Apple Is Still Apple Even without Steve Jobs

In my previous post, I expressed my concerns over Apple's (AAPL) innovation power in case that Steve Jobs won't return from his medical leave. From reading the comments on the article, I had the impression that some of the readers thought of me as a short of the Apple stock. Actually I am not. In the disclaimer, I stated that 'I am considering selling my AAPL shares', maybe the more accurate words would be 'reevaluating my positions'.

But is it even worth it to reevaluate? Under normal market conditions, sure we should look into the uncertainties introduced by Steve's leave. But we are in this unprecedented bear market and there are a lot of solid companies out there with a stock price at a bargain level. In other words, we have investment options that may bring in similar returns, but with lower risks, then why bother with AAPL? For me, I seriously considered switching my holdings of AAPL to Nike (NKE) (read the analysis of NKE here).

I admit it is the emotions that drove me to look deeper into Apple's situation - I don't feel ready to give up Apple and I like their products. I owned several versions of iPod, and I am managing my music library with iTunes. I am waiting for my Sprint (S) contract to expire in April to get rid of their crappy service, then I am going to buy an iPhone. There's a good chance that my year-end gift would be a Mac Book. So my starting point is like this, if Steve's leave is a big negative factor, are there any positive ones that would keep Apple on its old and glorious track? My answer is Yes, there are quite a few. Honestly, I was a little surprised by my conclusion.

1) This is a logical inference. Steve Jobs was at the helm of Apple for more than 10 years, had been continuously and aggressively driving Apple from one innovation to another. There has to be something got embedded into Apple's corporate culture and management system which should be somewhat self-sustainable even without the big man on the top. For example, Apple still retains the top-talented designer team that envisioned and sketched generations of their beloved gadgets; there should be some process that guarantees the original ideas and innovative efforts to receive proper attention and, some form of established routines to facilitate the interactions between the design team, the technical team and the management. I briefly touched this point in my last post, and, as an outsider of Apple company, I can't provide any proof. But again, I believe these are valid inferences.

2) Under Steve Jobs, Apple is a company with clear focuses. It has a very limited and straightforward product line, basically iPod, iPhone and Mac. IPod and iPhone share the same design concepts, and both leverage the capabilities of the Mac OS. This allows AAPL to pool its resources to develop winner products, while at the same time retain a relatively simple and agile organization structure, thus creating an innovation-friendly environment at the macro level. I'd like to say this is a strategy deliberately maintained by Apple. For example, it started accumulating cash since Steve Jobs took the office, and, for the time being, has around 30 billion cash in the pocket. It could have used it to expand into other territories, but it didn't. In other words, as long as Apple continues this strategy, maintains its focus and avoids impudent business moves, they should be able to keep their innovation power from endangered by unnecessary or unprepared market pressures.

3) This may be my most important finding. Through years of brilliant design and innovation, AAPL developed a certain form of 'Personal Attachment' between the customers and its products. This is rarely seen in the technology world. This solid and expanding 'Fan Base', to an extent, provides a buffer between the company and the external competition, thus offering Apple a very open and forgiving atmosphere and a very healthy mindset for innovation.

I always hear people say, 'Apple never competes in price', which I agree with; behind this simple statement actually lies its unmatchable brilliance. You may not agree with me that all of the gadgets that Apple manufactures are in nature commodities, but the fact is there are load of companies selling them at only a fraction of Apple's price tag. Simply put, Apple managed to differentiate itself from others by unique design in look and feel (hardware), providing different (better) user experience (software), clever marketing (those easily memorable commercials) and in the personal computer field, it actually benefits from Microsoft's monopoly position, which creates the appetite to look for alternatives. (one extra comment here, actually something interesting and bewildering to me.

