Washington Apple Pi

A Community of Apple iPad, iPhone and Mac Users

Apple Stockholders’ Meeting, Cupertino, CA, April 22, 2004

by Bob Whitesel

Washington Apple Pi Journal, reprint information


Since I can bike there from home, I couldn’t pass up the opportunity to see what went on at our favorite computer company’s annual meeting. I took my digital camera in hopes of capturing first hand photos. But, security was airport-tight. The photo included with this article shows how successful I was on that score.

For those who have never visited Apple’s headquarters in Cupertino, a brief description is in order. Stevens Creek Boulevard is a six-lane street extending from near downtown San Jose (Woz Way and Adobe headquarters) up the gentle eastern slope of the Santa Cruz Mountains to the foothills where Cupertino is located. Stevens Creek Blvd. is the “main drag” of west San Jose, complete with a mile long “auto row.” The Junipero Serra Freeway (Interstate 280) from San Jose to San Francisco runs roughly parallel to Stevens Creek. At the crossroads of modern Cupertino (intersection of Stevens Creek and De Anza Blvds), Stevens Creek and I-280 are 4-5 large city blocks apart. Apple’s headquarters buildings occupy a large chunk of land near the De Anza Blvd/I-280 over-crossing. Easily visible from both the I-280 freeway and the surface street, I judge the complex very attractive.

The Meeting

The whole of the stockholders’ meeting took only an hour; most of it spent with Jobs and Co. responding to about twenty questions from shareholders present.

At 10:04 am, after a few sentences of welcome from Steve, Nancy Heinen, Sr. Vice President, General Counsel and Secretary, conducted the business portion. She stated that 84% of the outstanding shares were represented, either in person or by proxy. Thus, a quorum was assured. The proposed board of directors was elected by a preliminary count of more than 82%. Appointment of KPMG LLP as auditor was approved, preliminarily. Finally, despite a persuasive—to me—presentation by a representative of the United Brotherhood of Carpenters and Joiners on the need for a “Commonsense Executive Compensation Proposal,” Ms. Heinen announced that this stockholder proposal had failed. She did not give any numbers to support that claim. That portion of the meeting was concluded at 10:17.

The Q&A period followed. Steve was joined by Fred Anderson (retiring CFO), Peter Oppenheimer (incoming CFO), Jon Rubenstein, Tim Cook, and Phil Schiller. Many educators were present. Throughout the next 40+ minutes I sensed large differences in perception on various issues between the questioners and Apple staff. A summary of the Q&A follows.

1. Q: Product announcements and shipping dates—why doesn’t Apple coordinate these so that sufficient product is available to meet demand? A: This is the goal but it is frequently not achieved because it’s difficult to schedule “innovation.”

2. Q: Mac market share? A: There are 25 million Mac customers. The priorities are: keep the installed base happy, grow the base, and add market share. Apple chose to invest in the iPod instead of low-end desktops. Only Apple and Dell make money selling PCs. No one wants Gateway’s market share at Gateway’s profits.

3. Q: Domestic/international markets? A: Apple closed the manufacturing plant in Sacramento because it became a “one product shop.” The jobs went to another location in southern Calif., and the company saved $3 million per quarter. There is a new focus on Japan. Example: Apple Stores will open this year in Tokyo and Osaka.

4. Q: Resellers—why is Apple putting resellers out of business? A: The “indirect” channel is important to us, and we don’t see significant changes.

5. Q: Desktop business—the G5 is a good performer but doesn’t seem to be selling well. A: Apple is counting on the Xserve and “pro” product line. Staff has gotten good feedback from attendees at the NAB (National Association of Broadcasters) in Las Vegas this week. [NAB members tend to use very high-end workstations for video editing.]

6. Q: Please develop a voting machine for California; it’s badly needed (comment: true, indeed!) A: We have no plans to get into that business.

7. Q: Openness—I appreciate Apple’s openness with regard to this meeting. I was excluded from a semiconductor company’s meeting last week, and I think no one was excluded today. A: Thanks. Q: You’re welcome.

