The next is the unofficial transcript of a CNBC EXCLUSIVE interview with Apple, Inc. (NASDAQ:AAPL) CEO Tim Cook and CNBC’s Jim Cramer which aired on CNBC’s “Mad Money w/ Jim Cramer” right now, Tuesday, January ninth.
WHEN: In the present day, Tuesday, January eight, 2019
WHERE: CNBC’s “Mad Money w/ Jim Cramer”
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JIM CRAMER: Tim, you understand I all the time say, “Own it, don’t trade it.” However proper now, individuals are saying, “Jim, give me the investment case for buying this stock.”
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TIM COOK: Properly, you realize, I never– attempt to promote a inventory. I attempt to promote a product.
JIM CRAMER: By no means have.
TIM COOK: Nevertheless– let me inform you the best way I take a look at it. We handle the corporate for the long run. An important issues in Apple, one, a tradition of innovation. This staff is unbelievable in creating hardware and software program and providers and getting all of them to work collectively. It simply works. Second, we now have a really giant lively set up bays. We hit $1.three billion a yr in the past, and we have added a few $100 million within the final 12 months. Third, highest buyer satisfaction and loyalty within the business. So you set these two issues collectively, you bought quite a bit of– an enormous, lively set up bays, and you bought a lotta heavy clients, then you will have a recurring income stream in your product enterprise. After which due to our ecosystem that we construct, which has unbelievable builders in it and– an app retailer to get providers on the market, we constructed a providers enterprise that was, you realize, slightly over $7 billion in 2010. Final year–for the calendar yr, over $41 billion. And so– and we have stated that, you realize, we’re gonna double the 2016 numbers by 2020. And so we’re on a quick clip there. After which, in fact, we’re shareholder pleasant on our– capital allocation. So you set all this stuff collectively, and people are an important issues for us: innovation, buyer satisfaction, and the general measurement and– loyal—of our buyer.
JIM CRAMER: Okay, so most tech corporations, I feel, do not innovate almost as a lot as you. However let me simply put– posit what we acquired. You’re taking so many dangers that I do not assume you get credit score for. As an example we had what turned to be real– ridiculous strings round our neck, after which we received the AirPods. We liked our dumb watch that advised time, and now we’ve a sensible watch that saves our lives. We liked the large, fats jack, after which we acquired the lightning jack. We beloved our Sony, $2,000, mirrorless digital camera, till we obtained the iPhone X, which takes higher footage. Why do you, subsequently, have a 12 a number of? As a result of to me, that’s mistaken.
TIM COOK: Yeah, I feel it is fallacious, too. However I inform ya what I concentrate on is the purchasers. And so the purchasers converse each quarter. They converse yearly. They converse day-after-day. And crucial factor for us is that they are glad. And so once I learn the emails and so forth from clients, they’re tellin’ me how the Apple Watch has modified their life. They’re tellin’ me the way it motivated them to be fitter, be extra lively. They’re tellin’ me that they found that they had AFib. They’re tellin’ me they– discovered an issue with their coronary heart that they did not know existed. And if they would not’ve reached out to a physician, they could’ve died. And so these are life-changing issues. We have got machine studying embedded in our silicon in our telephone. You already know, this enables us– not solely the facility effectivity to have an unimaginable efficiency in a really small package deal, however it permits us to control this knowledge on the telephone, have the transactions on the telephone, versus letting them out on the earth. And– you recognize, this– the entire privateness situation forum– we have all the time been on the suitable aspect of privateness. However the market is now shifting. And so that is an unimaginable power that we have constructed. The photographs that you simply’re capable of take together with your telephone, as you stated, I imply, these are life-changing issues, for those who wish to chronical your life. This morning, I used to be– I picked up my telephone. And I noticed a reminiscence from a yr ago–
JIM CRAMER: I really like the memorything.
TIM COOK: I adore it, you already know? You see– my nephew or someone that is essential to you. And their face simply seems. And you’ve got– a slideshow constructed for you. This stuff are– they’re– unbelievable. And our clients love them. And that is the most-important thing–
JIM CRAMER: However– okay, so let’s– unpack that. My daughter has the 5. Why? ‘Trigger she loves it. She stated, “Listen, Dad. If you put it in the washing machine, like your wife did, I’ll get a new one. But you can’t pry it outta my cold, dead hands, ’cause I love it.” She isn’t an upgrader, as a result of she– you made the best product. What can we do about that? What do you do–
TIM COOK: Nicely, the– most-important factor, for me, is that she’s completely satisfied. That’s the most-important factor. Now, if she’s not upgrading for an additional purpose, maybe– it is an excessive amount of of a problem for her to improve. Perhaps she’s fearful concerning the switch of knowledge. All of these items, we wanna assistance on. An you already know, we have got the shop that you simply’re in that is very targeted on having the perfect buyer expertise there, serving to individuals arrange their new telephone, ensuring all their knowledge’s transferred, and also– permitting them to commerce of their present telephone, which begins to appear to be a subsidy that the service might have beforehand offered. And it’s– offsets a few of the value of the brand new telephone.
