The Great Apple CEO Swap Out

Mac OS KenApple saw a big change this week — or maybe not so big, depending on your perspective — with the announcement that Steve Jobs retired from his role as CEO. Mac OS Ken’s Ken Ray digs through the reactions to the change at Apple, and has a little something to say about Samsung’s new Kubrick defense, too.

Steve’s Big Goodbye
You’ve probably heard. Apple CEO Steve Jobs is now former Apple CEO Steve Jobs.

From Apple’s press release:

Apple’s Board of Directors today announced that Steve Jobs has resigned as Chief Executive Officer, and the Board has named Tim Cook, previously Apple’s Chief Operating Officer, as the company’s new CEO. Jobs has been elected Chairman of the Board and Cook will join the Board, effective immediately.

What happened to the old chairman of Apple’s board? There wasn’t one until Steve resigned. Electing him chairman is certainly a vote of confidence for Jobs, though kind words don’t hurt.

Speaking on behalf of the board, Art Levinson — chairman of Genentech and member of Apple’s board himself — said, “Steve’s extraordinary vision and leadership saved Apple and guided it to its position as the world’s most innovative and valuable technology company… Steve has made countless contributions to Apple’s success, and he has attracted and inspired Apple’s immensely creative employees and world class executive team. In his new role as Chairman of the Board, Steve will continue to serve Apple with his unique insights, creativity and inspiration.”

As for the man taking the permanent title of CEO, Levinson says, “The Board has complete confidence that Tim (Cook) is the right person to be our next CEO. Tim’s 13 years of service to Apple have been marked by outstanding performance, and he has demonstrated remarkable talent and sound judgment in everything he does.”

That doesn’t really sound terrible. I mean, most Apple watchers and certainly most Apple investors would rather not see Jobs step out of day to day operations permanently, but nothing in Apple’s announcement sounds that bad.

What sounds bad is Steve Jobs’s letter To the Apple Board of Directors and the Apple Community. Quoting that letter:

I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.

I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee.

As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.

I believe Apple’s brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role.

I have made some of the best friends of my life at Apple, and I thank you all for the many years of being able to work alongside you.


And that doesn’t sound nearly as good as the Apple statement, though there are a couple of salient points therein.

First: Apple has a succession plan. Not they never made it public, but was it not a wee bit goofy to think that it might not?

And second: While Jobs may not feel he can continue as CEO, he’s put himself up as Chairman of the board and the board has gone along with that, indicating that while he may not be up for the day to day stuff no one thinks he’s going anywhere any time soon.

The Market Rollercoaster
Not surprisingly, Apple’s shares were down in after-hours trading on news of the CEO shuffle, though the amount was surprising. It really wasn’t that much.

Shares were down about five-percent, which BusinessInsider’s Henry Blodget says “is actually barely any drop at all.”

Money’s funny. I read that that 5 percent wiped out about US$24 billion of Apple’s market cap. But I get Blodget’s point. It could have been 20-times worse.

Blodget says the slight dip rather than a free-fall suggests two things:

One, the market expected this news at some point. And two, the market thinks Apple will be fine without Jobs as CEO — an idea with which Blodget agrees, at least for the next couple of years.

While no time would be a good time to lose a leader like Jobs, now’s not as bad a time as it could be.

Quoting the piece:

Thanks to Steve’s vision, Apple has created two massive new product categories out of thin air: iPhones and iPads. These products did not exist 6 years ago—at any company—and now they are much bigger than Apple’s legacy PC business. 

These two products are also very early in their life-cycles in terms of global market penetration. This means that Apple should be able to drive enormous growth in both categories for years without a revolutionary new vision. The company just needs to stay one step ahead of the competition and maintain its obsessive focus on user experience and quality. And the latter now appears to be deeply baked into Apple’s DNA.

Mmmm… baked DNA.

Plus all that praise Levinson and Apple’s board had to heap on CEO Cook? Blodget buys it. He thinks there might be power struggle inside Apple, but the company can get through that.

“In short,” says the piece, “Apple is now a diversified, global company with three mega-hit products: iPhones, iPads, and Macs. iPhones and iPads are still early in their adoption curves, and Macs still have only a small slice of global PC market share.

“So even if Apple never develops another new product category, it should have years of strong growth ahead of it,” he says. And, of course, they could still revolutionize another product category or other product categories into the future.

“It’s impossible to overstate the value of Steve Jobs to Apple, and losing him is a huge blow to the company and community,” wraps Blodget. “But Steve has done such an amazing job over the past 15 years that — for several years anyway — the company should be fine without him.”

