Ed: Tim Cook spoke at length during today's Goldman Sachs conference on Apple's insane first quarter, China, the Apple Watch, and so much more. Here's a transcript of his remarks, with occasional interjection by the Goldman Sachs interviewer. On the strongest quarter ever Y'know, we're fortunate to have a good year, but maybe the most important answer to that first would be that we don't believe in such laws as laws of large numbers. This is sort of, uh, old dogma, I think, that was cooked up by somebody and Steve [Jobs] did a lot of things for us for many years, but one of the things he ingrained in us [is] that putting limits on your thinking [is] never good. And so, we're actually not focused on numbers, we're focused on the things that produce the numbers, right? Get an iPhone SE with Mint Mobile service for $30/mo And so if you look at the accomplishments over the last year: We're a product company. And our most important thing is to make great products, and we feel great about how we did last year. We came out with iOS 8, which was absolutely our largest release since the App Store was created. We came out with Yosemite, which is our latest Mac operating system with a total new look, lots of new apps. We had the biggest advancement ever in the iPhone, with iPhone 6 and 6 Plus, and from an operational excellence point of view sort of hit the ball out of the park on the ramp and rolling of that to countries. We brought Touch ID to the iPad — and Touch ID was a really foundational technology that we invented and began to roll out the previous year. And we're really happy to get that into the iPad, along with making it even thinner and lighter and more powerful for people. And the Mac... the Mac kept humming. And, y'know, despite the industry being really awful, the Mac has been growing and gaining share for a long time. And so, on the product front, lots of things to feel great about. As important as those are the things that we do to set ourselves up for the long term. And last year, if you look at some of those things that we'll produce over the coming years: We developed our own programming language, called Swift. And what Swift does is significantly make our ecosystem even stronger, because you can write apps even faster, really complex apps — you and I could even write an app. [Laughing.] Mmm, I don't know about that. No, I'm actually serious! We came out with HealthKit. And HealthKit, I think, is going to be profound, because it enables you to take all of the information from different apps, and if you desire to, you can share that information with your physician. You can share it, or you can place it in way that you can then begin to correlate the data and find out some pretty interesting things about your health and be able to monitor it. We also came out with HomeKit, and HomeKit enables you essentially to control your home with Siri. And so whether it's lights, or your door, or your thermostat, or whatever it may be. We also came out with CarPlay. And so we've taken iOS and extended it into your car, into your home, into your health — all of these are really critical parts of your life, and all of us... none of us want to have different platforms in different parts of our lives. We want one, seamless kind of life. And so I think that is huge for our future. It's not every day you can plant that many foundational technologies. We also did a lot of things to further our global footprint. And so if you look at what we've done in China, we've opened more stores there, we've opened a lot more distribution there; through the world, we've opened almost 20,000 new points of sale. We've opened 27 new Apple Stores — a lot of flagship stores. We extended the online store into even more places. And so, the emerging markets, we saw phenomenal growth, with over 50 percent. You know, these are huge numbers and we have over 50 billion dollars of revenue in emerging markets, including 38 [billion] in China for the calendar year. So that was certainly a high point. We partnered with China Mobile. We also partnered with IBM to extend our reach into enterprise. And, y'know, I think we'll begin to see that relationship bear fruit this year as the apps have started to roll out and so forth. And y'know, for everyone at Apple, we're all there to make great products, and really enrich peoples' lives, and we believe in leaving the world better than we found it. And so, along those lines, our greatest contribution to society will always be through our products, because we can empower people to do some incredible things there, but we also put our energy into a program called ConnectEd, and are working with the administration on bringing our technology to kids in very underserved schools that desperately need technology. We partnered with the Global Fund, with a focus on eliminating the transmission of AIDS from mother to child, made a huge — we're up over a hundred million dollars in donations here, and this saves millions of lives. On the environment

And we did a lot for the environment last year, as well, adding on to some things that we're doing, and I'd like to spend just a second on this — we know, in Apple, that climate change is real. And our view is that the time for talk has passed, and the time for action is now. And we've shown that with what we've done. And so we're now running all of our data centers, which require lots of energy for those of you that understand data centers, all of them are run off renewable energy. And just today, we're announcing our biggest, boldest, and most ambitious project ever: We are building — we're partnering with First Solar — to build a solar farm in Monterey County, so not too far from here. It's 1300 acres. It's enough power for almost 60,000 California homes. And it's enough to provide renewable energy for all of our new campus — that you and I were just speaking of a few minutes ago, Apple Campus 2 — every other office we have in California, all 52 retail stores we have in California, and our data center in Newark. And so, it's an 850 million dollar investment. And I think, just to make this point, because I know this is a financial conference, and I'm sure some of you are interested in, well, "Is that a good use of funds or not," and, y'know: quite frankly, we are doing this because it is right to do, but you may also be interested to know that it's good financially to do it. We expect to have a very significant savings because we have a fixed-price for the renewable energy, and there's quite a difference between that price and the price of the brown energy. And so we're thrilled to continue on this course of doing things that really leave the world better than we found it. On Apple Watch

