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Friday, February 07, 2014, 06:11 pm PT (09:11 pm ET)

Cook discusses bigger iPhones, Motorola sale, Android and more in interview

In a wide-ranging interview with The Wall Street Journal, excerpts of which were published on Friday, Apple CEO Tim Cook discussed expanding the iPhone business, Google and Android, emerging markets and innovation.

Cook

Apple CEO Tim Cook accepting the Auburn University Lifetime Achievement award.


After a report covering Apple's recent $14 billion stock repurchase and the company's entry into new product categories, The Wall Street Journal has posted an edited version of Cook's full interview to its website.

As noted on Thursday, Cook still views Apple as a "growth company" despite sentiment that Cupertino's best years have passed. The executive conceded that Apple's revenue grew at a slower rate than in past years — $14 billion to $15 billion — but said in comparison to other companies, the numbers are still huge.

"Yes, those percentages are smaller compared to a year earlier and two years earlier and so forth. But that doesn't mean that you're not a growth company," Cook said. "We were in hyper-growth, or whatever is above growth. We went from $65 billion to over $100 billion to $150 billion to $170 billion. These are historic, unprecedented numbers. I don't know any companies adding growth at that level."

Stock

AAPL stock performance over last 12 months.


In context, the level of growth in 2013 is "like adding three Fortune 500 companies in a year," Cook said, adding that Apple clocked in with its highest revenue ever in the last quarter. Helping push the needle was best-ever iPhone and iPad sales, as well as a strong performance from Mac in the face of a shrinking PC market.

A major driver for future growth is emerging markets and Apple worked hard to bolster its presence in the biggest of those: China. Over the last 12 months, Apple has raked in $29 billion to $30 billion in revenue in greater China.

Some of that revenue was from the iPhone's rollout on China Mobile, the world's largest wireless carrier. Even with the new deal, Apple is only addressing two-thirds of the subscribers in the world, Cook said, adding that the statistic will change as the company plans to sign on with another 50 carriers by the end of the quarter.
"And even with adding China Mobile, we still only present our products to two-thirds of the subscribers in the world. In fact, this quarter, we'll sign on 50 new carriers." - Apple CEO Tim Cook
Developing markets, of which the iPhone and iPad already enjoy a large share, remain a struggle. However, Cook pointed to Japan, which accounts for about nine percent of Apple's revenue, as a possible area of growth.

"The dollar has gotten so strong that last quarter, our revenue growth in Japan was 11 percent," he said. "At constant currency from year before, it would have been 37 percent. When you lose 26 points on a currency conversion and it's 9 percent [overall], it takes off a couple of points on the macro-side."

When pressed on iPhone growth in particular, Cook said the cellular market consists of "feature phones, smartphones that function as or are used as feature phones, and real smartphones."

"I care about the market share of the last one. I don't care how many feature phones are sold," he said. "The more that are sold I look at as good because those are all potential future customers for real smartphones. The same thing goes for the second category. I'd like to convert as many of those as possible to real smartphones."

China Mobile

Cook handing out the first China Mobile iPhones in January. | Source: Eunice Yoon via Twitter


One smartphone manufacturer in the news recently is former Google subsidiary Motorola. Less than two years after being purchased by the Internet search giant for $12.5 billion, the struggling handset maker will now be passed on to Lenovo. Google ate a huge loss by selling Motorola at the end of January for $3 billion.

"I wasn't surprised," Cook said of the sale. "It seems like a logical transaction. Google gets rid of something that's losing money, something that they're not committed to. I think it's really hard to do hardware, software and services and to link all those things together. That's what makes Apple so special."

As for a large-screen iPhone, the Apple chief was expectedly coy, saying such a product isn't out of the realm of possibility. Apple will only make the leap when the technology is ready.

"That doesn't say we'll never do it," Cook said. "We want to give our customers what's right in all respects - not just the size but in the resolution, in the clarity, in the contrast, in the reliability. There are many different parameters to measure a display and we care about all those, because we know that's the window to the software."

Finally, the WSJ asked whether Apple's role in the smartphone market will mirror the PC market, where the Mac is largely a niche player. Cook said he doesn't see that happening, noting applications were the "catalyst" in separating the Mac and Windows platforms. Mac fell far behind Microsoft's nearly ubiquitous OS, though the opposite is true in the smartphone sector where iOS and Android dominate the field.

"We have over a million apps on iOS. We have over half-million that have been optimized for iPad," he said. "That half-million compares to 1,000 for Android tablets. That's one of the reasons, although not the only reason, why the experience on Android tablets is so crappy because the app is nothing more than a stretched out smartphone app."

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Android platform version distribution. | Source: Google


Going further, Cook said that Windows and Android are grossly different.

"The other thing is that Windows pretty much was one thing. Android is like Europe," Cook said. "Europe was a name that somebody came up with for Americans who didn't understand that Europe was a lot of countries that weren't like U.S. states. They were very different. Android is many things. How many people who use a Kindle know that they're using Android? And you see what Samsung is doing by putting more and more software on top. I think it's night and day. The compare is so off."