Apple's Tim Cook dishes on taxes and the demise of money

At the yearly shareholder meeting, CEO Cook says mobile payments haven't taken off like he thought they would. He also says wearables are booming.

Shara Tibken Former managing editor
Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
Shara Tibken
6 min read
Apple's Tuesday shareholder meeting was the first to take place on the company's new Apple Park campus.

Apple's Tuesday shareholder meeting was the first to take place on the company's new Apple Park campus.

James Martin/CNET

Consumers have been slower than expected to embrace using their phones to pay for goods and services at the cash register. Yet Apple CEO Tim Cook is still hoping for the demise of physical currency.

That's one of the key takeaways from Cook, who spoke at the company's annual shareholder meeting Tuesday. The comment was a response to a question posed by an investor. Cook also touched on the booming wearables business and the opportunity in health care. Likewise, he addressed the tax reforms passed in December and his vision for the future. 

The annual shareholder meeting, which included luminaries such as board member and former US Vice President Al Gore, was 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.

Watch this: Apple's Tim Cook talks up wearables, mobile payments and healthcare

Karen Cary from Cupertino brought her 88-year-old father, Heinz Ruther of nearby Mountain View, to the meeting to get a glimpse of Apple Park and Cook but also to 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, health care 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 was going to kill cash. 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. 

Though mobile payments had been around for years, Apple jump-started mainstream interest in them in 2014, when it added the capability to its iPhones. The feature has been hamstrung by older point-of-sale terminals that aren't compatible with the new technology, though 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. 

Health care opportunities

In the US, companies aren't always motivated to make innovative health care 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 it plans to introduce a new Health Records update to iOS to let you store your medical records. Cook has previously talked about the life-changing aspect of the Apple Watch. 

Booming wearables

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. 

People hanging out at the new Apple campus.

People hanging out at the new Apple campus. 

James Martin/CNET

Despite initial skepticism about the Apple Watch and AirPods, both items remain hot sellers. 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 channel $16 billion toward capital expenditures. 

"That's an extraordinary number, but it goes to our confidence in Apple's future," Cook said.

When it comes to mergers and acquisitions, Apple bought 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.

Apple's shareholder meeting drew big crowds of investors who wanted to see Apple Park.

Apple's shareholder meeting drew big crowds of investors who wanted to see Apple Park. 

James Martin/CNET

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 announcement came in January after Apple won a victory in Congress to bring back its overseas cash at a lower tax rate. As of the first quarter, which ended in December, Apple had a record $285.1 billion in cash, with most of that held overseas. 

The company 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. With the old system, companies paid a 40 percent tax on money they brought back to the US, on top of taxes already paid overseas. That meant they kept their money outside the US. Apple has long called for tax reforms to bring its cash back to the states. 

"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 he noted that Apple increases its dividend every year. He declined to specify the amount for this year. 

Shareholder proposals

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 had to do with wanting 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. 

Shareholders did, however, give the thumbs-up to Apple's four proposals to re-elect its board members, maintain its accounting firm, approve executive compensation and approve Apple's nonemployee director stock plan. 

One of the more unusual questions of the day was whether Apple plans to do anything related to oral health care. Cook said, "It's not an area of our current focus." 

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