Can Apple Be Apple Without Jobs?

By Stephen D. Simpson, CFA | August 24, 2011 AAA

Wednesday evening's announcement from Apple (Nasdaq:AAPL) that CEO Steve Jobs was resigning could hardly be called a surprise, but it will certainly accelerate a transition process that has been ongoing in fits and starts for a number of years. Apple has tapped a solid manager to replace Jobs, but competition in Apple's core markets is heating up and investors may be right to wonder whether the company can maintain its over-the-horizon vision and ultra-confident operating strategy without such a rare visionary leading the show.
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News That Really Isn't New
That health issues would eventually force Steve Jobs to step down from his CEO position was really more of a "when, not if" situation, and really not much of a surprise. Jobs was treated for pancreatic cancer back in 2004 and received a liver transplant in 2009. What's more, while it is arguably unfair to speculate on his current condition (and Jobs has been fairly private about these details), the information that has been made available in the past would suggest he is most likely not feeling especially well anymore (fatigue and lethargy are common symptoms).

Feeling that he is no longer able to fulfill the demands of the CEO role, Jobs is stepping down. Jobs will likely become the chairman of Apple's board, while Tim Cook will step into the CEO role. Given that Cook has served as Apple's interim CEO during Jobs' prior medical leaves, he is not unfamiliar with the role. What's more, there has been ample anecdotal evidence (as well as evidence gleaned by the company's compensation policies) that Cook was the intended successor for some time.

A Remarkable Legacy
Jobs gets an immense amount of credit for the success of Apple, sometimes so much so that it is easy to forget that Apple is a large company with tens of thousands of employees and skilled senior managers. Look at it this way - would a CEO who is notoriously demanding surround himself with executives that could not perform at a high level on their own?

Consider for a moment what Jobs has done. He built a company that in a matter of just a few years stood toe to toe with the giant IBM (NYSE:IBM) in the nascent personal computer world. Later, as a second act, Jobs shepherded product developments that have seriously wounded huge legacy tech names like Intel (Nasdaq:INTC), Microsoft (Nasdaq:MSFT), Hewlett-Packard (NYSE:HPQ) and Nokia (NYSE:NOK), to say nothing of being a major thorn in the side of other hot-growth names like Google (Nasdaq:GOOG) and Research In Motion (Nasdaq:RIMM). Oh, and keep in mind too that when Jobs wasn't at Apple, his idea of "puttering around in the basement" was to found Pixar and NeXT.

Can Apple Stay in the Lead?
CEO transitions can be very traumatic for companies, but the sell-side analyst community seems strangely calm and sanguine about this move. While it's true that Cook has plenty of experience and Apple's pipeline is deep, investors should not just assume that the company will march on without a pause.

Jobs was a hard-driving visionary, while Cook is generally described as an excellent operator who helped significantly improve and streamline the Apple supply chain. Moreover, Cook is close in age to Jobs (50 versus 56) and the reality is that innovation is typically a younger person's game. The risk, then, is that Apple may become a more efficient, but less inspired, company - something that is not uncommon as tech companies mature, but could be a real opportunity for the likes of Samsung or HTC to steal the march.

It is also worth speculating on how Apple's corporate culture will adjust to this transition. Jobs' management style was often described as autocratic and it is difficult to continue that management style with a new CEO (autocrats are not famous for fostering that sort of independence in their subordinates). With that, though, has also come a remarkable amount of internal self-confidence. Few companies have been so willing to "self-obsolesce" their own products and technologies, but it has been a key competitive advantage for Apple. Will Cook have the drive and the self-confidence to continue this trend?

The Bottom Line
By all accounts, Apple is in fine hands now. The company will not find another leader like Jobs any time soon, as these types of people are just not very common and most of them would rather start their own company anyway. The point here is not to denigrate Cook or predict doom under his legacy; rather just to highlight that there's a remarkable amount of calm around what could ultimately be a very major shift in the company. Still, Jobs will be around as chairman for some time (hopefully a long time), and he yet be in a position to provide inspiration and vision for the company and its shareholders. (So you've finally decided to start investing. But what should you put in your portfolio? Find out here. See How To Pick A Stock.)

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