Apple is dead! So sayeth Rocco Pendola writing for TheStreet.com. "There's No Question Now," Mr. Pendola wrote in the title, "Apple is Dead."
Whoa. That's a doozy of a death knell that goes beyond the usual mantra that Apple is dying by jumping right to the post-mortem pronouncement that Apple is actually dead.
What is the source of Mr. Pendola's observation? Apple's announcement that some of Tim Cook's and other executive stock option bonuses will be tied to Apple's stock performance—he believes that this is a betrayal of some of the late Steve Jobs's principles, particularly the notion of never kowtowing to Wall Street. As such, he sees it as proof Tim Cook has strayed far as CEO.
Ergo Apple is dead.
The Death Knell
Here's what he said:
[Apple's decision to tie executive compensation to stock performance] is not only a rebuke of Steve Jobs and the Apple way -- the very essence of what made Apple the world's greatest company -- it's a perverse validation of Wall Street and the stock market. As if Wall Street should play any role whatsoever in determining how much anybody from the CEO to the cleaning crew at Apple makes.
But, yeah, it's a brilliant and ballsy move by Cook and the Board to, yet again, give the nod to external and irrational forces such as the stock market. These guys are recklessly and multi-handedly desecrating Steve Jobs's legacy. This is just another example of Apple losing its way, operating like every other company.
Unlike almost all of the Death Knells we've captured in the Apple Death Knell Counter, Mr. Pendola's entry (#62) has some merit, but I think that merit is rooted in misunderstanding.
For one thing, Apple is not dead. Far from it. We saw at WWDC that innovation is alive and thriving at Apple. iOS 7, Mavericks, and the new Mac Pro show that Apple knows how to think differently. More importantly, it was proof to me that Tim Cook has so far achieved his goal of protecting and nurturing Apple's culture.
As I argued recently, Tim Cook was the ideal choice to transition Apple from the era of Steve Jobs to a new era, an era without a single figurehead for innovation. Even more importantly, Tim Cook has to train his successor, find the person who can not only lead Apple, but maintain its culture, too.
That is, after all, why Steve Jobs picked him.
(Note that the same column said that Jony Ive would be that successor, and that I stipulated that if Jony Ive didn't take the stage at the WWDC keynote I was wrong. Jony Ive didn't take the stage, making me wrong).
But this column is supposed to be about Mr. Pendola being wrong, not me, so let's back to to this Death Knell of his.
To find out where he went wrong, we need to look at what he got right. Apple has never kowtowed to Wall Street. At least not under Steve Jobs. Apple famously focuses on making the best product it can, and both Steve Jobs and Tim Cook (when Mr. Jobs was alive and since his death) have repeatedly said that if they do so, the stock price will take care of itself.
If Tim Cook has lost sight of that—if Tim Cook has suddenly decided that Wall Street is its first master—then I would stand up and say that Apple is doomed until we see the perpetrator's head on a pike.
To that end, I understand where Mr. Pendola is coming from—and unlike most members of the Apple Death Knell Counter, he's not a rabble rouser or someone who just doesn't get Apple.
Mr. Pendola believes that Apple's dividend and stock buyback programs are examples of Apple kowtowing to Wall Street. I completely disagree. Those programs are an effort to kowtow to the reality that Apple makes more money than it needs to keep growing. It's good governance that rewards shareholders for investing in $AAPL.
I think he's also taking the wrong angle on this executive pay thing. It's not about Wall Street, but rather more good governance for Apple's shareholders—a distinct subset of "Wall Street"—as well as Apple's own employees.
Note, for instance, that Wall Street has only punished Apple's stock more since this policy was enacted over the weekend. $AAPL closed Thursday at US$393.78, a loss of $4.29 (-1.08 percent), on moderate volume of 12 million shares trading hands. It's lost about $20 this week. Wall Street clearly couldn't care less about Apple's shift in executive compensation.
Ergo, the shift was not done for Wall Street's benefit.
It's All About the Messages
This change is about sending a message to Apple's shareholders, a group that could be understandably cranky about executives getting tens of millions in bonus options when they themselves have seen the stock drop from $702.1 in September to $394 today.
In Tim Cook's case, this policy shift covers his own massive grant of the one million shares he had already been given when he took over as CEO. There are hundreds of millions of dollars at stake for him.
Shareholders are a group of people Apple must pay attention to, and this message was for them, not Wall Street per se.
Apple's employees are another group for whom this change was designed. Stock options are a big part of Silicon Valley, and the message for employees is that the executives are more or less eating the same dog food, even if their plates are bigger and fancier.
That's a good message to send.
Is it what Steve Jobs would have done? Probably not. Mr. Jobs had a singular take on such things that worked really well for him. Tim Cook is a different person, and Apple will be a different company under him (and anyone else).
That's OK as long as Apple's culture of innovation continues, and as evidenced by WWDC, that culture is alive and well. When Apple releases the next crop of iPhones and iOS 7 and OS X Mavericks prove to be big hits, Apple's stock will begin its recovery.
We'll see that in a few months.
Thanks to TMO member Louis Skonick for the heads up on Rocco's article.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.