Apple Inc. has acquired 26 firms in 15 months while pursuing increased diversity, a confident Tim Cook tells shareholders
Riding high the day after detailing a series of new products at its Spring Forward event, Apple's chief executive Tim Cook recapped the company's progress at its annual shareholder meeting on Tuesday, with a particular focus on acquisitions, partnerships and achieving the kind of diversity that reflects the company's growing, global audience of employees and customers.
The formal business side of Apple's shareholder meeting reelected its seven directors and devoted the least attention to political distractions at the event in several years. There were no protests about "iWaste" (Greenpeace now lauds Apple's leading position in environmental issues), and no "silly sideshow" activist lawsuits like one filed by David Einhorn in 2013.
There was only a brief presentation of a "Risk Report" proposal fronted by a right wing group that sought to skewer the company's investments in alternative energy as entirely dependent upon the current U.S. administration's policies and doomed to crisis if the next one goes in the direction imagined by certain U.S. Senate members flouting the Logan Act.
Shareholders overwhelming rejected the proposal with more than 98% of their votes. The rapid conclusion to the corporate business side of the meeting left Cook with more time to devote to things he was actually interested in talking about, as well as questions and comments from shareholders in attendance, which weren't always things Cook wanted to discuss.
Cook reviews 2014
Cook beamed while holding up a print copy of the New York Post emblazoned with the headline "Watch Out!" and featuring a cover festooned with eight screens depicting Apple Watch fitness, friends, phone, faces, social media, texts, flight status and sports features. A subheading blared, "Apple unveils its new do-it-all wrist gismo."
"Check it out on your iPad," Cook quipped to the audience, "I hope you have one."
He then praised a series of Apple's teams and their leaders, including the "bang up job" of Craig Federighi's software team in delivering iOS 8 and OS X Yosemite; Eddy Cue's iCloud team in successfully deploying Apple Pay during the holiday season when retailers are hesitant to audition new technologies; and the "unbelievable process" that luxury goods expert Angela Ahrendts has brought to Apple Retail.
Cook separately noted the first new retail locations Apple has opened in Brazil and Turkey, the company's 21st store opened in China, and reiterated the company's plans to have 40 stores open in Greater China by the middle of 2016.
Cook then recapped the introduction of Research Kit, noting that it is "not a business model" and that, "for those looking for an ROI [Return on Investment], there's not one."
That line appeared to be directed across the bow of critics who last year demanded (and again this year, in the failed shareholder proposal) that Apple only pursue investments capable of turning a short term profit immediately measurable in dollars.
Instead, Cook referred to Research Kit as a "tool to make a profound difference" in clinical research and healthcare, the beginning of a theme of responsible, ethical and principled corporate leadership that wound through the rest of the shareholder meeting.
Swift, Pay & Continuity
Cook also mentioned Swift, Apple's new programming language, noting in particular that despite relatively little attention from the media, Swift was already being taught in universities around the world, just months after it was introduced last fall. That kind of rapid dissemination into educational channels is virtually unprecedented, Cook noted.
Like Apple Pay, Swift is being adopted faster than even Apple expected it could be. Cook has repeatedly noted that Apple believes Swift "will have a profound effect on our ecosystem."
Cook also reiterated how initiatives from CarPlay to HomeKit to Health create a "seamless extension of iOS" in other aspects of user's lives, and tied in the umbrella technologies of Continuity in iOS and OS X— and soon Apple Watch— as also playing an important role in expanding, enhancing and differentiating Apple's platforms and products for consumers.
With $13B in CapEx for 2015, Apple is "reshaping the global supply chain"
After profiling the success of recent product introductions, Cook noted that Apple isn't standing still. The company aims to invest a record $13 billion in capital expenditures during fiscal 2015. So far, the company has reported spending $2.1 billion on CapEx in its fiscal Q1, which includes "product tooling and manufacturing process equipment; data centers; corporate facilities and infrastructure, including information systems hardware, software and enhancements; and retail store facilities."
In fiscal 2014, Apple spent $11 billion on CapEx. Just five years ago, the company was only spending just over $2 billion on annual CapEx in total, outlining a vast increase in the infrastructure, including manufacturing capacity, that Apple is investing in on global scale.
In October 2013, Asymco analyst Horace Dediu astutely noted that Apple's rapidly increasing capital expenditures "has followed very closely their production of iOS devices," after having earlier detailed "how Apple's enormous capital spending is reshaping the global supply chain for the industry."
26 new acquisitions, 100,000 employees
Over the last fifteen months, Apple has acquired 26 other companies, Cook announced, largely for their talent and intellectual property. That's a larger figure than the 24 acquisitions Cook cited last year as having completed in the previous 18 months. Additionally, the identity of 17 of Apple's latest 26 acquisitions remains a mystery.
Only nine of these are publicly known about, including photography developer SnappyLabs, TestFlight maker Burstly, micro-LED maker LuxVue, social search startup Spotsetter, talk radio service Swell, the "Pandora of Books" BookLamp, Beats Electronics, e-magazine publisher Prss and UK media analytics startup Semetric.
Cook noted that the company likes to keep its acquisitions and the strategy behind them as quiet as possible, as reflected in the boilerplate acknowledgements the company's PR team is occasionally forced to make, stating only that "Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plan."
Apple has now passed the 100,000 employee mark. In 2006, Apple employed just 20,000. Within the last year, Apple has added 20,000 new employees to its global workforce.
That's a very different model than the prominent acquisitions made by other major tech firms, which frequently not only advertise who they are buying but also explain why, noting in some cases that they are buying audiences of active users (as Facebook did with Instagram and WhatsApp), or promoting the idea that they are entering entirely new business (like Google's recent acquisitions of Softcard, Nest, Dropcam and Titan Aerospace).
