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Consumers have been slower than expected to embrace using their phones to pay for goods and services at the cash register.
That’s one of the key takeaways from Apple CEO Tim Cook, who spoke at the company’s annual shareholder meeting on Tuesday. The admission was a response to a question posed by an investor. He also touched upon the booming wearables business and the opportunity in healthcare. Likewise, he addressed the tax reforms passed in December and his vision for the future.
The annual shareholder meeting, which include luminaries such as board member and former US Vice President Al Gore, is a chance for investors to get executives from the secretive company to open up — even for a little bit — about the state of the business. This year’s meeting was also the first held at Apple’s new Cupertino, California, campus, informally dubbed the “spaceship.” The new campus was a big draw for investors. Apple set up a registration for shareholders ahead of time, and many said they came specifically to see Apple Park.
Karen Cary from Cupertino brought her 88-year-old father, Heinz Ruther of Mountain View, to the meeting to get a glimpse of Apple Park and Cook but also hear about “the future.”
“We all have iPhones here,” said Cary, who noted she has “grown up with Apple” in the neighborhood. “But there’s the whole TV area, automated cars, healthcare systems” and various other areas Apple could get into
Apple didn’t provide an online video or audio stream of its annual meeting, and reporters weren’t allowed in the auditorium with the company’s shareholders and executives. Instead, we were required to watch remotely via video in a separate building.
The meeting kicked off at 9 a.m. PT.
Slow mobile payments
In October 2016, Cook said Apple. But Tuesday, he sounded less sure that it would happen anytime soon. “I’m hoping that I’m still going to be alive to see the elimination of money,” Cook said during the shareholder meeting.
“Mobile payments have taken off slower than I personally would have thought if you asked me sitting here a few years ago,” Cook said.
While mobile payments had been around for years, Apple jump-started mainstream interest in the feature when it added the capability to its iPhones in 2014. The feature has been hamstrung by older point-of-sale terminals that aren’t compatible with the new technology. although that’s gradually changing.
Cook said he’s seen “very rapid adoption” over the past 12 months, especially in parts of the world that don’t seem obvious, like Russia and China.
In the US, companies aren’t always motivated to make innovative healthcare products because they’re focused on what can be reimbursed by Medicare or Medicaid, Cook said. That’s not always in the patient’s best interest, he added.
“We’re in this really great position that we can do what we’ve always done, which is look at it as the user looks at it,” Cook said. “We can ask ourselves, how can we improve the health of the user, not worrying about if we can convince the federal government to give us a reimbursement or not. This is an area Apple can make serious contributions over time.”
Apple includes a health app on its iPhones, and plans to introduce ato let you store you medical records. Cook has previously talked about the life-changing aspect of the Apple Watch.
Cook noted that Apple’s wearables business — which includes its AirPods, Apple Watch and Beats headphones — is nearing the size of a Fortune 300 company.
Despite initial skepticism for both the Apple Watch and AirPods, both items remain hot sellers. In particular, Apple was late to the smartwatch game, but has still ended up dominating the business.
The comments are a reiteration of Cook’s belief that these younger product categories will have a larger impact down the line.
Focusing on R&D and M&A
Apple spent $12 billion last year on research and development, Cook said, with most of that spent in California. This year, he said Apple plans to spend $16 billion in capital expenditures.
“That’s an extraordinary number, but it goes to our confidence in Apple’s future,” Cook said.
Apple acquired 19 companies last year and is “constantly” looking for more purchases, he added.
Taxes, taxes, taxes
Employees started moving to the “spaceship” headquarters in April, and eventually, 12,000 will call it their base. Apple’s headcount has ballooned since its early years, and it outgrew its older offices at 1 Infinite Loop, which held about 2,800 employees. Cook said earlier this year that Apple plans to open yet another campus in the US, though it hasn’t yet disclosed the location.
The announcementafter Apple won a victory in Congress to bring back its overseas cash at a lower tax rate. As of that ended in December, Apple had a record $285.1 billion in cash, with most of that held overseas.
It will pay $38 billion in taxes to bring the money back to the US. Apple said it plans to invest $30 billion in the US over the next five years by building its new campus and creating 20,000 new jobs. Factoring in current spending, product sales tax and taxes on employees’ wages, Apple said it expects to contribute $350 billion to the US economy over that period.
Cook on Tuesday said that in the future, small and large businesses will generate most of their money overseas, Cook said. With the old system, companies paid a 40 percent tax on money they brought back to the US, on top of taxes already paid in overseas. That meant everyone kept their money overseas. Apple has long called for tax reforms to bring its cash back to the US.
“We could have left it where it was and not paid,” Cook said. “We said we want to pay and for wanting to pay, we want to use the residual profits to invest in this country.”
An investor asked Cook if Apple planned to issue a special dividend or possibly double its dividend given to investors. He said he’s “not a fan” of special dividends but noted that Apple increases its dividend every year. He declined to specify the amount for this year.
The conversation at last year’s shareholder meeting ranged from investor worries about health hazards from wireless technology to questions about Apple’s efforts to promote job growth in the US and pay attention to its pro users. The previous year’s hot topic was Apple’s 2016 battle with the FBI over unlocking an iPhone used in a terrorist attack.
This year, there were two Apple proposals from shareholders that Apple’s board recommended investors vote against. One was wonky and related to shareholder proxy access. The other wanted Apple to set up a human rights committee “to review, assess, disclose and make recommendations to enhance Apple’s policy and practice on human rights.” The majority of shareholders voted against both.
They did, however, approve Apple’s four proposals to reelect its board members, maintain its accounting firm, approve executive compensation and approve Apple’s non-employee director stock plan.
One of the more unusual questions of the day was whether Apple plans to do anything related to oral healthcare. Cook said “it’s not an area of our current focus.”
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