Enter the Bean Counters
Even as the dust was still settling, a number of financial names you know came not to bury Jobs, but to praise him and the way he’s paved for his successor.

AppleInsider rounds up a few, starting with UBS analyst Maynard Um, “We expect there to be no transition issues as Cook had been running daily operations as interim-CEO,” according to Mr. Maynard. He thinks Apple’s roadmap, while invisible to outsiders, has been “well laid out” for Apple’s executive team.

He doesn’t see Apple’s stock dropping that much on the news since investors have been anticipating this for a while. And, he says, his firm “would view any weakness as opportunity given our expectation for strong September and December quarters.”

The one thing he would like to see is Apple buying back shares as a show of confidence, though the company has shown no interest in that in the past.

Um maintained his “Buy” rating on Apple’s shares and his 12-month price target of $510.

J.P. Morgan analyst Mark Moskowitz says the Apple model is “built to last.”

We expect the news to create an attractive entry point for investors looking to add or build bigger positions in Apple. While the news could weigh on shares in the near term, we think the company’s model is built to last, sustaining a “digital way of life” that other industry participants have yet to rival.

Jobs’ second term as Apple’s CEO drove a stunning recovery and then rise to dominance by constructing a world of mobile devices and content ubiquity.

We believe that the level of creativity and intelligence assembled throughout the management team and legion of Apple employees can sustain the Apple model and its industry leadership… In our view, the far-reaching successes of the iPhone, iPad, iPod, and MacBook Air reflect the work of many, not one.

Moskowitz reiterated his firm’s “Overweight” rating on Apple’s shares and December 2012 price target of $525.

Morgan Stanley analyst Katy Huberty sees the move as a “well timed and planned leadership transition.” While she sees Jobs as “irreplaceable,” she notes that CEO Cook has a “proven track record of execution.”

Apple’s stock has always taken a hit after Jobs related health announcements, though it’s also always come back stronger. “While this transition is more permanent,” says Huberty, “it removes the overhang caused by uncertainty around the CEO transition.”

Huberty reiterated her firm’s “Overweight” rating on Apple’s shares and its price target of 4-hundred-68-dollars.

And finally, Piper Jaffray analyst Gene Munster thinks Jobs courses through Apple’s veins like baked-in DNA.

Quoting Uncle Gene, “The ethos of Steve Jobs, his vision and his work ethic, will forever drive Apple. As such, we reiterate, without hesitation, our Overweight rating on shares of Apple following the resignation of Steve Jobs and the appointment of Tim Cook as Apple’s next CEO.”

In fact, he sees Jobs’s “final great act” as grooming Cook as his successor, referring to the new CEO as “the ideal candidate.” Munster says, “Cook is capable of running Apple, but his rare combination of extreme humility and insatiable motivation make him uniquely suited to assume Jobs’ role as CEO and carry on his work with a peerless executive team.”

He also thinks Cook will carry out a five-year roadmap that “he and Jobs jointly established, including several iterations of Apple’s existing products as well as new categories, like an Apple Television as soon as late 2012.”

Really? Today? With the TV?

My God, it’s Full of Stars
And to wrap up this week, Samsung has a new defense against Apple’s “look and feel” lawsuit against its Galaxy line of smartphones and tablets, and I’ve gotta say I love it.

Will it work? I don’t know. Should it work legally? I’m not paid lawyer bucks, but I love what they’re trying to pull.

FOSS Patents’ Florian Mueller says Samsung late Monday night filed an opposition to Apple’s motion for a preliminary injunction against its Galaxy products in the states because we’ve all seen all of it before. The Galaxy Tab… the iPad… any lover of science fiction or cinema should recognize the devices… from Stanley Kubrick’s “2001: A Space Odyssey.”

They even included an image in their filing.

Kubrick's iPad2001: iPads in space

Along with the pic, the Samsung tells the court: Attached hereto as Exhibit D is a true and correct copy of a still image taken from Stanley Kubrick’s 1968 film “2001: A Space Odyssey.” In a clip from that film lasting about one minute, two astronauts are eating and at the same time using personal tablet computers (…) the tablet disclosed in the clip has an overall rectangular shape with a dominant display screen, narrow borders, a predominately flat front surface, a flat back surface (which is evident because the tablets are lying flat on the table’s surface), and a thin form factor.”

Art as prior art. That’s true and… socially literate. And ballsy.

Wrapping up his piece, Mueller says, “It would be amazing if the court agreed with Samsung that this constitutes prior art for that particular iPad-related design patent. Whether or not Samsung will succeed, the mere fact that they proffer this kind of evidence is remarkable and will be exciting for many fans of movies in general — and of that movie in particular — to find out about.”

I. Heart. This.