JIM CRAMER: Okay, so these points are all occurring on the similar time that we do have China. You have been very– abject about China and the 100% of what we did not think– of the upside that went away. There are points involving– maybe, not boycotts, we all know that is off the desk, however patriotism, in a wierd method, which means that, you understand what? If I can get a Huawei with a s– with a subsidy, why ought to I purchase an Apple? It is conspicuously American. How lengthy can that final?
TIM COOK: Properly, I feel what– this is what we noticed in China in– particularly. The–Chinese language financial system, it appeared to us, started to sluggish, perhaps, within the second half of the yr. And it was on some kind of rational trajectory. We consider, based mostly on what we noticed and the timing of it, that the strain, the trade-war tension– with the U.S., created this more-sharp downturn. I consider that is momentary. As a result of I feel that, once you actually take a look at it, it is in each nations’ greatest pursuits to return to an settlement. It’s a complex– very complicated commerce settlement. And it must be up to date. However I am– as I’ve stated earlier than, I am very optimistic that it will occur. And so– that clearly might be good, not just for us, frankly, however I–think extra about the– world basically. The world wants a robust U.S. and–China financial system for the world financial system to be robust.
JIM CRAMER: My understanding is, even the hardliners within the White Home have moved on this situation. And I do know President Trump calls you a pal I do know you commute. Since you symbolize the best that we’ve got in America. And my understanding is that there are individuals who really feel precisely such as you, which suggests a deal’s attainable.
TIM COOK: I feel a deal is– very potential. And I am– I’ve heard some very encouraging phrases.
JIM CRAMER: Even of current, proper?
TIM COOK: Sure, sure, in– very just lately. And so I do not converse for them, clearly. I do speak with them. And I give them my concepts and ideas.
JIM CRAMER: Okay, now– we gotta speak about a few of these individuals who– the naysayers. And we have handled them earlier than, when the inventory was considerably decrease. A Wedbush analyst stated, “Apple’s clearly the darkest days, representing a challenge in growth.” Journal, “It’s too soon to call the XR a flop, only after a few months. But early indications are, of course, it’s a flop.” What do you say to individuals who say the XR flopped? What do you say to, say, “darkest days”?
TIM COOK: Bologna. I name bologna on that. Let– me inform you how I view this. This is the reality, what the information are. Since we started delivery the iPhone XR, it has been the most-popular iPhone day by day, each single day, from– once we began delivery, till now.
JIM CRAMER: However how about comparatively? I imply, there’s been different ones that have–
TIM COOK: I imply, do I need to promote extra? In fact I do. Of– course I might like to promote extra. And– you recognize, we’re– engaged on that. And– however when it comes to the product itself, it is an extremely revolutionary product. It has a bunch of superior applied sciences in it for the chip with the neural engine to safety embedded to an edge-to-edge liquid retina show, the primary within the business, longest battery life ever in an iPhone. I imply, it’s unbelievable. And the pictures that you would be able to take of your life and of your family members, I imply, it beats– many, most of the standalone– cameras that you possibly can purchase now that no one makes use of anymore. And– so this stuff are– you recognize, give plenty of worth to the client. In order that’s that. When it comes to the naysayer, I’ve heard this again and again, Jim. I’ve heard it in 2001. I’ve heard it in 2005 and ’07 and ’08 and ’10 and ’12 and ’13. You’ll be able to in all probability discover the identical quotes from the identical individuals time and again. And I am not defensive on it. That is America. And you may say what you need. However I am supplying you with my trustworthy opinion is that there’s a tradition of innovation in Apple. And that tradition of innovation, mixed with these incredible– loyal clients, glad clients, this ecosystem, this virtuous ecosystem, is one thing that’s in all probability underappreciated.
JIM CRAMER: Properly, then you definitely have been stunned with the market response to each whenever you determined to not reveal models and whenever you revealed the shortfall?
