Five reasons Apple needs Steve Jobs
Dylan McGrath and Rick Merritt
Apple CEO Steve Jobs is now on medical leave for the second time in 24 months, saying in a memo to Apple employees Monday (Jan. 17) that he would remain CEO and continue to be involved in major strategic decisions by the company. Jobs said he hopes to return as soon as he can, but provided no timetable.
The details of Jobs' medical condition have not been revealed. Jobs had a cancerous tumor removed from his pancreas in 2004 and underwent a liver transplant in 2009, when he also took a medical leave for six months. Some have speculated that Jobs' latest medical leave could mean that his body is rejecting the transplanted liver or that his cancer has returned.
Tim Cook, Apple's chief operating officer, will be responsible for Apple's day to day operations in Jobs' absence. Cook filled the same role when Jobs took leave in 2009—the earth continued to rotate and Apple continued to reap healthy profits. There is no reason to suggest it will be any different this time.
But, callous as it may seem, Jobs' health issues—and the uncertainty of his return—force Apple employees, investors and fans to confront the unthinkable: The possibility of Apple without Steve Jobs.
"Obviously Jobs is irreplaceable as the industry's innovator, but he has more pressing matters today than being CEO of [Apple], in our view," said Brian Marshall, an analyst at Gleacher & Co. "Running a $100 billion annual revenue company while being forced to take periodic medical leaves is not fair to anyone. Cook has performed flawlessly in the past as [Apple's] interim CEO and we expect he will become the full-time CEO of Apple this year with Jobs hopefully serving as a senior advisor."
"If for some reason Steve could not return, the most logical successor would be Tim," said Tim Bajarin, president of consulting firm Creative Strategies Inc. "You can't just bring somebody from another industry or another company into overseeing Apple as CEO and hope they will understand Apple's culture, Apple's mentality and Apple's way of doing things. They already tried that once."
Cook has long been considered Jobs' heir apparent. And while he has proven himself a capable and well-respected leader, Cook—along with nearly everyone else—has one major flaw: He is not Steve Jobs.
Fairly or not, no CEO in electronics is considered to be as critical to his or her company's fortunes as Jobs, who has hoisted Apple to the pinnacle of the high-tech world not once but twice. Apple commands a premium in part because of the aura around its returned founder who was there at the beginning of the PC industry and reinvigorated the company when it had lost its way.
Still, Bajarin argues that Apple would be in good hands with Cook and the rest of the company's deep management team—particularly in the short term. He noted that under Apple's corporate structure, the rest of the executives already report up through Cook.
"What Jobs has done over the past five years is assemble an amazing team of executives who are very strong and capable of directing Apple even if Steve was not there," he said. He added that Apple begins creating its products three to four years before they are put into the marketplace, meaning that Apple's products for 2011, 2012 and even part of 2013 "will have already been cast and had Steve's input."
Still, Jobs is one of a kind. In the event that Jobs' health issues prevent him from returning permanently, the company is likely to suffer in countless ways. Here are five of them:
The vision
Apple did not invent the personal computer, the MP3 player, the smartphone or the tablet computer. But, with Jobs at the helm, it dramatically redefined all of them with an emphasis on technology, industrial design and user experience.
Not to say that Jobs is the only smart person working at Apple. "I would argue that not only is this [Apple] team more than capable of understanding [Jobs'] vision, but Apple is by now a pretty well oiled machine," Bajarin said.
It's impossible to know whether the company could continue to set the bar in electronic products with someone else calling the shots. But what is well known is that Jobs has an extremely keen new product sense. One reason why Apple keeps many of its product launches under wraps is that no one knows what the company will run with until the last minute before an announcement, when Jobs picks the products he believes will win in the market.
Jobs also has ties to Hollywood and Silicon Valley that have enabled him to build a digital music business with iTunes (Apple is the leading music distributor in the U.S.) as well as secure deals with studios and publishers for content that makes the company's iPods, iPhones and iPads engaging. His keynotes are often attended by senior executives of content and chip partners that seem to venerate him almost as much as the buying public.
The drive
At Apple headquarters in Cupertino, Calif., Jobs drives a driven culture. Former employees report that the work ethic at Apple is so high that it's not unusual to see employees at their desks after midnight. Jobs' aggressive, hard-charging nature and demanding personality are the stuff of Silicon Valley lore.
"There is no question that Steve is an incredible motivator," Bajarin said. "But to be fair, the people at Apple seem to be motivated by somewhat of a higher cause—which is to create great products. Even if Steve wan't there as a cheerleader, these guys know what they are supposed to do. I just don't see that changing."
According to Bajarin, the keys to Jobs' success are his eye for design and the fact that he is a great technologist. He noted that Microsoft Corp. Founder Bill Gates alluded to this rare combination in an article published in the Wall Street Journal years ago. "Even though Jobs has [Apple Senior Vice President of Industrial Design] Jonathan Ive doing the heavy lifting, he clearly has a real idea of what it takes to make something not only look good but easy to use," Bajarin said. "That's very rare. I don't know of any other CEO in the tech world who has that combination."
The showmanship
These days, Jobs isn't the only tech CEO who steps up on stage before a captive audience to describe the cool new products and innovations that his company is bringing to market. But Jobs does it with more flair than the rest of them put together. Striding the stage in his trademark black turtle neck, holding Apple's latest invention, Jobs has the uncanny ability to make it seem like absolutely the coolest thing in the entire world. The consummate salesman, Jobs creates user demand with a few well chosen phrases. And he can whip up the Apple faithful like no one else—his keynotes and product introductions can feel like yuppie revival meetings.
Bajarin acknowledged that it would be impossible for anyone—including Cook—to replace Jobs in term of persona and flair. But he said that he was with Cook last week in New York when Apple and Verizon introduced the iPhone for the Verizon network and noted that Cook has a real stage presence. "I walked away from that thinking that this guy is much more in control of Apple than people think," Bajarin said.
The fan club
Apple has aptly been described as a cult with a stock ticker symbol. Apple enthusiasts are fanatical about being Apple enthusiasts. In addition to buying every new Apple gadget that hits the market, Apple Nation evangelizes them online and in the real world, packs Apple events and cheers Jobs' every word. Jobs is this group's unquestioned Supreme Leader, and there is reason to doubt that Apple fans would embrace Jobs' successor quite as warmly—especially at first. (That said, assuming that Apple continues to churn out innovations that change the world, the company's next CEO should be able to win this group over eventually.)
The stock price
Apple released the news of Jobs' leave on Martin Luther King Day, when U.S. stock markets were closed. But Apple's stock reportedly fell more than five percent in some foreign markets.
When U.S. markets opened Tuesday, Apple's stock promptly dropped by more than 6 percent before recovering to trade down 3.3 percent, or more than $11 per share, as of this posting (it has sense recovered further). Bottom line: Apple investors are squeamish about the possibility of a Jobs-less Apple.
Wall Street sees Jobs as Apple's golden guy. Apple's stock also tanked in December 2008 and January 2009 as rumors of Jobs' health concerns circulated and Apple announced his medical leave in mid-January. But by the time Jobs returned to work in late June of that year, Apple's stock had increased in value 90 percent from a mid-January low as Apple continued rolling along. (Of course, this rise and fall occurred following the financial meltdown of late 2008, when markets declined dramatically before beginning to recover as 2009 unfolded).
