market folly

CEO of Apple (AAPL) Tim Cook recently gave a lengthy talk at All Things Digital's Conference.  We wanted to highlight this because AAPL is the top stock held by hedge funds.

Not to mention, this is the lengthiest interview we've seen with him publicly.  We've embedded the video below, but for those who might not have an hour and forty minutes to sit and watch, we've highlighted the key takeaways:

On Innovation

Right from the start of the interview, Cook focused on how Apple always has been and will continue to be about innovation.  He says the products he's seen (but obviously can't talk about) that they're working on are phenomenal.

With the late Steve Jobs' passing, many investors questioned where the innovation would come from and we asked similar questions in our post on the Apple conundrum.  Cook says innovation is what the company will always be about.


On the Halo Effect

Cook himself pointed out the 'halo effect' that many analysts have recognized.  He said that when the iPod was released, it exposed Apple to customers in the developed world that didn't know about the company.  Those consumers then were exposed to Mac computers and many of them became customers there as well.

And when the iPhone came out, Cook says a similar phenomenon occurred, but this time more-so in the developing world: China, Middle East, Russia, and Latin America.

And now, he says they're in the first inning of the iPad because he thinks the tablet market can overtake the personal computer (PC).


On What Cook Learned From Jobs

Obviously, things at the company have changed since Tim Cook took over as CEO.  But of course Jobs taught Cook many things and he shared some of that wisdom at the conference. 

Of the things Jobs taught him, Cook said that focus is key, not only in running a company, but also in your personal life.  "You can only do so many things great... cast the rest aside."

Cook also revealed that when Jobs had a conversation with him about becoming CEO, he emphasized that he didn't want people to sit around and wonder "What would Steve do?" after he was gone.  Instead, he only desired that things be done right.

On some of the key differences between AAPL under Jobs versus Cook, the current CEO says, "we did the right thing by doing dividends and share buybacks."  But there will also be similarities as they'll continue to invest heavily in research and development.


Chinese Manufacturing

Cook also touched on how it makes sense for Apple to outsource certain aspects of their operation where they think others can do the same or better.  One area in particular is manufacturing as they've let others handle this while they focus their time on doing what they do best: creating and innovating.

And while the company outsources manufacturing, Apple still focuses on running the supply chain and the managing the operational aspects of the company.


On the TV Market

"This is an area of intense interest for us ... We're gonna keep pulling the string and see where it takes us."  

Cook kept talking about the current iteration of the Apple TV (set top box) and Walt Mossberg prodded for more information and wondered if they would make an actual television set instead.

Cook said that they key to any new product is figuring out what the key components are and how they could control them.  They want to make products where they can improve upon something and give people something that they would want.

Cook of course did not comment on what they specifically were doing in the television space aside from pointing to their current product and saying the area is very interesting to them.


On Potential Acquisitions

Instead of focusing on revenue streams of potential acquisitions, Cook says they like to focus on great people, great products and intellectual property instead.  He said they currently aren't looking at any big acquisitions, but he wouldn't rule them out.  They did not look at Instagram (Facebook purchased them).


Embedded below is Tim Cook's appearance at the All Things Digital Conference:




For hedge fund resources on Apple:

- Dan Loeb's investment thesis on Apple

- David Einhorn refutes bear concerns on AAPL

- Goldman Sachs VIP list of most important stocks to hedge funds

- The Apple Conundrum: when to sell?