How Apple Could Fall From Grace
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) is by and large the gold standard of technology companies and has dominated the technology market for the majority of the new millennium. Apple stock underwent a meteoric rise from $10 to just over $405 in the last ten years. With the recent passing of CEO Steve Jobs recently, however, there is a lot of speculation about Apple’s future and whether the company can continue without the tech mogul guiding the ship’s sails. Will Tim Cook be able to take the reins and lead Apple forward in a continuation of Jobs’ legacy or will the company lack the pieces to compete with the emerging competition?
The first time Apple lost Steve Jobs was in 1985 when he was pushed out of the company. Moving forward without its founder was shown to be a critical error as the prominent technology giant fell into obscurity through the ‘90s. Jobs returned to Apple in 1997 when speculators predicted that the company was on its way to complete and utter failure. Steve Jobs proved just how valuable he was to Apple by not only restoring it to its former glory but moving well beyond anything the company had ever dreamed.
Some investors are concerned that history could repeat itself as they look back at the monumental failure of Apple after Jobs was forced out in 1985. Tim Cook has been named Jobs’ successor and has taken the reins in the past when Jobs struggled with health problems. In order to retain investor confidence, however, Cook needs to prove once and for all that he is capable of leading the company without having access to Jobs as a failsafe. Should Cook fail to win the confidence of investors, Apple will begin to decline steadily until Cook finds a way to prove himself.
The true test of Cook’s ingenuity and vision for Apple will come in the delivery of the company’s next creation and its acceptance by the world. Cook will need to take an idea from the drawing board and into production without the creative mind of Jobs behind him this time. Should he succeed, investors will have what they need in order to place their faith in him as Apple’s new head.
Apple’s fate doesn’t just hinge on the performance of Tim Cook though. If Cook were to lose any of his key players, it could cause investors to panic. This catalyst could present itself in the form of Jonathan Ive’s departure, which has been speculated in the past. Ive is the Senior Vice President of Industrial Design and credited with being as much of a component of Apple’s success as Jobs was, making him a very important piece of the puzzle that Apple cannot afford to lose. While no news has developed regarding Ive’s possible departure, it is a well-known fact that he has expressed a desire to return to the United Kingdom where he would like to send his son to school.
Whether or not Ive plans to leave the company is still unknown and in the realm of speculation, but he has fulfilled the terms of his prior contract, which bound him to the company into the beginning of 2011. No word has come of whether a new contract has been placed on the table or of any of Ive’s plans regarding Apple to date.
Yet another doomsday scenario for Apple rests in the current incursion between Apple and Google (NASDAQ: GOOG) over the smart phone market. Google’s linux-based Android smartphone has the opportunity to take a bite out of one of Apple’s key markets and send millions of users to Google, which has the power and resources to bring the fight to Apple. The company cannot afford to lose prominence in the smart phone market and while this scenario seems unlikely, we are reminded of Apple’s fortune when it is missing Jobs.
If you have a position in Apple, don’t panic. I would strongly suggest paying close attention to which players leave or join the company and the ability of Tim Cook to command operations. There are many possible outcomes in this transition and 2012 could prove to be an extremely pivotal year for the direction of the company.
At the first sign of trouble, I would seriously consider leaving my stake in Apple until the company proves that it can exist without Steve Jobs. Many investors remain unsure of whether to commit their faith in Cook and I don’t think that Cook is in the least unqualified to lead Apple into the future. I think what has investors most concerned is just the fact that history has a way of repeating.
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