TIM COOK: I am by no means stunned by the market, to be trustworthy with you. As a result of I feel the market– is sort of emotional within the brief time period. And– we sorta look via all of that. We take into consideration the long run. And so once I take a look at the long-term well being of the corporate, it has by no means been higher. The product pipeline has by no means been higher. The ecosystem has by no means been stronger. The providers are on a tear. In the event you look at– let’s simply take wearables for instance, proper? Wearables, it is primarily the Apple Watch and AirPods. For those who take a look at this, and you– and on a trailing foundation. I am not projecting. On a trailing foundation, we have already exceeded– the income for wearables is already greater than 50% greater than iPod was at its peak. Now, this can be a product that everybody would I– iPod would say, I feel everyone would say it was an incredibly– necessary product for Apple, filled with innovation, and doubtless, the set off for the corporate getting on a really totally different trajectory and into different markets. And so already, exceeded it by 50% at its peak, at its peak. Additionally, in case you take AirPods and the Watch individually, and also you kind of again these up and align it to the launch date of iPod, as nicely, and, you already know, the place all of ’em have a comparable period of time, you’d discover that– that every one, independently, is, like, 4 to 6 occasions forward of the place iPod was at a comparable time period. And so this– AirPods have gotten ubiquitous on the market. Individuals love them. I get notes each day. They’re chock filled with know-how. However they only work. It is the magnificence of them– however with vital know-how and– constructed proper in and an unbelievable consumer interface.
JIM CRAMER: Alright maintain that thought we speak about innovation. We’ll be proper again extra with Tim Cook in a second.
JIM CRAMER: All proper, I have been following shares for 40 years, Tim. And also you guys are a fount of innovation. My spouse stated, “Tell him, what do they want? Time travel?” What do you need to do?
TIM COOK: Hey, time journey sounds sort of cool.
JIM CRAMER: Proper? I imply, that is what – as a result of the rationale I point out it’s as a result of there are corporations that promote at 22 to 23 occasions earnings, they’re the buyer packaged items corporations. They’re corporations that are likely to go from 1% to four%. In the event that they get 5%, then they get a 28 a number of. And but, the analysts who comply with your organization proceed to search for models of telephones. They don’t seem to be serious about the income. And but, if it have been Procter & Gamble, they usually acquired that many razors with razor blade, they’d pay 28 occasions earnings. Are you adopted by the mistaken individuals?
TIM COOK: I feel that our story is not properly understood. I feel Apple is just not nicely understood in a few of Wall Road. In the event you, for instance, I feel there are a number of people who consider an important metric is what number of iPhones are bought in a given 90-day interval or what the income is. This goes – that is far, far, far down my listing as a result of the purpose is, if someone decides to purchase an iPhone a bit later, if due to the battery – big low cost that we gave – they determine to carry on just a little longer, I am nice with that. I would like the client to be completely happy. We work for them. And so, however the necessary factor is that they are joyful. As a result of in the event that they’re joyful, they may ultimately exchange that product with one other. And the providers and the ecosystem round that may thrive.
JIM CRAMER: However so long as it is north of 60%, I imply, so long as cell telephones are north – I do not understand how you get individuals to assume, even when it is $20 billion in service income. It is the 62%. It’s overwhelming. And they do not know what to do. And I perceive their conundrum, Tim. They do not know what to do. As a result of the cellphone’s such an enormous a part of the pot.
TIM COOK: Yeah, however when you kind of again up and take a look at Apple, in our final fiscal yr, we had $100 billion of income that was not iPhone. $100 billion. And on this final quarter, for those who take every part outdoors of iPhone, it grew at 19%. 19% on an enormous enterprise.
JIM CRAMER: Once more, it is a shopper packaged items firm however not a tech – look, you might have the most effective tech shopper packaged items, why not settle for it and say, “You know what? We’re just – we want to be covered by other people”?
TIM COOK: I do not assume we get to select who we’re coated by.
JIM CRAMER: Properly, I do not know. You are an enormous firm. Perhaps you would. Now, I’ve obtained some concepts for you, okay? I talked to some individuals at Walmart yesterday. An association with Walmart, Flipkart to take over India with a finances telephone, somewhat than doing it piecemeal.
TIM COOK: For us, we’re about making one of the best product that enriches individuals’s lives. And so we’re not about making the most cost effective, proper? We need to make an amazing worth. However that is not essentially the most cost effective. And so for us, what we have seen is there’s sufficient individuals in each nation on the planet that we play in that we will have a very good enterprise by promoting one of the best telephone. Now, the perfect telephone we knew that, as we went to the X after which the follow-on of the XS and the XS Max, that everyone wouldn’t need to spend $1,000 for the telephone. So we made the iPhone XR. And we put as most of the superior applied sciences as we might in that telephone—
JIM CRAMER: Nicely, let Flipkart do the subsidy.
TIM COOK: And we priced it proper between the eight and the eight Plus of the yr earlier than. And so forth – however in India, generally, we’re all in. It’s a main focus. For those who take a look at how we have completed through the years, we have gone from, you understand, $100, $200 million enterprise to, final yr, we hit – we exceeded $2 billion. That $2 billion was flat, yr over yr, after speedy, speedy progress. And so we’ve got extra work to do. We might wish to put shops there. We wish a few of the duties and so forth which are placed on the merchandise to go away. And we’re working intently with the group there. And I consider that we’ll have higher outcomes sooner or later sooner or later. I am not within the forecasting mode right here at present. However it’s an essential marketplace for us.
