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Steve Jobs Steps Down: The New Picture


Steve Jobs is one of the greatest business leaders in American history. This isn't merely a function Jobs' unimaginable success at Apple (AAPL) since reclaiming the mantle of the company after a forced hiatus, but his entire body of work.

Among Jobs's other successes is buying Pixar from George Lucas for $10 million in 1986, then selling the company to Disney (DIS) for $7.4 billion in 2006. The transaction made Jobs the largest shareholder in the Mouse House. Not bad for what amounted to a side-gig/ hobby.

Even the man's missteps turned to gold. After leaving Apple in the mid '80's, Jobs founded NeXT Computer. Though technically advanced, NeXT was shunned by the mass market, received a tepid response from corporate users, and sold only 50,000 units. NeXT was widely regarded as a disappointment -- that is, until 1996, when Apple brought Jobs back into the fold by paying him nearly half a billion dollars.

Jobs had, and indeed still has, a preternatural ability to understand the wants and needs of his customers before they know themselves. Such a talent is the defining characteristic of a visionary, and Jobs has few, if any, rivals in that regard.

All of this is true, but it ignores the only question Apple investors should be asking themselves today. Specifically: Where does Jobs's departure leave Apple? What does it mean for Apple? And what does his exit mean for shareholders?

Is this somewhat cold? Yes. Is it the question Jobs himself would be asking were he in the shoes of the average investor? Absolutely. For all of his attributes, Steve Jobs is also known as one of the most ruthless businessmen and intolerant ball-busters in corporate America today.

You want more incentive for taking a gimlet-eyed look at Apple's stock post Steve Jobs? Pull up Microsoft's stock since Bill Gates left day-to-day operations in January of 2000. Microsoft (MSFT) isn't alone. From Henry Ford to Sam Walton to Howard Shultz, the history of companies in the wake of the departure of charismatic long-time leaders tends to be ugly.

In order to help handicap Apple's future, it's useful to break down the company's field position in terms of both leadership and competition -- the most important predictors of a company's success or failure.


Current Apple COO Tim Cook is taking over Jobs' CEO role. Cook is a 13-year Apple vet with an intense approach to finding, then killing, inefficiencies. As part of raising his profile for the CEO gig, Cook has been handling conference calls and increasing amounts of press. As part of this effort, Cook was featured in a 2008 slightly less than hard-hitting Fortune magazine cover story entitled "The Genius Behind Steve Jobs." The piece wasn't exactly on par with Watergate coverage, but it did illustrate Apple's nonpareil control of its own image.

Cook presumably has an intimate knowledge of Apple's inner workings. But Apple isn't so much about efficient operations as it is about selling insanely cool stuff in remarkably appealing ways. There is little to no evidence that Cook has Jobs's obsession or ability with design. No one does. Cook also lacks anything even resembling Jobs's charisma -- also true for the rest of the world.

He may deserve to take over for Jobs, but that doesn't make Cook the right man for the task. Lets just say Cook has a lot to prove, and he better start doing so fast.

The Apple Board of Directors

Apple has the exact type of Board of Directors you'd expect Jobs to have assembled when he returned to the company after being fired in favor of a soda-pop executive. In other words, the board is by all available evidence a group of figureheads whose decisions over the past 10 years have related only to saying yes to the Svengali in charge and deciding how many stock options to bestow upon him.

Consider the board's subservience to Jobs in the communications regarding his illness as it developed late last decade. One of a corporate board's key mandates is communication with shareholders regarding material information involving key executives.

Despite this duty, the company announced in 2009 that a visibly ailing Jobs's shocking appearance was the result of a "hormone imbalance." Shortly thereafter, Jobs took a medical leave. In June of that year, the Wall Street Journal reported that Jobs had received a liver transplant months earlier. The company confirmed this report only later, coincidentally at the same time as the release of the third generation iPhone.

Was Jobs entitled to privacy during his ailment? Absolutely -- that is, if he hadn't been the face and driving force behind the most important technology company in the world. Jobs was the CEO of a public company and he was going through life-threatening surgery. This was obviously material information known only to select outsiders not in the employment of Apple (hospital workers, among many others). The board's silence may have violated no laws but was a clear violation of their moral duty to shareholders.

Apple's board is, by all appearances, a collection of lapdogs. The jury is very much out as to whether or not they begin working on behalf of their shareholders now that their master is leaving.

Competitive landscape

Google: Google (GOOG) is still a one-trick pony, but they certainly picked a nice time to stick a toe into expanding their Android efforts with the Motorola patent and hardware buyout. If Google can execute -- and that is a HUGE if -- then it could mount a mobile OS challenge to Apple a few years down the road.

Amazon (AMZN): The only online retailer in the world that's better than Apple is up and running with cloud already, presenting a clear and present danger to Apple's cloud ambitions. Both Apple and Amazon are extraordinary operators. This race could get interesting.

Microsoft: Man oh man, would Microsoft love to regain some of the ground they're losing to Apple. Hell, Microsoft would love to just slow their share erosion on the consumer front. And I'd like to be 23 years old, 6'7" tall and have explosive hops. I'll be in the NBA before Microsoft slows apple.

Anyone who makes a tablet: Just give up for five years and see if Apple somehow screws up the iPad monopoly.

Phone makers: Ha. No chance whatsoever to take advantage of Jobs's departure. None.

Hewlett Packard (HPQ), Dell (DELL) and anyone else making PCs: Your product is both a commodity and a rapidly dying one at that. You'd be better off making CD-ROMs or slide projectors.

Bottom line

Apple has leadership questions from top to bottom and is losing one of the best -- if not THE best -- CEOs in history. Apple has untold billions in cash, a monster pipeline of cool stuff in the works, thousands of talented designers who learned from the very best and dominant leadership positions in most of the important consumer tech product areas with a growing footprint in enterprise.

Jobs's departure may hit the stock for the near term, and it certainly raises questions for Apple's growth prospects two or three years out, but the company's competitive position gives Tim Cook a good deal of time to develop in his role and further build his bench.

In terms of the stock overall, my take is that there's no reason to panic but Apple shares are no longer a "one decision" buy-and-hold-forever proposition. If the company's product lineup shows signs of faltering as we get into 2012, it will be a sign that Apple's hard-earned title as the best company on earth is nearing an end.