I know that to be creative in software is at a more sophisticated level, but in hardware design, just the look and feel, for me it is virtually all about paying good money to find the talented personnel, I don't understand why there is no match with Apple even here. Or is it because I brain-washed by Apple's commercials? Apple's success created two far-reaching results: first, the popular cravings to its products, and second, it obtains the tight hold of its target customer - actually a group of people with relatively higher income. In return, the pressures that normally link to the commodity player are pretty much taken off Apple's shoulder, such as maintaining the market share, the thin margin, the excessive marketing efforts, and the timing (be the first few to rush the products into the market). As a result, you see today's Apple taking its time to be creative and elegant, which is a form of 'temperament' that I don't see with any other companies.

I'd like to say that only the greatest strategist is capable of leading Apple into this position, and no doubt, Steve Jobs is the one. My personal opinion is that this this is his greatest contribution as well as his most precious legacy. On the other hand, Steve's leave won't take Apple off this position, and more importantly, the company doesn't necessarily require a CEO as great as him to maintain this position. In summary, Apple is already there: a certain pattern between the innovation, the products and the market has been in place; even just relying on the momentum should be enough to keep it safe on the right track for several years.

One more comment to make, I don't sense anything revolutionary in Mr. Cook; instead, he was regarded as a 'business operation maestro'. I view this as a big positive. After all, what we need for Apple is not an unproven innovator, but rather an executor that is well qualified to continue Steve's path.

4) Apple already reached the end of its innovation. I know it is a bold statement, but think about it: the way Apple makes a digital music player is the way it makes a iPod Touch, the way it makes a wireless phone is the way it makes an iPhone, and the way it makes a personal computer is the way it makes a Mac Book. Do you think anybody, or any company (including Apple itself), is capable of topping that? Another perspective, once you hold your own iPod touch or iPhone in your hand, do you think it is even necessary for any companies to come up with anything that is 'better'?

Let's take the controversy away and make some realistic points. Innovation comes at two different levels, the concept level and the implementation level. Using Microsoft (MSFT) as the example - it completed the innovation at the concept level in 1980s and 1990s with the introduction of the initial generations of Windows Operation System, and since then, the innovation is mostly at the implementation level, including architecture redesign, adding more functions, features, etc. Obviously, it requires a prophet type of person on the top during the concept stage. For MSFT, Bill Gates is the one. But once the company stepped into the second stage of innovation, he is not that critical anymore. For Apple, it already completed the innovation at the concept level for all three fields it plays in. What Steve Jobs accomplished is not just a few versions of MP3 player/wireless phone/computer, but a concept/package/platform of how these gadgets should be built. Without Steve Jobs, Apple is not today's Apple, but in this implementation stage, Tim Cook should do OK.

With all these said, I'd like to say the impact of Steve's leave is somewhat exaggerated. The great CEO already lifted Apple to one level where the company is self-sustainable. We all know that eventually he will leave, then is it really bad if it is now? For me, his mission is completed, excellently completed, and I'd like to see how his successors will continue. Steve left the legacy which may turn Apple into an all-time greatest company, and if the new management team holds it well, AAPL might simply become a stock of a life-time.

Disclosure: I am holding a long position in AAPL

Comments

[typopolice:]

good lord...

Mar 23 11:19 AM

[Johnnymack:]

No matter what happens to Jobs, he already did a LOT of work and make changes that will endure. Therefore, I AM certain of the following issues about Apple:
- Apple will not get back into the laser printer and CRT business Steve got them out of.
- Apple will not close down the sales of music, videos, and apps from iTMS because "people can get music free from limewire, etc"
-Apple will not go back to Power PC processors
-Apple will not go back to OS9.
-Apple will not bring back SCSI, or ADB ports, or floppies

Mar 23 11:34 AM

[sglaney:]

I think that this topic is a dead horse...

Mar 23 11:48 AM

[User 381345:]

Steve Jobs may not be sick after all. Perhaps he is holed up in a secret location working on the next breakthrough product. Instead of hiding under a Jolly Roger flag he may be hiding under a the guise of sickness. This aside, Apple has Jobs DNA and will thrive beyond him.

