 500 million. However, over 40% of that happened last year. And so there’s incredible momentum there and across that period of time we built an ecosystem that is the best customer experience on the planet and in addition it’s fueling and incredible economics gain for developers and so we’ve already gone over, paying $8 billion now to developers.

If you look back at the economy of the PC market or look at it today, there’s money flowing to two or three people but you don’t see a large number of people doing PC apps. I would challenge you to find any except the usual suspects now. The money’s all moved. The innovation has all moved to tablets and smartphones. And so I see momentum. I see an ecosystem. When I look at what Apple Inc. (NASDAQ:AAPL) has done in China I think it’s hard for anybody to evaluate this and say it’s not impressive.

Apple Inc. (NASDAQ:AAPL)’s gone from a few hundred million in revenue one year to $3 billion plus the next to $13 billion plus the next to $23 billion plus last year and so the last two years were adding over $10 billion a year. And I also see in markets where we haven’t done as well — and I view that as opportunity, not the glass half empty. So, when I string together all of these things from the momentum to the market that we’re in to the ecosystem to the incredible opportunities we have in emerging markets and I consider that today — this may surprise you, but iPhone is really only available to about 50% of the subscribers in the world. There’s tons of opportunity to continue expanding that as well. Frankly speaking I see a wide open field. That’s the way I look at it. I don’t think about that word called limit.