If you think about the, for those of you can remember, the MP3 industry, before the iPod — we weren't the first company to make an MP3; there were lots of companies in the... you may not be able to remember that, but there were lots of them out there. They weren't used very much. They were fundamentally too hard to use, and the user interface was really bad. You almost needed a PhD to use these. They weren't, they're not memorable. They didn't really move the dial. And the tablet business was kind of like this, too. There were lots of tablets shipping when the iPad came out. But there was nothing earth-shattering. There were very niche-y kind of applications; you probably weren't using one like you're using now. And so I see the smart watch category very much like that. There are several things that are called "smart watches" that are shipping, but I'm not sure you could name any. Maybe you could. I'm not sure the audience could name very many. But certainly there's been none that have changed the way people live their lives. And so what we want to do at Apple, that's our objective: We want to change the way you live your life. And just like this iPad has changed the way you work, and hopefully the way you live, and the iPhone has done that, we see the Apple Watch doing that. I've been using one, and I'm actually wearing one now — but I wear it all the time, actually. And I think one of the biggest surprises people are going to have when they start using it is the breadth of what it will do. And so, obviously it's a precision time piece. And just like you're wearing a watch and you probably think it looks really cool — I'm not sure I do, but... [crowd laughter] My wife gave it to me, so it stays on my wrist. The look of this is fantastic. And of course there's lots of different ones. And so you may look at this and you might want a different color band, or a different type of band, or you may want an 18 karat gold one, or whatever you may want — the variety is incredible, the customizable nature of it is incredible. You'll also find that there are some new, innovative ways to communicate that you didn't have before. And so I constantly use Siri with my watch, and ask different things, and all of a sudden, y'know, it's just there. You can do things like get notifications across your watch. And so right now, if you're like most men, you carry your phone in your front pocket. I see too many men in this audience, by the way, there needs to be a lot more women, a lot more diversity here. [clapping] Thank you. But most men do that. They put it here. And so you can imagine, in a meeting, how distracting it is to watch everybody do this all the time. [Miming pulling an iPhone out of pocket.] And here, it's kinda little subtle. And if you're interested in keeping up with the sports score to the financial markets to whatever it is, it's like this, the Watch knows you're looking at it, and it comes on. If I'm not looking at it, the Watch is off. Which can be very important, right? And so there's so many things like that, and the third-party apps — the things third parties are working on? — I'm super excited about. And so I think it's going to be, everybody's going to have their favorite thing. Just like when the App Store came out, and you remember the tagline, "There's an app for that?" And the way you felt with your favorite apps, and so you're going to have a feeling like that. I use it in the gym constantly to track my activity level, my exercise, how long I'm exercising; if I sit for too long, it will actually tap me on the wrist to remind me to get up and move. Because a lot of doctors believe that sitting is the new cancer, right? And arguably activity is good for all of us. And so if you haven't moved within the hour, ten minutes before the hour it'll tap you. And it's been amazing watching this at Apple, because you'll be in a meeting — and we have a lot of employees now that are using the watch — and about ten minutes before the hour, everybody will start standing up. [laughter] And it took a little while to get used to, but it's actually very good. And so, there's just an enormous number of things that it will do, and I think you're going to find it something that you're going to think, "Wow, I can't live without this anymore!" And you're gonna be deciding you may not want to give up that real estate for that particular watch anymore. So Siri's going to be on my wrist, right? Siri's on your wrist. So I'm gonna not be able to get away from someone yelling at me, ever. [Laughter.] Okay. On the significance of Apple's software vs hardware

You know, it's been... we haven't been a hardware company for... since I've been with Apple. And I'm not a historian, so I can't tell you about the beginning of time, but I don't really think Apple was ever a hardware company, even at the beginning of time. I think people that know Apple well and are users of our products, I don't believe any of them would call us a hardware company. When they buy a Mac in the early days, and today, they're buying an experience, and that experience is the integration of hardware, software, and services. And that's clearly true with the iPhone, and iPad, it's true with the iPod. You can imagine the iPod without the iTunes Store — or, you actually can't imagine it, probably, anymore. So it has always been a key part. Now, financially we report services together, and the sum of all these things which, uh, things are included in that like the App Store, and AppleCare, and so forth, and our media sales — this adds up to, like, 18 billion for the last year. However, if you really think about it, when we sell an iPhone, there's a great deal of value in the operating system, and then there's value in the updates that come thereafter that keep the phone fresh, but we don't spend any time internally apportioning all of that to software and services. But if we did, that category would be even larger than it already is. And so the net of all that is that the magic in Apple is that we do all of them: hardware, services, and software. And the real magic comes out where they integrate. And sort of owning the whole widget is the reason we're able to deliver the kind of customer experience we do. All of these will always be important to us. They're all important. It's not that one is more than the other. It's doing them all, and doing them all at a very high level, and integrating them. It's what produces the magic. On Apple Pay

