CEO Concerns at Apple and Microsoft Illustrate the Need for Succession Plans

I was shocked to see how thin and gaunt Steve Jobs looked at the recent meeting in which he revealed the wonderful details about the upcoming release of the 3G iPhone.

Rumors have been swirling about the possibility that the cancer that Jobs was diagnosed with in 2004 might have returned. Apple (AAPL) needs to make a clarifying announcement soon for the sake of nervous shareholders. The recent decline in AAPL shares due to worries about Jobs' health, has illustrated the fact that there is a crying need for an open succession plan. Although, an argument could be made that at Berkshire Hathaway (BRK.A), the shareholders are still happy, despite the fact that there is no succession plan for Warren Buffett.

My belief is that at the very least AAPL should assure shareholders that a valid succession plan has been created, even if the company doesn't reveal the details. For most of us, it is hard to conceive of Apple without the leadership of Jobs, and the history of the company bears that out.

Another company in CEO trouble is Microsoft (MSFT). As far as I'm concerned, Steve Ballmer’s credibility is in trouble. Even though the Yahoo (YHOO) deal fell through, it would have been an expensive deal if Yahoo hadn't balked at it. Many of us question whether the expenditure would have been worth it.

Now that MSFT is on the outside looking in, Yahoo has cozied up to Google (GOOG) to leave Microsoft further in the dust as Google grows stronger and more popular.

According to a recent report by the Associated Press,

What began in January as Microsoft's most audacious attack yet on Google instead paved the way for the Internet's most powerful company to gain even more clout through a deal that gives Google access to a large chunk of Yahoo's advertising space.

According to industry analysts, by submitting to a partnership that endorses Google's search advertising technology as a better choice than its own, that Yahoo is giving online marketers even more incentive to spend most of their money on its biggest rival.

It looks like such a sweet deal for Google that the U.S. Justice Department and lawmakers are expected to take a hard look at the arrangement to make sure it doesn't give Google too much control over the Internet's search advertising market.

Google currently has about 75 percent of the U.S. search advertising market followed by Yahoo at 9 percent, according to the research firm eMarketer Inc.

Although they contend their alliance won't lessen competition, Google and Yahoo have agreed to wait until late September to begin working together so the U.S. government has more time to assess the potential impact.

Even more importantly to Google, the Yahoo partnership keeps a potentially valuable weapon out of Microsoft's control. Without Yahoo's renowned franchise, Microsoft once again is scrambling to find a way to fix its unprofitable online operations and narrow Google's commanding lead in the Internet's rapidly growing ad market.

This is one of many reasons why I think there is a need for new leadership at MSFT. Steve Ballmer has guided MSFT to a reputation of mediocrity as a corporation that has lost its technological advantage and doesn't know how to use its wealth to stay competitive.

Bill Gates and the board of Microsoft need to wake up and the shareholders need to speak up. Mr. Ballmer should at the very least figure out how to inspire the confidence of shareholders like a Warren Buffett or a Steve Jobs.

If the CEO can't inspire a sense of purpose and competent leadership, he needs to be replaced as quickly as possible with a leader who has a vision to use this powerful franchise as a viable tool to stay up with the Googles and the Apples of the world.

Just looking at the recent history of MSFT share price movement, one can easily see that there is a great disparity between their share- price and their technological potential. Where is the great business sense and acumen that used to create a sense of awe and motivation?

Mr. Jobs should recover and stay well. However, the AAPL board should formulate, and publicly release a succession plan - just in case.

As for Steve Ballmer, maybe it's time to "fish or cut bait." If he can't stand up before shareholders and tell us how MSFT can grow its business and blow away the competition (let alone catch up) then maybe it is time for him to try his hand at something else.

Disclosure: Long AAPL

Comments

[Igneous]

Perhaps a change of venue is in order for a couple of CEO's who over the past few years have been negatively affecting my returns......Ballmer and Immelt.

[wallawallabingbang]

Scumbag. You are perpetuating BS.

[2bitRick]

I was shocked to see how bald and droopy eyed Marc Courtenay looked at the recent blog posting. Rumors have been swirling about the possibility that the loss of hair is a sign of much more serious health concerns.
It has been said that the continued loss of hair has effected Marc's ability to discern between FUD and fact. The Seeking Alpha community expresses their wishes for a speed recovery.

[jmmx]

What does thestreet.com have against Apple?
.
You really have to question their motivation when they continually repeat their stupid video "Apple users are snobs" I mean - this is really getting to be offensive!!

