Apple CEO: Watch is 'profound,' Apple Pay 'fantastic,' Alibaba the right kind of partner

LAGUNA BEACH, Calif. -- Apple CEO Tim Cook said the new Apple Watch is a "profound" gadget that people will want to use so much they'll end up running down the battery every day and need to recharge it overnight.

Of course, he didn't say what the battery life is for Apple's first wearable, a smartwatch introduced last month and set to go on sale in early 2015 starting at $349.

But Cook, in a wide-ranging interview at the Wall Street Journal Live technology conference here Monday night, did say he's encouraged by the new "constituencies" interested in the device. That includes health and fitness fans and fashionistas, who haven't been the typical audience for tech gadgets. Cook credited Apple design chief Jony Ive and his team for recognizing that the wearable, which works with newer versions of the iPhone, needed to be more personal than the company's other devices.

"They saw that something you wear has to be more personable, more customizable," Cook said. "When you begin to wear something, it's got to look really cool. It can't be geeky."

Apple is looking to new product categories like wearables to drive sales growth as competitors from Amazon to Google to Samsung work to woo away customers from its key products. Together, the iPhone and iPad account for more than 70 percent of Apple's sales. But even with the Apple Watch in the wings, Cook said that the iPhone, which delivers more than half of revenue and the majority of Apple's profit, will continue to be the company's biggest moneymaker for the foreseeable future. (Apple earlier this month announced it won't break out watch sales when the device is released.)

As for the iPhone, Cook said the smartphone brings in revenue from apps and services, including Apple Pay, a new mobile payments system that went live last week. More than 1 million people activated the service in the first 72 hours, with Cook boasting there are now more credit cards activated within Apple Pay than in all other so-called tap-to-pay or touchless payment systems combined.

But Apple's chief acknowledged that the company is in a battle with retailers who may endorse rival payment systems as they seek to avoid paying transaction fees to credit card companies including MasterCard and Visa. Last weekend, drugstore chains CVS and RiteAid said they won't accept Apple Pay. "It's a skirmish," Cook said. "Merchants have different objectives sometimes. But in the long arc of time, you only are relevant as a retailer or a merchant if your customers love you."

In a 30-minute question-and-answer session, Cook also shared his thoughts on taxes (Apple, he said, is the largest US taxpayer), said he believes law enforcement should go after individuals to obtain smartphone and other personal data because Apple doesn't want to be "Big Brother," and warned that some "kind of event" will happen that will raise public awareness of security concerns.

He also said that he decided to discontinue the 160-gigabyte version of the iPod Classic because Apple could no longer get parts for the iconic media player, and that the engineering resources required to update it outweighed user demand.

Fans who have been waiting for the company to step into the television market heard a repeat of Cook's criticisms of TVs, but no news of what Apple might have in the works. "You work on your computer and iPads and iPhones one way, and then you go into your living room and you've stepped back in time. I think there's a lot to be done in this area," he said. "What we'll do I don't want to be so clear on, but it's an area of a lot of interest. I'm optimistic that there can be something great done in this space. "

Cook stepped onto the stage after Jack Ma, co-founder of Chinese e-commerce giant Alibaba, said he would love to do a deal between Apple Pay and Alibaba's own payment technology, Alipay. "I hope we can do something together," Ma said.

While he expressed his admiration for Ma, Cook wouldn't say what kind of a deal the two companies could do - only that such a partnership held appeal. "'We like to partner with people that are wicked smart, with flexible teams that are product based that push us," Cook said. "I think Jack has a company that's exactly like that. If we can find some areas of common space, I love it. I love partnering with people like that."

Here's an edited transcript of Cook's remarks.

On the iPhone continuing to be Apple's biggest moneymaker in the next three to five years: The phone right now is the majority of the company's revenue and profits. But that doesn't mean the other businesses aren't really important. And of course the phone is the sum of many things. Apple Pay is included in the phone. We have many services included in the phone. We have an $18 billion services business that doesn't get noticed a lot but it's huge and incredibly important to our ecosystem...In the long arc of time, there's going to be a lot more smartphones sold and they're going to continue to get better and better. I'm really proud of the products [we released this year].

In that period of time, the iPhone is still going to be the majority -- at least 50 percent -- of the company's revenue and profits.

On the Apple Watch. I think the watch is profound. We're super excited about it. We're not shipping it yet and so everybody will have to see what they think when they start wearing it. But the thing I'm really encouraged about is the constituencies that are looking at it -- these are vastly different kinds of constituencies. There's the technology sector we always listen to, and that's very important to us. But health and fitness is a new area. We have many people that are looking at it from that point of view and are really excited about what it offers.

And then we've got the fashion thing, which is totally new for us, totally new for most technology companies. I give Jony [Ive] and his team an incredible amount of credit here because they saw that something you wear has to be more personable, more customizable. When you begin to wear something, it's got to look really cool. It can't be geeky. It says something about you.

We think people are going to use it so much that you're going to wind up charging it daily -- overnight....Given my own experience and others around me, you're going to wind up charging it every day because you're using it so much that it's going to need to be charged.

On uptake for Apple Pay and retailers like CVS, RiteAid saying they won't play along. It's a skirmish...We started last Monday. We've been at it for a week. I follow these numbers pretty closely. In the first 72 hours, we'd gone over the 1 million mark on activations of cards. Visa and MasterCard -- we talked to these guys today, and they told us that if you sum up everyone else that's in the contactless mobile payment at the point of sale, we're already No. 1. And not just No. 1, but we're more than the total of all the other guys.

Now we've got a lot more to go. We've got a lot of merchants to sign up, we've got a lot more banks to sign up, and we've got the whole rest of the world. We're only in the US right now. We're just getting started, but the early ramp just looks fantastic.

Merchants have different objectives sometimes. But in the long arc of time, you only are relevant as a retailer or a merchant if you're customers love you.

I don't know about you, but last year I had to change out my credit cards twice...This is a pain in the butt.

On Apple's interest in TV and HBO's decision to sell its content service a la carte. I think what HBO is doing is very smart. I applaud what they're doing. They're thinking about the consumer, and content companies win, just like any other company wins, when they really focus on the consumer. I think there's consumers out there who want HBO but today it's too hard to buy. Who wants to go spend all their life on the phone to get it activated?

I think it's very clever what they did. I think you'll see more content companies willing to do this, particularly if the mergers are allowed to occur...I think it's the right thing as a consumer.

I think the current system has a lot to be desired. Content is really great, but I think if you go beyond the content, we're living in the 1970s. Yes, we've got a faster pipe, and a faster pipe is good, but the interface into your TV is literally you've gone to a time capsule and it's 30 years old. It hasn't kept up. You work on your computer and iPads and iPhones one way and then you go into your living room and you've stepped back in time. I think there's a lot to be done in this area. What we'll do I don't want to be so clear on, but it's an area of a lot of interest. I'm optimistic that there can be something great done in this space.

On the health of the Macintosh computer business. The Mac business grew remarkably last quarter. It was up 21 percent in units. People a few years ago or just a year ago or two years ago thought that PC business was kind of dead. The PC business is going down -- that was correct -- but the Mac business has done well. We've kept investing there, we've kept innovating there. And we think the Mac has a great future.

With reporting by CNET News' Shara Tibken.