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Apple Becomes a Democracy

Douglas A. McIntyre

In a remarkably short time, Apple Inc. (AAPL) has gone from being a dictatorship to a democracy. What Steve Jobs could do as he moved the company from a modest maker of computers to the foremost consumer electronics operation in the world made him the master of his board, his executives, his investors and even the consuming public. However, new CEO Tim Cook finds himself in series of battles over how Apple should be run, most recently as Carl Icahn took a position in the public corporation's stock and demanded a better return.

Icahn bought about $1 billion in stock. He apparently has made a simple demand. Apple can borrow around $150 billion at 3% interest. That money can be used to buy back shares. As the number of shares outstanding falls, earnings per share rise -- easy math. Icahn has met with Cook. He would never have gotten a meeting with Jobs.

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Icahn is the latest in a parade that includes activists investors, particularly David Einhorn, who have suggested how Apple might raise its share price back toward its all-time high above $700. The stock currently trades around $490.

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Cook also has been pressured to force Apple's suppliers to improve how they treat their employees, how and when to release new products, what those products should be and do, and how well they have to sell once they hit the market. There have been rumors that Apple's board, once a slave to Jobs, has pressed Cook to increase the pace with which the company invents new hits. And Cook, not a product design expert, probably finds himself out of his depth as he struggles with the right formula to restart Apple's massive growth momentum.

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To argue Cook's side of the debate: Apple has become penned in by competitors, particularly Samsung. Apple has had to turn to the legal system to keep the South Korean company at bay. Samsung's products are not so much brand new creations as they are knockoffs, perhaps with some improvements, to Apple's own iPhone and iPad.

Cook also is up against a new reality, which has been mentioned over and over. Revolutionary products reach the point at which upgrades become small steps, compared to the ones created by the original inventions. That leaves Apple in the unenviable position in which it gets to release only modestly changed smartphones and tablets. Rumors indicate it will create a wearable watch. Maybe that will jolt Apple out of its slumber.

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One of the reasons Jobs could run Apple without any dissent is that his inventions where on the cutting edge of a new age of electronics. That period may be behind the entire industry, making gradual improvement all that remains.

Cook cannot run Apple without the considerations of bowing to ever more suggestions and demands. A greater number of people and organizations effectively have a vote in the company's future.

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