Wolverton: Apple at crossroads as Tim Cook celebrates fifth anniversary as CEO

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 a good thing for Apple and its various stakeholders. In other ways, maybe not so much.

But that simple fact 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 it 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, the company 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, Apple sold 74 million iPhones, which was more than the company sold in all of its 2011 fiscal year, when Cook took the helm. While Apple’s smartphone had already been on the market for more than four years when Cook took over, the vast majority of iPhones — 85 percent — have been sold since then.

But Cook has been important to the company in other ways than just 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. Not only has it beefed up the security of its devices to thwart unwarranted spying, but it publicly squared off against the FBI when the agency demanded that Apple help crack the iPhone used by one of the perpetrators of the San Bernardino shootings earlier this year.

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 sub-par performance have been problems on the product front. Under Cook, Apple has been riding the iPhone’s immense success. Since he took over, the smartphone has grown from about 44 percent of Apple’s overall annual sales to about 64 percent. And in some quarters, its edged up to nearly 70 percent of the company’s total sales.

That success boosted the company’s overall performance, but it helped mask the weakness in Apple’s other product lines. Sales of the iPod, which was still accounting for about 5 percent of Apple’s annual revenue when Cook took over, fell off a cliff after.

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. Indeed Apple is now selling fewer iPads each quarter than it did when Cook took over.

While Mac sales grew for years after Cook took charge, it too has started to stumble. Sales of the iconic computer have dropped on an annual basis for three straight quarters.

Now iPhone sales themselves are falling. The larger-screened iPhone 6 models, introduced in 2014, led to a big boom in sales. But the its successor, last year’s iPhone 6s, has been something of a bust. 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 flagship device. The company has sold some 13 million Apple Watches in its first year on the market, according to market research firm IDC. That’s a respectable number, but sales have reportedly been falling 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 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. Although we remember Jobs’ second reign as an unmitigated success, Apple struggled in the early 2000s before the iPod became a hit, as it contended with a national recession and making a difficult transition to an all-new version of the operating system underlying its Mac computers. 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 by on products and ideas generated by his predecessor. Sure, the company’s 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.

Those struggles may also underscore worries about what the next five years will bring.

Photo: Apple CEO Tim Cook at the company’s  annual developer conference in 2015. (Karl Mondon/Bay Area News Group)


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  • bmwguy

    More like Tim Crook

  • sd

    ^^^ Ha. There’s nothing like a completely unsupported drive-by to advance your argument…

    Going in, I don’t think anyone thought Cook was going to be the visionary Jobs was. In fairness, Jobs had his whiffs too — Apple TV preceded Cook as CEO and, the purchase of Beats aside, Apple pretty much entirely missed the iDevice accessory market (docks, powered speaker systems, etc.), with CarPlay being maybe the most winning integration yet from Apple.

    I think Cook also has to deal in a different tech environment than Jobs did. Apple is not alone in seeing new models of successful products get a cold shoulder. Talk to Samsung about the Galaxy 6 or LG and Sony about any phone at all. iPad sales may be sputtering, but most other manufacturers have no great stories to tell, either, and Apple still holds the vast majority of Internet commerce traffic via mobile devices and did so even before ApplePay was “a thing”.

    Trouble is, where hardware is concerned, many people are finding what they have “good enough” and they’re opting to spend their money on other technology products or on services. It wasn’t hard to sell the public on the advances made by the iPhone 4 over the 3GS; the new stuff in the 6s/6s Plus is not so earthshaking as to justify another $500-700 purchase over last year’s model.

    Maybe people should not be looking for some new breakthrough hardware category at all. Maybe services really is where it’s at for Apple. They’re catching up in streaming (though they’re still nowhere near #1). ApplePay appears to be doing well despite competing efforts by Google/Android, Samsung, Walmart, Chase, and others. Expanding into autonomous cars (or some profitable niche of that) could make people forget about Watches just as they forgot about the Apple iPod Hi-Fi.

  • The article you have shared here very good. This is really interesting information for me. Thanks for sharing!

  • Raza Ali

    In my point of view, both are the best professional in modern digital technology world. Apple gave a new horizon for a modern generation.

  • really wonderful work from him. Personally i love his character. However your article is more wonderful. http://kitknock.com/

  • Tim Cook is doing a fabulous job keeping the Apple brand alive and well. Clipsit.net