Tim Cook at 5 years: More profits, less innovation
LOS ANGELES — It’s been five years since Tim Cook took over as Apple CEO from a gravely ill Steve Jobs. His report card is a contradiction of Apple's still-impressive financial strength with signs innovation has slowed.
Since Cook was named CEO on Aug. 24, 2011, Apple's stock price and revenue have doubled. Its net income has surged 84%. Apple is still the largest company, by market value, in the world.
The half-decade of gains have been clouded by more recent worries. Apple reported its first quarterly sales drop in over a decade, followed by another, as the iPhone sales engine finally sputtered.
With no new must-have product, investors torpedoed the stock that once knew only one, nose-bleed direction. The stock (AAPL) has lost about a fifth of its market value since an April 2015 high.
The Apple of the Jobs era — brash, innovative and uber cool — is now a different place. Under Cook, it’s bigger, more profitable, cautious and more prone to update older products minimally than introduce new cultural hits.
The comparisons with Jobs, Cook's friend and mentor, were destined to be tough. Apple was on quite a roll during the last years of Jobs’ life, with the iPhone introduction in 2007, App Store in 2008, 27-inch iMac all-in-one computers in 2009, and iPad in 2010.
Cook has had different challenges, and he's carved a different tack. He’s managing a significantly larger company and transitioning it from one dependent on hardware to one delving in services, artificial intelligence, TV and, probably, cars.
“Cook better manages the operations of the company while Jobs innovated,” says Angelo Zino, senior analyst at S&P Global Market Intelligence. He pointed to Cook’s decision to go with a larger screen for the popular iPhone 6, something Jobs opposed. “It was a phenomenal product. They finally decided to change with the times, and it paid off well.”
As Apple Watch evolves, it, too, will bolster sales before Apple eventually makes the transition to an expected car project and TV-guide-like service, Zino says. “Apple has clearly entered a mature phase behind Cook,” he says.
Where Jobs was focused on product, product, product, Cook has been more issues based — championing gay rights and engendering broad tech support in its fight against the government over encryption.
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He's also shown a willingness to partner with companies such as Didi, a leading ride-hailing service in China, and expanding and refining Apple’s supply chain for some 600 million to 800 million customers, says Carolina Milanesi, an analyst at market researcher Creative Strategies.
“It’s a very different style from Jobs — Tim is much more down to Earth, approachable,” Milanesi says. “Even in his tweets, about current events like the Oscars, he shows a personal interest in events and more than just being a PR machine.”
Innovation lagging?
But under Cook's rule, Apple has fallen behind Google, Facebook and Amazon in releasing cool new products the past three years. Its rivals have been luring engineers and carving out a view of the future with virtual reality apps, 360-degree video viewing, driverless cars and a connected speaker that controls your smart home. Constant rival Samsung has been upping the competition with features such as water resistance.
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Instead, Apple seems stuck in a phase of iteration — thinner, bigger, faster, better-performing iPhones and iPads and just one all-new product, the Apple Watch, in 2014. About 13 million watches were shipped in the first 12 months, according to market tracker IDC. Respectable, but not a mass market product like iPhone, whose shipments totaled 1 billion in nine years.
Cook also introduced Apple Pay in 2014, a payment system for iPhone instead of credit cards. Apple Pay won rave reviews, but its adoption rate is small.
Computer innovation has lagged, too. The top-of-the-line Mac Pro hasn’t been updated since 2013, and Oculus Rift, the virtual reality gaming system owned by Facebook, is only available on Windows computers.
Cook’s expertise has been getting Apple's high-margin hardware into stores quickly to meet intense demand. But consumers, unfazed by minor upgrades, are holding onto their phones longer. That's expected to be a drag for another half year. Apple's iPhone sales are expected to decline in the September and December quarters, according to S&P. Apple shipped 40 million iPhones in its June quarter.
He has also done a masterful job of beefing up a category that was teeny during Jobs’ era. The services division, which includes iTunes, Apple Music, the App Store and iCloud, rang up nearly $6 billion worth of software purchases in the most recent quarter. Services is now No. 2 to iPhone in terms of revenue for Apple, and could grow much larger in the coming years as more consumers ditch physical products for on-demand entertainment.
As for future, gee-whiz products, many eagerly await the much-reported car project and an AI-powered Siri.
And iPhone? Analysts expect a major reboot of the iPhone next year, the device's 10th anniversary.
As Cook celebrates his 5-year anniversary as CEO Wednesday, he has bigger revenues and profits to show for his stewardship. But amid declining iPhone sales, and with rivals breathing down Apple's neck, Cook's next five years are going to be a lot tougher.
Follow Jon Swartz @jswartz and Jefferson Graham @jeffersongraham