Cook also noted that Apple has now passed the 100,000 employee mark. Last May, AppleInsider profiled that in 2006, Apple employed just 20,000. Within the last year, Apple has added 20,000 new employees to its global workforce.
Happy with IBM, "no relationship" with Tesla
Cook next addressed Apple's partnership with IBM to build "MobileFirst apps for iOS, saying Apple is happy with IBM and that the "conduit is wide open" for the two companies to collaborate in new arenas. Cook praised IBM's "knowledge of verticals" and its "go to market team," noting that the enterprise is interested in the ease of use and simplicity that Apple offers.
"IBM is not in the business we are in," Cook noted, perhaps an allusion to the series of instances where former partners have turned on Apple as competitors, including Microsoft in the 1990s, Google in the 2000s, and most recently its key supplier Samsung in the 2010s.
In response to shareholder questions asking about whether Apple has plans to leverage IBM's Watson and other advanced machine learning technologies, Cook said the two companies' relationship is "so good it would be a surprise if other things don't fall out."
On the other hand, two shareholders hoping for some affirmation of Apple entering into a partnership with (or even acquiring) carmaker Tesla were apparently disappointed to hear Cook flatly say "we don't have a relationship with Tesla."
Cook added that he'd welcome Tesla's adoption of CarPlay (the minor but very visible carmaker is a notable standout in this regard), but Cook didn't entertain any speculation about Apple's reported plans to enter the automotive business as a carmaker itself.
Brand as a reputation, rather than an invented facade
When asked about what Apple is doing to protect and nurture its multibillion dollar brand, Cook answered with a thought he attributed to Steve Jobs, that a brand "can sometimes be viewed as a facade," essentially a false front of invented pretense. Instead, Cook said that Apple sees its brand as standing for something, meaning something and 'expressing who we are.'
Rather than fronting a brand identity, Apple sees its brand as a representation of what the company actually does and is. "We don't try to be a German company in Germany, or a British company in the UK. We are a California company," Cook stated.
That also explains why Apple hasn't sought to create a proliferation of marques to designate low end or luxury model lines (like the old Apple Performa or Centris brands from the 1990s that Jobs canceled) and why it doesn't stretch its reputation thin with brands like Samsung's Galaxy, which includes both high end expensive products down to very low end, basic devices the company internally refers to as "good enough, carrier friendly" models.
Diversity is part of doing the right thing as a business
Cook also addressed a series of other initiatives at Apple, beginning with its pioneering efforts in human rights and worker rights in China, including invitations that brought Chinese Universities into factories as partners in creating an educated, dynamic workforce.
He noted accessibility in Apple's products as an important factor in making the best products possible for everyone who uses them, and noted that Apple had reached its goal from the previous year to achieve 100 percent renewable energy for powering its data centers and other facilities, noting that experts had previously told the company that it would not be able to do this, but it did anyway.
Also addressed were Apple's greater than $100 million backing of the Global Fund's (Product)Red campaign to end HIV transmission in Africa, and its $100 million pledge to the Obama Administration's ConnectED, tasked with enhancing learning and opportunities in disadvantaged schools.
Cook noted that the program has identified that 92 percent of children at schools linked to poverty are members of minorities. That highlights one example of how providing a more level playing field in early opportunities can result in improvements down the line in diversity overall.
Introduced as a special guest, Cook invited the Reverend Jessie Jackson to read prepared comments from the audience addressing the need for continued efforts to support a diverse workforce and to bring more diversity into corporate leadership positions.
Cook has previously acknowledged that Apple's executive team and board— like most American companies— are predominantly made up of white males, although efforts to broaden the board's demographic to better represent the company and its customers has resulted in the appointments of two highly qualified female executives, Andrea Jung and Sue Wagner.
In response to a question about diversity from a shareholder who identified himself as both African American and representing the GLBT community, Cook singled out Lisa Jackson, the former head of the EPA, now leading Apple's environmental initiatives, and Denise Young Smith, who was promoted from running Human Resources in Retail to overseeing all of corporate HR.
But instead of than suggesting that Apple was aiming to improve its diversity numbers through preferential treatment of members of minorities, Cook noted that Jackson was hired "because she was perfect," and stated that Young Smith was promoted because of "what she accomplished at Apple Retail."
Cook noted that Lisa Jackson was hired "because she was perfect," and stated that Denise Young Smith was promoted because of "what she accomplished at Apple Retail."
Rather than implementing selective hiring policies resembling Affirmative Action, Apple is instead seeking to increase the number of qualified women and minorities who are working in tech. That includes a new $40 million contribution to the Thurgood Marshall College Fund, a non-profit supporting 100 historically black colleges and universities across the U.S.
The TMCF, which is also supported by Walmart and the NBA, will use the money to "create a database of computer science majors at HBCUs, train both students and faculty and offer scholarships," according to a report by Michal Lev-Ram for Fortune.
That report noted that Apple is also setting up a paid internship program for "particularly promising students," as well as donating $10 million to National Center for Women and Information Technology, an organization working to "create a broader pipeline of female technology workers." Google, Microsoft and Symantec have also contributed to fund the NCWIT.
Apple's Young Smith told Fortune that the company is also talking to military leadership to develop ways to 'provide technology training and specialized on boarding programs for veterans,' a population that in the U.S. has historically failed to gain adequate support in finding employment after their service from the nation itself.
"In any of these programs we're really trying to provide focus, impact and a ripple effect-not just on Apple," Young Smith stated.