Steve Jobs' resignation from the post of CEO at Apple Inc. (NASDAQ:AAPL) on Wednesday, August 24, was inevitable -- only a matter of time. The question on everyone's minds is whether Apple will continue to thrive, or will languish without Jobs at the helm of management.
Apple shares on Thursday dropped as much as 2.97% on an intraday basis, to a low of $365, but closed down only 0.65% from the previous close of $376.18. With rumors of Jobs' demise circulating for years, the ultimate market reaction was in line with Wall Street's wisdom: "Sell the rumor, buy the fact."
On July 22, 2008, when rumors circulated about Jobs' status, Apple shares dropped from $166.29 on the previous close, to an intraday low of $146.53 (-11.9%). On December 30, 2008, when rumors circulated about Jobs' status, Apple shares dropped from $88 to an intraday low of $84.72 (-3.72%). On January 18, 2011, when Jobs announced a medical leave, Apple shares dropped from $348.48 on the previous close, to an intraday low of $326 (-6.5%). When the ultimate resignation materialized, Apple shares closed down only 0.65%. Given past reactions vs. the actual announcement, either such reality was already somewhat built in the stock price, or possibly investors believe Apple will continue to thrive without Jobs as CEO.
In a recent article, 9 hurdles were identified to have contributed to Apple's success. Such hurdles have also helped prevent competitors from "taking a bite out of Apple." One such hurdle that Apple has surpassed with flying colors is creativity and innovation. Indeed, this is where Steve Jobs excels. In Jobs' own words (during an interview conducted with Wired in early 1996), Jobs stated that "creativity is just connecting things." In determining Apple's future, it is important to take a closer look at his full response to the question: "You have a reputation for making well-designed products. Why aren't more products made with the aesthetics of great design?" Jobs replied:
Design is a funny word. Some people think design means how it looks. But of course, if you dig deeper, it's really how it works. The design of the Mac wasn't what it looked like, although that was part of it. Primarily, it was how it worked. To design something really well, you have to get it. You have to really grok what it's all about. It takes a passionate commitment to really thoroughly understand something, chew it up, not just quickly swallow it. Most people don't take the time to do that.
Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn't really do it, they just saw something. It seemed obvious to them after a while. That's because they were able to connect experiences they've had and synthesize new things. And the reason they were able to do that was that they've had more experiences or they have thought more about their experiences than other people.
Unfortunately, that's too rare a commodity. A lot of people in our industry haven't had very diverse experiences. So they don't have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one's understanding of the human experience, the better design we will have.
Although Jobs resigned as CEO, he is remaining as chairman of the board of directors. Meanwhile, Tim Cook is assuming the role of CEO. In order for Apple to avoid rotting and decaying, it must follow Jobs' own advice; it must avoid going "linear" and must maintain broad perspective. This will allow Apple to continue to thrive in innovation and creativity. As for other hurdles, they are less tricky. Steve Jobs' strength is to perceive things in a manner that others failed to see. He is neither a follower nor an imitator; he is a leader.
With Steve Jobs remaining as chairman, he continues to be in a position to influence Apple to hire talented executives and engineers who also possess a non-linear approach. Jobs' strength is not only his non-linear approach, but also his ability to identify the reasons behind his strength in creativity and innovation. By identifying the reasons behind such strength, Apple is in the unique position to "institutionalize" Jobs himself.
If Apple avoids going linear, the odds will continue to be in its favor. With its massive hoard of cash and liquid assets (over $70 billion), its reasonable P/E ratio (14.78), and expectations for solid continued growth in revenues and earnings, Apple should continue to thrive, and its shares can prove a good long-term investment.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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