8. Q: Apple and Real Networks—wha’ happened? A: Real Networks operates a music download system that competes with iTunes. iTunes consistently has 70% of this market each week. We judge it’s not worth the effort to make iPod support Real Networks. (Steve could then have described why the link with HP makes sense but didn’t.)
9. Q: Discounts to shareholders? A: In the old days Apple’s margin was close to 100% on each sale. Now those margins are very thin. So, in effect, everyone is getting a discount. (Comment: Yeah! Right!)

10.Q: Apple Stores #1—paying their way? A: Yes, indeed! There are 76 stores open today, with 88 expected by the end of this fiscal year. Internationally, Toyko and Osaka, then London will be opening. Many people have reported that their purchase was a very satisfying experience.

11.Q: Apple Stores #2—I went to the Apple Stores in Palo Alto and San Jose and had bad experiences at both stores. A: I’m sorry to hear that because we do train our people extensively. Please write to me (sjobs@apple.com) and tell me about it.

Apple Cupertino

Apple stockholders leaving the company’s annual meeting at 4 Infinite Loop, Cupertino, California. (Photo by Bob Whitesel, taken with an Olympus D510Z digital camera.)

12. Q: Mac OS X—With its Unix base many of my particle physicist colleagues are moving to Mac OS X on the G5. Yet, I see Apple losing ground in the higher education market?? A: Revenue in the higher education market is up sharply this year. Mac OS 9 to Mac OS X is the third U.S. operating system transition. The fraction of Apple base customers using Mac OS X has gone from 0 to 40% in four years. (Previous transitions were: Apple II to Mac, and PC-DOS to Windows 95.) MS will attempt to go from Windows to Longhorn in the near future. (“We wish them luck.”)

13. Q: Safari development—I can’t pay my utility bill with Safari. I have to back off and boot Internet Explorer?? A: Apple works on these issues with developers. Frequently, it’s the people developing websites at the host that cause the incompatibility.

14. Q: Dividends? A: Apple has no plans to pay dividends. Profits are invested in Apple Stores, etc. Our plan is to grow stock value instead.

15. Q: Education—many school systems are switching from Macs to PCs. Some of the reasons given are lack of software compatibility or availability and the switch to Mac OS X. What efforts are being made to get software producers working for Apple again? By the way, I like AppleWorks very much. Please keep it! A: First of all, we have to get all these machines upgraded to Mac OS X. Then, we think that software compatibility/availability will be less of an issue. To lessen the impact of these transitions we are told that it’s easy to hook a Mac running Mac OS X to a PC server.

This all concluded by 11 am. Steve Jobs thanked everyone for coming, and it ended.

I had a distinct sense of déjà vu. The exchange seemed so similar to Q&A sessions during past Pi general meetings when an Apple rep was present. Although the company reps in this case were clearly the “top bananas,” I sensed the stockholders present were no more convinced by the answers they received.

Afterwards, I stopped at the Company Store, which is open for retail customers, and did my usual drooling routine. Playing with a new iMac I learned, as I suspected after MacWorld in San Francisco, that the version of Safari that ships with Panther contains bug fixes not passed down to the version which runs under Jaguar. The very helpful store clerk also told me that upgrading to the current version of Panther is not nearly as risky as before, i.e., archive and install is no longer so strongly recommended. I also learned that the old trick of starting up from the Mac OS X CD and dragging a copy of the system folder to a spare disk doesn’t always pick up all the files OS X needs. He recommended a downloadable utility, whose name I can’t now remember, as a better option. [Carbon Copy Cloner, perhaps? – ed.]

The verdict on stockholders’ meetings? At least I got some exercise riding my bike!

Bob Whitesel joined WAP in 1995 when he lived in Fairfax. He and his wife, Heidi, moved back to the San Francisco Bay Area in May 2003 to spend at least a couple of retirement years near West Coast family.