They recycle the exact same story day after day after day. Why? Why? Why?
.
This certainly is NOT journalism. They clearly have some motivation other than sound stock advice. Any reasonable person will say that he has some axe to grind.

Now I am a reasonable person and quite open to other opinions. I first saw this video several months ago and found it interesting. But as it repeats almost every day I have come to find it offensive and it really appears to be some kind of smear campaign. I mean, why else would they repeat it continually?
.
They clearly MUST have something going here. They have lost all credibility with me. I mean - their leader ADMITS to having manipulated markets. How can you trust anything he says.

Give them your thoughts here:

Investor Relations
Manager, Investor Relations
14 Wall Street 15th Floor
New York, 10005
Phone: [phone]
Fax: [phone]
E-mail: [e-mail]

[Tom B]

"Perhaps a change of venue is in order for a couple of CEO's who over the past few years have been negatively affecting my returns......Ballmer and Immelt."

Key difference: I think Immelt is better than Welch and will succeed over time. Same can't be said about Ballmer. Although Ballmer is CLEARLY a worthless loser, he also has a near impossible task. Apple has awaked from its decade-long slumber and has GREATLY improved its already superior franchise (OS X, iPod, iPhone, XCode, Final Cut). MSFT has sat on their hands (Zune, XBox, Vista)..

I hope Jobs is healthy. He looks a bit thin, but is heftier than most supermodels, to be sure.

[wallawallabingbang]

thestreet (Cramer et al) is a known fomentor of unfounded rumors designed to damage stock shareprice - Apple in particular.

SeekingAlpha is in the same league.

Cramer should, by all rights, be in a federal penitentiary.

[Tom B]

"Cramer should, by all rights, be in a federal penitentiary."

Come on-- leave some room for the more deserving-- the Bush administration.

[bck136]

The future of MSFT is going to be turbulent at best. Ballmer may be hopeless, though it's not entirely his own fault. It was only a matter of time until they found themselves in this position given their dependence on Windows and Office.

For the longest time MSFT exploited the commoditization of their products through strict licensing and high per-PC license prices, and now that those days are coming to a close their inability to truly innovate is coming to light. Vista is a bloated and unstable OS which was clearly pushed to market too early, their Xbox brand has been saddled with poor hardware quality and customer service issues from the beginning (in addition to the connectivity problems people have been experiencing on Xbox Live), their attempts to gain an online presence with Live.com and then the Yahoo! takeover bid have BOTH failed, and many institutions are reluctant to upgrade to Office 07 in an effort to stave off high training costs and lost productivity from workers who won't know how to use it. Just look at how thriving the market is for third party plug ins designed to make Office 07 more accessible...

Add to that AAPL's gain in momentum (with many people actually rallying behind the company, as if it is some sort of social movement), the number of home users who are sticking with XP and Office 03, and a growing number of dissatisfied Vista owners (many of whom spent large amounts of money for the privilege) - and you have a pretty clear case for a serious crash in MSFT's share price in the next several years.

Also, I firmly believe the open source community is going to give MSFT's price models a huge kick in the face in the fairly near term. If the Linux community can ever adopt a single standard, throwing all of their support behind it, Windows will lose its dominance in very short order.

I owned stock in MSFT up until last fall. I do not regret selling, and don't believe I ever will.

[tom1234]

was there not a release from aapl that jobs has a bug like a cold ---i know there is a bug going around like a cold that is difficult to chase and lingers for weeks ---i hope jobs enjoys his trip to austrailia when he opens up his new store(s)--that aside did cramer forget walt disney who like steve jobs was the some total of his company until W.D passed and then the WD stock really took off because of less risk taken by its founder

[vassar]

Pancreatic cancer is very malignant. If it were to have recurred, Jobs would have been dead long ago.

[jimocarroll]

The guy is a vegan, for cripe's sake. He eats grass.

This article goes on like it was "Weekend at Bernie's" or something. I expect to see this kind of stuff at the checkout counter, not on SA.

[MuddlingInvestor]

Problem with Jobs: you can't replace him. He is the genius who makes Apple tick. I agree with Jim Cramer on that: without Jobs, there is no Apple.
Problem with this article: there are irreplaceable people. You can't have succession plan to replace such people. Jack Welsh was such at GE, I don't see how anybody else can make that monster work. Buffet/Munger is a two-headed genius at Berkshire, impossible to replace.