JIM CRAMER: You’ve got people who find themselves naysayers. One of many naysayers shouldn’t be an analyst, it is Qualcomm. Qualcomm retains telling me, again and again, “You’re going to come to the table. You have to. Lost the suit in Germany. Lost the suit in China. Wait until you see them cave.” Are you going to cave?
TIM COOK: No. Look, the reality is, we’ve not been in any settlement discussions with them because the third calendar quarter of final yr. That’s the fact. So I am unsure the place that considering is coming from. The difficulty that we now have with Qualcomm is that they’ve a coverage of no license, no chips. That is, in our view, unlawful. And so many regulators in many various nations agree with this. After which secondly, they’ve an obligation to supply their patent portfolio on a good, affordable, and nondiscriminatory foundation. They usually do not do this. They cost exorbitant costs. They usually have numerous totally different techniques they use to try this. And that is not simply us saying that. I imply, you’ll be able to see what’s popping out of the FTC trial right here in the USA. And clearly, I’ve a problem with a few of their different techniques that I am positive you’ve got examine.
JIM CRAMER: Proper, that they are saying you’re in settlement talks on a regular basis.
TIM COOK: Properly, not simply that, however the paying someone to put in writing pretend information after which selling it. That is stuff that ought to be beneath corporations. This isn’t how issues ought to function.
JIM CRAMER: All proper, so let’s speak about competitors. The opposite firm that I consider with innovation I all the time have to speak about is Amazon. They usually do nice voice. You have got voice. It’s kind of of a contest, Tim. When you threw – you have got limitless capital and also you throw it at voice, wouldn’t it make Siri even higher?
TIM COOK: Nicely, we’re placing a ton of funding in Siri. And so when you take a look at Siri right now, Jim, we’ve a few bit over 500 million units which are utilizing Siri on the market, Siri enabled. And Siri is used over 10 billion occasions a month. And it is in 21 totally different languages and 30 one thing nations. And so we have tried to do – we tried to create a worldwide product. We’re not in each nation but. We need to be. And if you’d like one thing that’s one thing that has been created in your gadget, Siri is the perfect place to try this. And I feel I get increasingly nice issues each day. The standard goes up. You already know, voice is a endless journey. All of us converse slightly bit in a different way. I’ve a southern dialect, not as southern as I used to. However there’s plenty of stuff to do there. However I am extremely assured in our capacity to maintain innovating like loopy there.
JIM CRAMER: Okay final query, as a result of they’re giving me some wrap. Healthcare, in case you attached with totally different – might you make it in order that I can sync? I have to sync – I have to handshake with my physician, okay? And funds, it may be big. When you take a look at a PayPal, they have a 30 a number of. MasterCard, 30 a number of. Are you able to layer both a type of on to have the ability to bounce, regardless that it is large, the service stream, take it in order that it is 40% of your organization, by doing extra in funds, extra in well being?
TIM COOK: On providers, you will notice us announce new providers this yr. There’ll extra issues coming. I do not need to inform you about what they’re—
JIM CRAMER: Materials, materials.
TIM COOK: I consider they are going to be materials over time. I am not going to forecast—
JIM CRAMER: Proper, truthful sufficient.
TIM COOK: You already know, exactly, the ramps and so forth. However they’re issues that we really feel actually nice about, that we have been engaged on for a number of years. On the healthcare, particularly, and type of your wellbeing, that is an space that I consider, in the event you zoom out into the longer term, and also you look again, and also you ask the query, “What was Apple’s greatest contribution to mankind?” It is going to be about well being. As a result of our enterprise has all the time been about enriching individuals’s lives. And as we have gotten into healthcare increasingly by way of the Watch and thru different issues that we have created with ResearchKit and CareKit and placing your medical data on the iPhone, this can be a big deal. And it is one thing that is essential for individuals. We’re democratizing it. We’re taking what has been with the establishments and empowering the person to handle their well being. And we’re simply on the entrance finish of this. However I do assume, wanting again, sooner or later, you’ll reply that query, Apple’s most-important contribution to mankind has been in well being.
JIM CRAMER: Tim Cook, CEO, Apple.
TIM COOK: Nice to see you.
JIM CRAMER: Thanks a lot, sir.
TIM COOK: Thanks for having me.
JIM CRAMER: Nice to see you. Nicely, now you recognize the story behind simply the models of the cellphone. Tim Cook, CEO, Apple.