Apple streaming Tim Cook's speech at Goldman Sachs Conference

Asked "what investors should know about the supply chain," Cook said "Apple takes working conditions very, very seriously, and we have for a long time."

Noting his own background in working on the floor of American factories, Cook said "we understand working conditions at a granular level," adding that "Issues can be complex. Our commitment is very, very simple. We believe every worker has the right to a fair, safe work environment where they can earn competitive wages and voice their concerns freely."

Suppliers must do this or they're loose Apple's business, Cook said.

Cook also highlighted education as "the great equalizer," saying, "if people are provided the skills and knowledge, they can improve their lives. We put a lot of effort to free classes in many sources in the supply chain," as well as sponsoring schools.

"65,000 employees have attended these classes," Cook stated. "If you could take all these employees and move them to one location it would be a campus larger than Arizona State, the largest in the US. Many go on to earn an associates degree."

In terms of problems Apple is working to fix, Cook directed listeners to Apple's website. "No one is doing more than Apple," he added, "We report everything because we believe transparency is important."

Cook also addressed reports of child workers, saying "we think the use of underage labor is abhorrent. It is extremely rare in our supply chain, but we have worked to eliminated it entirely. Hiring underage labor is a firing offense."

Cook also noted, "We don't let anyone cut corners on safety. We speak out before anyone. If there's a fire extinguisher missing in the kitchen, that facility doesn't pass inspection."

Also addressed were "endemic problems such as excessive overtime," with Cook saying Apple "manages working hours on a very micro basis. We collected weekly data on 500,000 workers; we found 84 percent compliance. Significantly improved but we can do better. We took the unprecedented step of reporting this monthly so everyone can see what we are doing."

Cook also noted, "We started working with the FLA on a auditing project last year," and last month announced plans to partner with the group to deliver the "most detailed audit" in existence.

"We know people have higher expectations of Apple," Cook said, noting that Apple has even higher standards of its own. "We are blessed to have the smartest and most innovative people on earth, and we put the same kind of effort and energy into this as we put in our products."

Talking about products

Cook explained Apple's "iPod halo" didn't have as much of an effect on Mac sales outside of the US and other developed markets, but noted that "the iPhone is creating a halo for the Macintosh, and also for iPad. You can definitely see the synergistic effects of these products, not only in developed markets, but in these developing markets where Apple wasn't really resonant to any degree."

As evidence of this new halo effect, Cook cited the combined revenues of Greater China, several other parts of Asia, India, Asia, Latin America, Eastern Europe, Middle East and Africa as being $1.4 billion in 2007. Last year, for the same group was $22 billion. "And we're really only on the surface," Cook said, noting "lots more opportunity out there."

iPad

Asked about the demand ramp for iPad, which has sold 55 million units in 7 quarters, Cook said "this 55 million is something no one would have guessed, including us. To put it in context, it took us 22 years to sell 55 million Macs, it took around five years to sell [55] million iPods, and it took about 3 years to sell that many iPhones."

Cook said "iPad stood on the shoulders of everything that came before it," from iTunes to the Store to the iPhone. "It's amazing how the product has captured" the attention of a variety of customers Cook said, noting "It's the fastest adoption across a wide range that I've ever seen before."

We started using iPad at Apple well before this launch. Of course, we had our shades pulled and everything so nobody could see it. But what I started noticing about my own personal behavior [using iPad] it quickly became 80 to 90 percent of my consumption and work was done on the iPad. Honestly, from the first day it shipped many of us at Apple thought that the tablet market would become larger than the PC market, and it was just a matter of time for that to occur. And I feel stronger about that today."

"If we had a meeting today in this hotel, and we invited everybody that's working on the coolest PC apps to come to the meeting," Cook said, "you might not have gotten anyone in the meeting! But if you did that same thing for iOS, or that other operating system, and said 'everybody come that's working on this,' you couldn't get everyone in this hotel. You'd have somebody covering every square inch here."

That doesn't mean the PC is going to die. I love the Mac, and the Mac is still growing. But I strongly believe that the tablet market will surpass the sales of the PC market […] It's too much of a profound change in things not to."

Competing on price & dealing with cannibalization

Asked about iPad competitors, and in particular Amazon's low cost Kindle Fire, Cook replied that cost isn't the primary consideration for most people, noting that after months of frustration with a limited product, you don't retain excitement about having paid less for it.

Cook noted that there were around 100 tablets launched to compete with the original iPad while Apple was furiously working to compete with the new design of iPad 2. "I think people at the end of the day want the great product," noting that while Amazon is a different company with its own strengths and weaknesses, "I think they'll sell a lot of units, they have and they will, but the customers we are designing our products for are not going to be satisfied with the limited function kind of product. And I think the real catalyst to the tablet market will be innovation and pushing the next frontier. We'll compete with anyone. I love competition. As long as people invent their own stuff, I love competition."

Cook noted that iPad sales had cannibalized some Mac sales, but added "we'd prefer to do it than have somebody else do it. We never want to hold back one of our teams from building the absolute greatest thing even if it takes some sales from another product area. Our high order bit is we want to please customers."

Cook added that "Given what we've seen," iPads are eating up some Mac sales but have "cannibalized more Windows PCs, and there are more for them to cannibalize than Mac, and that's a plus for us." Cook reiterated that while Apple expects the tablet market to outgrow the PC market in unit sales, he does not expect the PC market to go away. "I think it will be good for the PC because they've got this strong competitor. And it will be good for tablets because they'll innovate like crazy every year. And customers will decide what to buy at the end of the day."

A look at the $98 billion balance sheet

Asked about Apple's plans for its cash reserves, Cook disputed the idea that Apple was using its cash "sparingly," noting that "we've actually spent billions on the supply chain, we've spent billions on acquisitions including the acquisition of IP, we've spent billions on retail, we've spent billions on the infrastructure of the company, data centers and so forth. But yes we still had a lot. I would say we're judicious. We spend our money like its our last penny. I think shareholders want us to do that, not act like we're rich."

Cook repeated that he "was not religious" about holding or not holding all of Apple's mounting cash pile, and continued to have serious, active discussions that are increasing in detail just because the cash pile continues to grow. "I only ask for a bit of patience so we make the best decisions for the shareholders."

Cook said he continues to call Apple TV a "hobby" because he doesn't want to send the signal that the market it represents is as large as the Mac or iPhones or its other business. Cook added that in general, Apple "doesn't do hobbies," but that the company sees the potential for something larger to eventually develop.

100 million iCloud users

Asked about Siri and iCloud, Cook said "I think Siri and iCloud are profound," adding, "if you dial back ten years, Steve announced a strategy for Apple that positioned the Mac as the hub of someone's digital life," a strategy that involved Apple's suite of iLife and iWorks apps. That's not the best model when working with multiple mobile devices, Cook noted, adding that iCloud would be the center of Apple's "strategy for the next decade or more."

Cook referred to both iCloud and Siri as being in the "profound category," major advances that would change how devices are used for the long term rather than being a passing fad for the next year or two.

'Not going to permit the slow undoing of Apple'

"Apple is this unique company, unique culture, that you can't replicate," Cook said. "I'm not going to witness or permit the slow undoing of it, because I believe in it so deeply. Steve grilled in us over many years that the company should revolve around great products, and that we should be extremely focused on a few things, rather than doing everything but not doing anything well. Entering markets only where we can add value, not just sell volumes.

"Those are the things I focus on. Because those are the things that make Apple this magical place where people want to do the best work of their lives at.

"We're always focused on the future. We don't sit and think about how great things were yesterday. Those are the things I'm holding on to. It's a privilege to be part of that."