It's going faster than I thought it would — much faster, actually. The reason is that, the reason I thought it would be a bit slower than this is that when you're going into the holiday season, most retailers don't want to change anything around their point of sale. And we found, however, we found a lot of significant reception to get it going quickly. And, y'know, by December, two out of three dollars that were spent in stores with contactless payments, on contactless payments — were Apple Pay. And this is by the three major networks: AmEx, Visa, and Mastercard. And so it's essentially the overwhelming vast majority of the market. But maybe what's even more significant than that is that there's so many retailers that are approaching us about getting signed up. We had the banks see at a very great level. We have 2000 banks and credit unions now going, and more coming, although that's well over 90 percent of the market. And so the focus in the United States is very much on merchants. We did a walk around, earlier, around the hotel, and if you do that, you'll find that you can buy a coffee at Peet's, you can buy your lunch at McDonald's or Subway, you can buy cupcakes at this little cupcakes small business place down a few blocks from here, you can go to Foot Locker and buy the latest Nikes, you can go to Bloomingdales. And so, from sort of a large company with Bloomingdales, Macy's, to a toy store called Jeffery's a few blocks from here, many many retailers. And in fact there's a vending machine in the lobby that you can use — and now there's 200,000 of these around the U.S. — that you can buy water, and sodas, and snacks, and these types of things. They're also in laundromats. And so the rollout is going much faster than I would have thought, and I think it's truly profound. There are also some retailers that are taking it even further, where they're innovating around their own customer experience. Like Panera Bread now allows you to order in advance, you can go in and pick up your lunch, made, it's done before you get there, and you're paying with Apple Pay [in-app]. And so they're trying to kind of taking it all further, and I love to see these. Jet Blue just announced this morning that they will accept Apple Pay beginning mid this month, and they're going to roll it out across all of their flights between now and three months or so from now, and you can buy from your snack to your drinks and all the other things you can do on planes, your entertainment et cetera. We think all of these things are great, and I see them happening faster and faster and faster. This is an example, back to your other question [on software and hardware integration], where this was only possible because we could control and design the hardware, the software, and the service. You can imagine trying to do this with several different companies, you would be pulling your hair out doing it. You don't have much left, but... [Laughter.] But you'd really be doing that. Yep, some of us are follically-challenged. On not collecting Apple Pay shopper data Well, for us it's a value. It's first and foremost a value. We believe that customers have a right to privacy. And that the vast majority of customers don't want everyone knowing everything about them. And so that's first and foremost what it's about. When we make money when you buy one of those [items via Apple Pay], we'll make a little bit of money. But it's a simple, straightforward business model. You are not our product. That is our product. And so that's the way we kind of look at the world, and we think that that's the way customers want us to look at the world. And so if you take this and look about the areas that are emerging now, where on your smartphone, there's your financial data — we think that this is even more true in this world — there's no reason why anyone, or us, that we need to know where you're buying something, what you're buying, how much you're paying, I don't want to know any of that. It's none of my business, frankly. And so this is not how we want to make a living. We don't think you in the long term would want us to do this, either, by the way. We think customers will rebel on this. I think that this is the same way, back to the HealthKit that we talked about earlier, you're going to want to keep your own health information. This is not something you want to be monetized by somebody. And so we think that customers, over the arc of time, will more and more go to people they trust with their data. Because it's not just sharing one thing that's going on now. It's the people unknowingly sharing a number of things in their lives and where somebody can now connect those dots and find out ten things about them that they really didn't want anybody to know, that nobody deserved to know. And so I do think over time, more and more people will appreciate that, and not only just appreciate it, but demand it. So for Apple Pay, for us, it was about doing something simple; we knew that it had to be easier than pulling out your wallet and taking out a card, there was nothing out there that was easier than that. Nothing had really taken off. We knew that it had to be secure, because all of us are tired of people breaching our credit cards, and going online and having to reput in all of these numbers everywhere. I'm sure everyone in this room, or almost everyone in this room at least once that's happened to. It's happened to me three times. With Apple Pay, we don't — we never give the merchant your credit card number. We don't even have it. We're essentially making up a proxy for each individual transaction which prevents the passage of this number. Think about it for a minute, how secure can a card be when it has your number on the front, and this thing called a security code that anybody can see on the back! [Laughter.] How secure is that?! Yep. Y'know, and so we knew it had to be secure and, as I've said before, we felt it had to be private, because we think that that's between you, and your bank, and the merchant. And we're not a party to it. We're facilitating the transaction. And so I'm super excited. I think we have come up with something that people love to use. The guys are telling us — Panera Bread told us that 80 percent of their mobile transactions now, in store, are on Apple Pay. And so in the stores we're in, it's even higher than the average across the total, obviously, because that includes stores that we're zero in, because we're not accepted yet. And so I couldn't be happier about the speed of — I would have never predicted that I could be sitting at this conference in February, after launching in October, and we would be where we are now. On the demand for a low-cost iPhone