To say Apple Inc. (Nasdaq: AAPL) won't be the same company without Steve Jobs is an understatement.
Jobs helped Apple's share price climb to $373 - a 9,020% gain since 1997 when he was named interim CEO. Earlier this month, Apple's market capitalization grew to $337.17 billion and it briefly displaced Exxon Mobil Corp. (NYSE: XOM) as the most valuable U.S. company, but was unable to hold the lead.
All this from a college dropout who quit his first job to backpack around India.
Yet, the legendary Jobs stunned fans and employees late Wednesday when he announced he would step down as the chief executive officer of the tech giant, 35 years after making his first computer in his parents' garage.
Jobs recommended the company appoint his current fill-in Chief Operating Officer Tim Cook as CEO. Apple's Board immediately did so.
Still, as capable as Cook may be, Jobs' "magic man" presence is irreplaceable.
"I believe the top is in for Apple and it will become a more "normal' company in the future," said Money Morning Global Macro Trends Specialist Jack Barnes. "Steve was an edge they cannot replace. While the company is rich and profitable, it has lost its prophet."
Steve Jobs' Irreplaceable Creative Force
The news wasn't a shock to some Apple-watchers who speculated Jobs' worsening health would lead to a premature exit.
Jobs had been on medical leave since January, popping up occasionally for conferences and product unveilings. This is his third health-related absence; he was gone in 2004 to undergo pancreatic cancer treatment, and again in 2009 for a liver transplant.
Jobs' personality and demanding management style - paired with his creative genius - are what vaulted Apple to the innovative tech leader it's become.
Perhaps the hardest loss for Apple will be Jobs' intuition.
"The big thing about Steve Jobs is not his genius or his charisma but his extraordinary risk-taking," Alan Deutschman, who wrote a biography of Jobs, told The New York Times. "Apple has been so innovative because Jobs takes major risks, which is rare in corporate America. He doesn't market-test anything. It's all his own judgment and perfectionism and gut."
Apple's tech-world contributions with Jobs at the helm include the best of the best: Macintosh computer, iPod, iPhone and iPad. The company will likely release its fifth-generation iPhone in October.
Apple shares slipped 5.13% to $355.70 in after-hours trading following Jobs' announcement, erasing $17.7 billion from the stock's value. The stock rebounded somewhat yesterday during regular trading, closing down 0.65% at $373.72.
Some good news for Apple is that Jobs will remain involved with the company as chairman of the board. But that role does not mean having the final say on what Apple does.
"I think the key question is whether the Apple team will continue to work as effectively as a collaborative without the single person to rely on for the final decision," Charles Golvin, an analyst with Forrester Research Inc. (Nasdaq: FORR), told The Times.
Now that job lies with Cook. While Cook's operational capabilities are superb, few believe he has the ability to replicate Jobs' creative force.
Filling the Creative Void
Cook filled in for Jobs during his medical absences, stepping up from the COO role he landed in 2005. The 13-year Apple veteran is known as being just as obsessive and detail-oriented about his work as Jobs.
Cook was hired in 1998 to fix Apple's deteriorating manufacturing operations. He was a 16-year industry veteran who worked with Compaq Computer and International Business Machines Corp. (NYSE: IBM). He wasted no time showcasing his challenging management style; one well-circulated story involves Cook sending an executive to China during one of his first meetings, with no change of clothes and no return ticket, to tackle a severe manufacturing concern.
Cook successfully used his operational acumen to streamline Apple's supply chain and save the company billions of dollars. He closed factories and warehouses and drastically cut inventory. While his cost-reduction skills aren't as exciting and well-publicized as Jobs' design and marketing talent, they're a major factor in Apple's profitability.
Cook has a broader reach in Apple than any other top executive; he deals with operations, sales, customer support and negotiations with wireless carriers. He also has the work ethic needed to carry a behemoth like Apple. Cook is known for being the first one in the office and last one out, for working every weekend, and for fueling up with energy bars to withstand marathon meetings.
The key to Cook's success will be finding someone in a supporting role to complement the design innovation needs left by Jobs.
"I'm not sure he'd be able to replace Steve's design creativity," Michel Mayer, former CEO of Freescale Semiconductor, told CNNMoney in 2008. "Then again, I could argue that it's not the role of the next CEO to do that."
Apple has time to fill its missing creative role and emerge with its next best-selling product. Apple's pipeline likely has more of Jobs' creations slated for upcoming release, which will dull the short-term impact of his departure. It's the long-term progress with Cook in the top spot that is up for debate.
"We've known this day was coming for a long time even though we didn't know literally "when,'" said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The next 12-24 months are still Jobs' products, but 36 months from now is the challenge."
Rivals See Chance to Steal Apple's Crown
Now that Apple's long-term success is in the hands of someone other than Steve Jobs, rivals already are looking for vulnerabilities to steal market share.
Samsung Electronics' smartphone and tablet computers, which run on Google Inc.'s (Nasdaq: GOOG) Android operating system, could be Apple's main competition.
"Even before Steve Jobs' (resignation), Samsung was getting more and more optimistic that they can actually take on Apple in the smartphone arena," Mark Newman, senior analyst at Sanford C. Bernstein and former director of strategy at Samsung, told Reuters. "The game is really now Samsung's to lose...They are picking up market share because of the change in dynamics in the smartphone industry."
Samsung's smartphone sales grew 500% in the second quarter, and it just released four cheaper smartphone models to attract emerging-market customers.
Another competitor that could edge out Apple is HTC Corp. The Taiwan-based electronics company has had its innovative touch compared to Apple's and has seen sales soar in recent quarters.
While Apple's iPhone and iPad products position it to compete in the post-PC era, its ability to continue beating rivals lies with creative development.
"Losing a visionary is really hard," Brian Barish, president of Cambiar Investors LLC, told Bloomberg. "It's sad but it's not a total shock. The open-ended question is whether Apple is going to have the vision to continue to develop its market position. Sometimes companies lose their visionary and they continue to successfully do what they've done in the past, but any changes in the paradigm are harder."
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