I suspect that this article will not be very popular with Apple (AAPL) fanatics but I feel it is time to highlight some of the differences between the management capabilities of Tim Cook and Steve Jobs. The differences are striking, and will likely lead to an eventual crumbling of Apple's pie.
Simply put, vision was Steve Jobs' secret to success. His talent didn't lie with inventions as most of Apple's products were not original. Steve Jobs didn't invent Windows, nor did he invent hand-held devices, music players or smart phones. But he did come out with the right products, the right design, at the right time. He demonstrated an uncanny sense of what consumers would buy.
His success was not achieved through market research, but instinct. In fact he once stated that "It's not the consumers' job to know what they want." I remember back in 2007 when the original iPhone announcement came out. At the time I worked with several engineers and every one of them without exception thought that the iPhone was a crazy idea that would never succeed. Little did they know how right Steve Jobs' vision really was.
With Tim Cook at the helm, a new but not necessarily improved Apple has emerged. Apple is no longer providing the market-dominating vision and leadership it once did. Instead of flying higher and faster as investors are accustomed to, Apple is instead embroiled in patent wars. What innovations is Apple bringing to the table? The recent iPhone 5 release included the much desired LTE, but this is simple catch-up with other Smart Phone manufacturers. Other initiatives such as Siri and Apple Maps have been a flop, acknowledged by the recent departure of senior vice president Scott Forstall. In all fairness, both Siri and Maps were acquired under Steve Job's watch, but it is doubtful that he would have allowed such immature technologies to be pushed out the door.
Planning and Execution
The importance of planning regular product releases and on-time product delivery cannot be understated. Revenues depend on both of these factors. With no product updates, sales tend to stagnate over time. Product updates generate renewed customer interest and a flurry of sales.
When customers anticipate a product update they generally hold off on purchasing that item, and old stock sits in warehouses.
Steve Jobs apparently understood the importance of planning and execution as there were regular product releases across the product lines each year. But under Tim Cook, the same cannot be said.
|Product||Release Date (Steve Jobs)||Release Date (Tim Cook)|
As can be seen from the above table, product releases occurred like clockwork when Steve Jobs was in charge. Also of note was that product releases were spread throughout the year. For example, the iPod release always occurred in the fall (September), iPhone in the summer (June/July) and iPad in the spring (March/April).
In contrast, with Tim Cook leading the company, product releases have been sliding and seem to be stumbling out the door. The iPhone 4S didn't occur in June as would normally be the case. The product announcement came on October 4 2011, one day before Steve Jobs' passing. The iPhone 5 was released in September 2012 but was beset by manufacturing and parts supply issues, resulting in a shortage of iPhones. The iPhone 5 came with Apple Maps has been a complete flop with Tim Cook finding it necessary to write an apology to Apple customers.
The iPad 3 was released in March 2012 but has quickly been cancelled, to be replaced by the iPad 4 in November. The iPod Nana and Touch didn't have a product release at all in 2011. This could be overlooked due to the passing of the torch from Steve Jobs to Tim Cook. But an opportunity to generate new interest in these products was certainly missed.
Another observation I would like to make here is that product releases now seem to all be occurring in the fall. For example, the most recent iPod Touch release was October 15th, iPhone 5 was released September 21st, and the next iPad release is expected November 2nd. I wonder if this is an attempt to generate Christmas sales or simply that development schedules have caused this to occur.
It seems to me that it is a mistake to release all product updates at the same time. It must be a huge strain on resources, management and supply of common components. In addition, customers only have so many dollars to go around at Christmas time.
Let's face it. Apple has fans willing to line up around the block camped out all night to buy Apple products sight unseen, at a very high profit margin for Apple. There are very few if any other companies that can claim such loyal customers. To sustain the high profit margins, Apple needs to maintain the good will that Apple has cultivated over the years. Otherwise, Apple products will simply become commodities with intense competition and little profit.
In order to do so, Apple needs to continue to offer not only visionary products, but products that live up to their promise and have few bugs that are addressed quickly. Some areas of recent letdown have been:
- misleading customers about the capabilities of Siri, resulting in a class action lawsuit;
- complaints regarding Apple's Maps including no public transportation component, requirements for third party developers and missing geographical features such as "Canada";
- downgrade of free iCloud storage from 20 GB to 5GB, resulting in a class action lawsuit;
- battery not living up to Apple's claims;
- older accessories not compatible with iPhone 5 lightning connector;
- scratches and dents on new iPhone 5s; and
- Wi-Fi issues
While issues have surfaced with all generations of iPhone, they have generally been addressed relatively quickly and customers understand that they are buying leading edge technology. But this isn't the case with the iPhone 5. Competitors have caught up and the only advantage that Apple has is to look cool.
With these points in mind, I expect that the iPhone will soon be relegated to commodity status, with increased competition from the likes of Samsung, Nokia (NOK), Google (GOOG) and Microsoft (MSFT). This will result in low profit margin and lower stock price to follow.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.