AAPL shareholders meeting recap: Wearables business approaching Fortune 300 size, Apple Pay adoption slower than expected, more

As scheduled, Apple’s annual shareholders meeting took place at Steve Jobs Theater at Apple Park today. The 2018 Annual Meeting of Shareholders — previously held at Town Hall at 1 Infinite Loop — is the first to take place at Apple’s new campus. While there were no surprises during the voting procedure, Apple CEO Tim Cook did throw out a few tidbits regarding Apple Watch, Apple Pay, who might replace him one day, and much more.

As we mentioned this morning, Apple had six tasks at hand for its shareholders meeting.

  1. (a)  To elect to the Board of Directors the following eight nominees presented by the Board: James Bell, Tim Cook, Al Gore, Bob Iger, Andrea Jung, Art Levinson, Ron Sugar, and Sue Wagner;
  2. (b)  To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for 2018;
  3. (c)  To vote on an advisory resolution to approve executive compensation;
  4. (d)  To approve the amended and restated Apple Inc. Non-Employee Director Stock Plan;
  5. (e)  To vote on the shareholder proposals set forth in the proxy statement, if properly presented at the Annual Meeting; and
  6. (f)  To transact such other business as may properly come before the Annual Meeting and any postponements or adjournments thereof.

Based on coverage from reporters attending the overflow room:

The meeting opened with a video about customers using Apple Watch followed by Apple’s new top attorney Katherine Adams covering stock details and investor regulations ahead of voting. Adams recently replaced Bruce Sewell as Apple’s General Counsel.

Somewhat comical is the vote to re-elect the board being held up by a shareholder who is refraining from voting to protest the direction of Apple’s software. According to reports from the ground, the shareholder is upset about the 2015 (?) retirement of Aperture and still uses iOS 9. That shareholder says Apple is losing touch with working people.

Another second shareholder questioned Apple on only having two women on its board, while a third asked when Apple will waterproof its phones as her son drops them in toilets (iPhone 7 and later are rated IP67 for splash, dust, and water resistance).

Also notable is a shareholder asking about the qualifications about some of the board members while asking for more Apple-supplied information about who they are.

Following the board re-election, items two through four (detailed above) were quickly approved.

Shareholders also requested Apple create a human rights committee that in part studies iPhone addiction among children. This issue received attention earlier this year which prompted Apple to promise additional parental controls.

Apple says its audit committee already handles what a human rights committee would, but shareholders want the proposed committee to do more than Apple’s audit committee.

As is typical, shareholder proposals opposed by management did not pass. Proposals five and six (opposed by management) received 32% and 5.6% votes in favor from shareholders.

While there are rarely surprises out of the voting process (which is largely done by mail ahead of time), the question and answer session between shareholders and Apple CEO Tim Cook often does produce an interesting quote or two.

Cook opened the section by sharing that the iPhone X (drum roll please) has 99% customer satisfaction. There’s always that pesky one percent! Cook recently said that iPhone X has outsold other models since it launched in November. He also disclosed that Apple has nearly 1 billion subscribers (to services including iCloud and Apple Music) so there’s an upcoming milestone to watch for.

Regarding Apple Watch and other wearables, Cook said the category is approaching the size of a Fortune 300 company; Cook previously said that what it calls wearables (Watch, AirPods, Beats, etc.) collectively was the size of a Fortune 500 company last summer.

On the subject of acquisitions, Cook disclosed that Apple acquired 19 companies in 2017 with more on the radar this year. It also spent $12 billion on research and development in 2017. Company wide, Apple has about 123,000 full-time equivalent employees and plans to grow another 20,000 in 2018.

The Apple CEO briefly touched on the company’s continuing efforts to improve diversity before shifting to policing content in the App Store (a reference to Telegram briefly being pulled for distributing child pornography).

The first question to Cook covered Apple’s succession plan for CEO. A shareholder said she is glad the tech press has abandoned the meme that Cook is not as good of a CEO as Jobs, but asked about Apple’s plans to replace him in the future.

Cook said his work requires preparing internal candidates, but Apple’s board could always select an outside candidate if they wanted.

On the topic of mobile payments, Cook said Apple Pay has not replaced cash as aggressively as he would have expected a few years ago, but adoption is picking up, especially outside of the United States. Jennifer Bailey recently shared that Apple Pay is accepted at half of vendors in the US, while Eddy Cue has said Apple Pay is private so he can’t know precise usage numbers.

Regarding health and technology, Cook continues to say he believes Apple can make a contribution because it is not focused on being reimbursed by Medicare and Medicaid, which is not always best for the patient.

The discussion then turned to tax reform which is a pet topic for the Apple CEO. Cook said a lot companies make most of their money out of the United States, but Apple didn’t repatriate that profit because of what they viewed as a tax rate that was too high. Apple now plans to bring $350 billion of overseas cash home and invest it in the US economy.

The meeting entered a bit of overtime when Cook accepted questions on oral health and blockchain — neither invoked newsworthy responses. A shareholder pushed Cook on the possibility of a special dividend, which prompted Cook to say he’s “not a fan” of special dividends but Apple plans to continue to increase dividends paid to investors.

Another question asked Cook about the future of Apple retail while praising Angela Ahrendts. Echoing what Ahrendts often says, Cook responded by saying Apple does not believe physical retail should go away and the company is continuing to invest in its efforts around Apple Stores.

Finally, in typical shareholder meeting fashion, the last question was an investor asking for a tour of the new campus. Cook said the visitor’s center is intended to serve that purpose since so much of the work happening at Apple Park is confidential. That’s a wrap! 

More details from reporters at Apple Park:

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