Mar 23 11:58 AM

[jemminie cr...:]

I don't think any one person is that indispensable. Apple will be fine without Steve Jobs. The company is replete with awesome talent and that will continue. Anyone who thinks Apple is finished innovating is in my opinion not thinking clearly. When the market does come back to some normalcy, Apple will be on of the big leaders and winners. How many companys out there have billions of dollars in the bank? They are well positioned to lead out as never before. I'll keep my money on Apple thank you.

Mar 23 12:19 PM

[Alex Filonov:]

I wish you were right. Unfortunately, last time Jobs left Apple (1985), it was a total disaster. Not immediately, eventually. There is a chance that the same thing can happen again.

Mar 23 12:25 PM

[RattyUK:]

@Alex

Hmmm you are doing math on completely the wrong thing.

Last time Steve Jobs left Apple was because he was ousted by a board who thought they knew the business better than he did - they thought that they could keep going on the way they did - remember the slogan "Apple II forever"? They HATED the fact that the Mac stole the thunder from the Lisa and were pissed at him giving money to Ridley Scott for an ad that only ever aired once.

So the bean counters threw him out and started to release a bunch of ho hum products that even they couldn't keep track of but were essentially the same.

I don't THINK that Steve is exclusively responsible for the product Apple releases in fact I am certain. Steve IS however responsible for the focus that each product gets. I think people misunderstand how and why this is important. Suffice to say that after nearly 10 years the R&D dept. at Apple now gets this. It is inbuilt, ingrained, and will probably continue that way for years.

Mar 23 12:56 PM

[iphonerulez:]

People keep talking about Steve Jobs as though he was dead. Even if he stepped down as the head of Apple and remained relatively healthy, couldn't he still become a part-time consultant or something.

Mar 23 01:04 PM

[despicable:]

Unless you use their products and are at least a little tech-savvy, you have no idea just how far ahead Apple really is. Steve Jobs is funding my retirement, dead or alive. No way I'd consider selling AAPL now. I'd buy more if I could.

Mar 23 02:04 PM

[GSlusher:]

One difference is that, in 1985, Jobs was FORCED out--fired, in essence. Another is that, with that experience, it's unlikely that Apple's management will repeat those mistakes. Yet another is that the upper management team at Apple was essentially all hired by Jobs: those who were involved with the "Jobs-less" period are essentially gone.


On Mar 23 12:25 PM Alex Filonov wrote:

> I wish you were right. Unfortunately, last time Jobs left Apple (1985),
> it was a total disaster. Not immediately, eventually. There is a
> chance that the same thing can happen again.

Mar 23 03:04 PM

[neutrino23:]

As was pointed out above, Apple (and other companies) run into trouble when managed by accountants and lawyers. Good people with useful functions but running a company like Apple you need someone to keep pushing the boundaries without getting distracted.

Mar 23 11:07 PM

[Jon T:]

Ha ha! There was a Victorian gentleman who declared that 'everything that could be invented had been invented'.

Has Apple already reached the end of its innovation? Almost certainly not - in fact it's probably only just getting into it's stride. As of today they have a much better idea of what you will want in 3 years time than you do...

Mar 24 09:14 AM

[tommylee:]

What everyone seems to forget is that when Jobs was ousted, he created Next, which was his vision for Apple if he hadn't been ousted by bloodsuckers and bean counters. If Jobs had been given the chance then (1986) to introduce Next but on an Apple platform... think of the size and innovation platform Apple would have been today.

When Jobs was "begged" back into Apple he brought Next on board and with it the team that had been developing Next since 1986. Now fast forward to 2001/2002. Next could not yet be implemented since the technical step was too great so the aesthetics was first on the list the intro of the first "i-Mac". Jobs knew he had to get back the enthusiasm of the youth, back into the schools and he could only do that by creating a form and color scheme that would make the Mac again a Mac and not look like a PC. Basically a new version of the 1984 Mac (the all-in-one-machine) that made the Mac popular in the first place.

