Apple CEO Tim Cook calls doom and gloom 'huge overreaction,' turns sights to India
In an exclusive one-on-one interview with CNBC's Jim Cramer on Monday, Apple CEO Tim Cook said concerns that the company's best days are behind it are overblown, citing optimism in China and areas of huge growth potential like India.
Cook offered little in the way of new information during today's broadcast, instead reiterating international growth opportunities and an "exciting" upcoming product pipeline. As expected, a majority of the show focused on iPhone, Apple's bread-and-butter segment that last quarter saw its first ever year-on-year sales slowdown. For the second quarter of 2016, iPhone sales dipped to 51.2 million devices, pulling revenue down to $50.6 billion.
Like he did during an earnings conference call last week, Cook said the contraction was in large part due to comparatively slow upgrade rates, tough compares and macroeconomic headwinds, the latter of which impacted growth markets like China. Despite the decline, iPhone is performing well with switchers, or users who moved to Apple's ecosystem from platforms like Android. In China, for example, switch rates were up 40 percent for the first half of 2016.
While numbers were down year-over-year, China posted a "huge quarter" by absolute standards, which account for exchange rates and economic headwinds. In constant currency, Apple's Greater China business has grown 70 percent over the past two years, Cook said.
Interestingly, Cook more than once brought up Apple's prospects in India, saying this year's regional LTE rollout could play big for iPhone. Traditionally, Indian consumers shy away from premium smartphones, opting instead for budget devices running some flavor of Android. But Cook believes change is in the wind. About half of India's population is 25 years old or younger, a demographic Cook said is keen on buying "the best" products available. With LTE penetration at near zero, wireless customers didn't have a compelling reason to buy iPhone, but that too will change.
Looking at mature markets like the U.S. and Europe, the Apple chief expressed confidence in future upgrade cycles without revealing any juicy details. Cramer asked what Apple would include in a new iPhone that would make him need, not simply want, a new one, alluding to concerns that the company can no longer innovate.
"We're going to give you things you can't live without that you don't know you need today," Cook said.
On services, Cook commented on platform stickiness, saying ecosystem buy-in doesn't stop with hardware. Devices like iPhone and iPad are gateways to services purchases, from iCloud storage to apps, movies and music.
Finally, Cook addressed new product "flops" like Apple Watch, saying users will one day wonder how they ever survived without one. Commenting on lower than expected shipments — estimates Apple never released — he noted that Apple Watch is available in 14,000 locations, which compares to 200,000 for iPhone. The company is still in "learning mode" when it comes to wearables, but Cook is optimistic that Watch will one day be as pervasive as iPod and iPhone, products that got off to a slow start but are retrospectively viewed as overnight successes.