After five years, we know this: Tim Cook is no Steve Jobs.
In some ways, the fact that Cook, who took over as Apple’s CEO five years ago, is his own man has been good for Apple and its various stakeholders. In other ways, maybe not so much.
But that simple fact that Cook is not Jobs has already had a significant influence on how Apple has evolved in the wake of the death of its iconic founder. And it’s likely to have an even greater impact going forward as the echoes of Jobs’ influence inevitably fade.
One thing that’s clear about Cook’s reign is that he didn’t mess up what Jobs had built. In fact he took the profit engine that Apple had become in Jobs’ second era and torqued it up to previously unimaginable levels.
Since Cook took over, Apple’s stock price and its annual sales have more than doubled and its yearly profit has grown 84 percent. Apple’s annual profit is larger than its yearly sales were up until the very last year of Jobs’ tenure as CEO. And under Cook’s leadership, Apple became the most valuable company in the world, joined the Dow Jones industrial average, and started paying a healthy cash dividend each quarter for the first time since the mid-1990s.
Cook took the iPhone, which was already Apple’s most important product when Jobs stepped down due to health reasons, and turned it into a juggernaut. In the holiday quarter this past year alone, Apple sold 74 million iPhones, which was more than the company sold in all of its 2011 fiscal year, when Cook took the helm.
But Cook has been important to the company in more ways than its financial performance. Under his leadership, Apple has engaged with the community in ways it didn’t under Jobs. The company instituted a matching program for employees’ philanthropic donations and has made several sizable charitable contributions on its own. Cook, who came out as gay two years ago, has made an effort to stand up for gay rights and speak out against discriminatory legislation. And under Cook, Apple has taken the lead in pushing back against the government’s surveillance efforts.
If Cook had retired a year or two ago, he probably would have gone down as one of the greatest chief executives ever. But he didn’t, and Apple’s recent stumbles may lead to a reassessment of his tenure.
Apple’s sales have sputtered in the last three quarters, barely growing in the all-important holiday period last year and falling sharply in the last two periods. Its profit for the first nine months of its current fiscal year is down 13 percent from the same period a year earlier. And its days of torrid stock price growth now seem increasingly distant; Apple’s share price has grown just 7 percent over the last two years.
Underlying that subpar performance have been problems on the product front. Under Cook, Apple has been riding the iPhone’s immense success. That success boosted the company’s overall performance, but it helped mask the weakness in Apple’s other product lines.
Sales of the iPod fell off a cliff after Cook took over. Sales of the iPad, which initially was an even bigger success than the iPhone, started slowing down about a year into Cook’s tenure and have never recovered. While Mac sales grew for years after Cook took charge, it too has started to stumble.
Now iPhone sales themselves are declining. In its second fiscal quarter this year, Apple’s unit sales of iPhones fell on an annual basis for the first time ever. They fell again in the third quarter.
That decline has made it even more obvious that Apple under Cook hasn’t come up with a gadget to replace the iPhone as its growth engine. The Apple Watch garnered a lot of hype when it launched last year, but sales have reportedly been falling sharply after an initial boom, and the gadget doesn’t look like it’s going to a hit on the scale of the iPhone or the iPad.
And other initiatives either haven’t seen the light of day or have underwhelmed. Apple’s car project is still in development and reportedly struggling to figure out its mission. Despite lots of hype, Apple’s television efforts have yielded only a digital set-top box that has been at best a modest — but not terribly lucrative — success. As competitors like Google, Microsoft, Facebook and Amazon rush to stake claims in areas like virtual and augmented reality and the smart home, Apple’s apparent interest in those areas has been confined to patent filings and the ever-present rumor mill, rather than in releasing actual, competing products.
These setbacks could end up being short-term blips in Cook’s tenure. Should iPhone sales rebound with the next model or should Apple’s car project turn into a big hit, memories of the company’s current doldrums could fade quickly.
But for now, they raise worrying questions about Apple’s future under Cook. One could argue that Apple under Cook has been largely coasting on products and ideas generated by his predecessor. Sure, the company has introduced smaller and bigger iPads and large-screened iPhones, but those have been variations on existing themes, not all-new products. The one all-new product under Cook — the Watch — has been underwhelming and hasn’t built on the company’s success.
Jobs himself once noted that Cook is not a “product person,” that Apple was going to have to rely on others in the organization to come up with new products and new ideas and bring them to market. The company’s struggles of late in that regard may highlight that weakness and hint that in the switch from Jobs to Cook, Apple lost a crucial part of its winning formula — the ability to create breakthrough, market-creating products.
Now, with tens of billions of dollars in profits rolling in every quarter and hundreds of billions of dollars in the bank, Apple remains in an enviable position; many companies would love to have its problems. And no one’s suggesting the company’s going to fade away any time soon.
But its recent struggles do underscore fears that the company’s best days are behind it and could prompt worries about what the next five years will bring.
Contact Troy Wolverton at 408-840-4285 or twolverton@bayareanewsgroup.com. Follow him at www.mercurynews.com/troy-wolverton or Twitter.com/troywolv.