This was the turn-around point to prove that his vision in 1984 was correct. But Steve is much more than a brilliant "designer" and culture creator. He understood that in 1994-5 when the World Wide Web became common place it would forever change the landscape of doing business. He realized the impact and he also realized that brick-and-mortar business was in serious trouble. No other company put as much effort into taking the marketplace as serious as Jobs did. He forsaw the demise of the music industry due to the Internet possibilities as well as the demise of the "blockbusters" of the world, but he could not execute his vision due to infrastructural limitation but he also forsaw that they would not last. Hence the introduction of a media player (i-Pod) with a delivery system (iTunes) that he could "sell" to a dying music industry.

All the while working on incorporating the Next architecture into the most prestigious leap in technology innovation the PC world has ever seen with the release of OSX. He also realized that the PowerPC was not the (power)horse to bet on to deliver the speed required to satisfy the Multimedia requirements of the future to deliver music and video content but in preparation had to create a media standard so superior that it would find adoption not only in the Mac world but also the Windows World (H.263 and followed by H.264) Quicktime.

Thereafter it was the coupe d'etat that Apple pulled-off to convert a whole operating system running on the PowerPC structure to the Intel structure while using the "Internet Language Protocol" (Unix) as the base foundation to built upon. Simply brilliant, but very logical.

Further the explosive growth of the Mobile Market was foreseen and as such he knew that the "content delivery" of entertainment, news and data had to be mobile. Hence building on technology that is light years ahead of a "sleeping and talking about but not doing anything" competition, he ventured very well thought out into the mobile market with the iPhone while unlocking "mobile computing" for the masses.

I'm not saying that Steve Jobs knew this global financial collapse was coming, but all actions indicate he most certainly expected it, thus hording profits to build up a cashflow position, while putting in place that what people want that the internet cannot convey: The touch and feel by opening hundreds of Mac stores and launching the only three completely synchronized working on one and the same platform "gadgets" people would need to be completely independent in their communication needs, entertainment needs and professional needs: A superior Mac line with the crowning jewel the MacBook Pro for the serious computing needs, A music headset that soon will fit in your ears without any external devise attached and a mobile computing platform (iPhone) that is running on steroids.

Jobs also knew that Apple had to create its own browser, Safari, and that it had to be a cross browser (Mac and Windows) if any real traction was to come from it and to be completely independent from any 3rd party. Next up... the next brilliant move was to in first instance deny immediate Application development for the iPhone until they had all kinks worked out, while in the darkness of day, preparing for application developers a platform to sell their "wares". The App store was born and no other "online selling mechanism comes close to its brilliancy with the exception of iTunes.

Absolutely brilliant. The circle is closed with enough cash in the bank to silently brood on new implementations to stay ahead of any competition that is so scatter brained that they can only react with "half-ass" products that have no congruence what so ever and hold true to Ceasar's "divide and conquer" strategy, running blindly after bits and pieces to compete with on the Apple Inc. platform.

Make the man President of the United States and the country will be back on track in no time since there is no-one with such a vision in the landscape of corporate America that could even hold his ever present bottle of water.

And by the way, this vision does die the moment the CEO takes a medical or otherwise leave.

Mar 24 10:26 AM

[Techtrader10:]

I agree with Jon T on the point about the gentleman that declared "everything that could be invented has been invented". And I'm sure Apple is going forward with new and innovative items. A company is like a symphony orchestra and needs a leader to keep the great musicians within the orchestra working together. That was, what Steve Jobs did best. He acted as the strong willed leader that kept all the creative types working together. As someone else pointed out, it took time for Apple to loose its way the last time Mr. Jobs left, it will take time for it to happen again. One thing to be sure of, is that as long as the return of Steve Jobs hangs over the heads of the potential leaders of Apple, no one will take the leap to grasp control. It takes a certain type of "corporate person" to work under as strong personality like Jobs and still be able to function, and that person does not have the personality of a leader. You can see the lack of design leadership with the new iPod that has controls on the wire, this was tried and shown to be a bad concept in the past, yet here it is again. As those of you know it limits the ear plugs you can use, to the ones supplied because of the control. If you have a favorite set of plugs or find the Apple plugs uncomfortable, you are less likely to buy this unit. You are also less likely to buy the unit if you owned one of the earlier units with controls on the wire as they did not work well. These are little things however, the success or failure of a product and also the company is in the details.

Mar 24 10:30 AM

[tommylee:]

Sorry, slip of the pen:

"And by the way, this vision does die the moment the CEO takes a medical or otherwise leave."

Does NOT die the moment the CEO takes a medical....

Mar 24 10:42 AM

[optionsgirl:]

Safari could use some improvement. You still have to buy microsoft windows to run some financial programs on a MAC.


On Mar 24 10:26 AM tommylee wrote:

> What everyone seems to forget is that when Jobs was ousted, he created
> Next, which was his vision for Apple if he hadn't been ousted by
> bloodsuckers and bean counters. If Jobs had been given the chance
> then (1986) to introduce Next but on an Apple platform... think of
> the size and innovation platform Apple would have been today.
>
> When Jobs was "begged" back into Apple he brought Next on board and
> with it the team that had been developing Next since 1986. Now fast
> forward to 2001/2002. Next could not yet be implemented since the
> technical step was too great so the aesthetics was first on the list
> the intro of the first "i-Mac". Jobs knew he had to get back the
> enthusiasm of the youth, back into the schools and he could only
> do that by creating a form and color scheme that would make the Mac
> again a Mac and not look like a PC. Basically a new version of the
> 1984 Mac (the all-in-one-machine) that made the Mac popular in the
> first place.
>
> This was the turn-around point to prove that his vision in 1984 was
> correct. But Steve is much more than a brilliant "designer" and culture
> creator. He understood that in 1994-5 when the World Wide Web became
> common place it would forever change the landscape of doing business.
> He realized the impact and he also realized that brick-and-mortar
> business was in serious trouble. No other company put as much effort
> into taking the marketplace as serious as Jobs did. He forsaw the
> demise of the music industry due to the Internet possibilities as
> well as the demise of the "blockbusters" of the world, but he could
> not execute his vision due to infrastructural limitation but he also
> forsaw that they would not last. Hence the introduction of a media
> player (i-Pod) with a delivery system (iTunes) that he could "sell"
> to a dying music industry.
>
> All the while working on incorporating the Next architecture into
> the most prestigious leap in technology innovation the PC world has
> ever seen with the release of OSX. He also realized that the PowerPC
> was not the (power)horse to bet on to deliver the speed required
> to satisfy the Multimedia requirements of the future to deliver music
> and video content but in preparation had to create a media standard
> so superior that it would find adoption not only in the Mac world
> but also the Windows World (H.263 and followed by H.264) Quicktime.
>
>
> Thereafter it was the coupe d'etat that Apple pulled-off to convert
> a whole operating system running on the PowerPC structure to the
> Intel structure while using the "Internet Language Protocol" (Unix)
> as the base foundation to built upon. Simply brilliant, but very
> logical.
>
> Further the explosive growth of the Mobile Market was foreseen and
> as such he knew that the "content delivery" of entertainment, news
> and data had to be mobile. Hence building on technology that is light
> years ahead of a "sleeping and talking about but not doing anything"
> competition, he ventured very well thought out into the mobile market
> with the iPhone while unlocking "mobile computing" for the masses.
>
>
> I'm not saying that Steve Jobs knew this global financial collapse
> was coming, but all actions indicate he most certainly expected it,
> thus hording profits to build up a cashflow position, while putting
> in place that what people want that the internet cannot convey: The
> touch and feel by opening hundreds of Mac stores and launching the
> only three completely synchronized working on one and the same platform
> "gadgets" people would need to be completely independent in their
> communication needs, entertainment needs and professional needs:
> A superior Mac line with the crowning jewel the MacBook Pro for the
> serious computing needs, A music headset that soon will fit in your
> ears without any external devise attached and a mobile computing
> platform (iPhone) that is running on steroids.
>
> Jobs also knew that Apple had to create its own browser, Safari,
> and that it had to be a cross browser (Mac and Windows) if any real
> traction was to come from it and to be completely independent from
> any 3rd party. Next up... the next brilliant move was to in first
> instance deny immediate Application development for the iPhone until
> they had all kinks worked out, while in the darkness of day, preparing
> for application developers a platform to sell their "wares". The
> App store was born and no other "online selling mechanism comes close
> to its brilliancy with the exception of iTunes.
>
> Absolutely brilliant. The circle is closed with enough cash in the
> bank to silently brood on new implementations to stay ahead of any
> competition that is so scatter brained that they can only react with
> "half-ass" products that have no congruence what so ever and hold
> true to Ceasar's "divide and conquer" strategy, running blindly after
> bits and pieces to compete with on the Apple Inc. platform.
>
> Make the man President of the United States and the country will
> be back on track in no time since there is no-one with such a vision
> in the landscape of corporate America that could even hold his ever
> present bottle of water.
>
> And by the way, this vision does die the moment the CEO takes a medical
> or otherwise leave.

Mar 24 01:03 PM

[tommylee:]

You miss the point.... I'm not stating that windows is obsolete, I'm stating that Job's vision is far more advanced than you and I thought 8 years ago since this transition didn't come about in "let's create the ultimate user package" and execute it in a year's time. And you mean "financial programs that has not yet been ported because those are the ones you are used to", right?

Your comment only strengthens the point of miserable failures windows ME, IE6, IE7 and IE8 and Vista's failure.... and are in the same expectation boat as the Wallstreet analysts that Microsoft must have something up their sleeve. Well, so far I'm not impressed since it is still all loose sand and any congruence is missing from the menu.

Hey, i'm not trying to convert anyone. I'm simply stating that you should give credit where credit is due i.s.o. knocking the most innovative US company that has its ducks in a row that you still be proud of....


On Mar 24 01:03 PM optionsgirl wrote:

> Safari could use some improvement. You still have to buy microsoft
> windows to run some financial programs on a MAC.

Mar 24 09:01 PM

[dan7777:]

Good observations, and I agree with you, but i think you may have missed one point and innovation that has and will continue to pay great dividends for Apple.
The retail stores are neither hardware or software but they have helped to grow market share for everything Apple has to offer. They also do a lot to help maintain a superior customer service mentality.

Mar 25 04:46 AM

[tommylee:]

That is my point. Apple is a company that will continue to grow because of the "roadmap" and as such should be put on your "must own" list. I simply can't stand analysts questioning why the iPhone should fear Nokia, Ericson or Samsung, LG or Blackberry. People they are PHONES with some half ass implemented add-on features that most people don't even use because it is too difficult to figure out. They're Not. Read the statistics on the average time spend on an iPhone vs. any other "smartphone". The percentages are simply stunning. Now, translate that to "consumerism" because that is we all want to happen, that people "consume" than there you have it. Apple Inc. inspires consuming. Isn't that what we are all longing for... that people spend their money...????


On Mar 25 04:46 AM dan7777 wrote:

> Good observations, and I agree with you, but i think you may have
> missed one point and innovation that has and will continue to pay
> great dividends for Apple.
> The retail stores are neither hardware or software but they have
> helped to grow market share for everything Apple has to offer. They
> also do a lot to help maintain a superior customer service mentality.

Mar 25 06:14 AM

[Grawlix:]

So, why did you edit out my comments on your original post? They were up for a day, now gone. They contained no coarse language or personal attacks. Just a vigorous rebuttal of your arguments.

Since when did Seeking Alpha decide upon censorship of contrary views?

Regards,
%$#@!

Mar 30 05:43 AM