Is Tim Cooked?
All signs point towards the idea Apple's CEO is closer to the end than the beginning
The headlines are in and they aren’t kind. Investors, developers and the rest of the world writ large watched yesterday for a hint, anything to signify Apple had gotten its game together with a significant AI announcement. Spoiler alert - that didn’t happen.
It seems no matter the font size of the writing on the wall, Apple just can’t seem to pivot into the AI era despite the fact they have a global install base to work off of and more engineering talent than almost anyone else.
It would be easy to blame the current administration’s sideways trade policies for Apple’s recent stock slump. But the reality is Apple is now yesterday’s news as it pertains to projected future earnings. The stock is down almost 20 percent in the first six months of this year due in large part to the fumbling nature of its late entry into this exploding category.
There was once a time when Apple held all the cards. Its headlock on the laptop and mobile device market opened doors for experimentation with products like Apple Watch. And while Apple Watch has been successful it’s been only one high point over the past few years as Apple has continued to grow revenue from its services and ecosystem built on its iPhone empire.
Since then Apple has had one, maybe two significant product announcements. Its recent introduction of Apple Vision Pro was essentially the Cybertruck moment for VR - a futuristic, high-priced piece of next-tech with few options besides the demo experience. Like the Cybertruck it was projected to sell into the millions only to see production halted when there was limited demand. To Tim Cook’s credit he didn’t start taking bizarre political stances in public.
Why Can’t Apple Pivot Into AI?
To hear Apple executives tell it they’re doing just fine in AI. But that’s done little to quell public criticism or shareholder nervousness. This recent CNBC piece dives into the central question which is how Apple managed to bungle Siri so badly. It’s a good watch if you have a few minutes.
Before there was ChatGPT there was Alexa. And before Alexa there was Siri. Apple’s had a 14-year headstart on competitors but either didn’t see the flags on the horizon or didn’t think they were serious enough to merit any real deviation from their traditional roadmap. In Apple’s defense, Siri and Alexa both largely paved the way for ChatGPT, Claude and Gemini. Apple has long invested in AI/ML applications to power its apps and also invested significant time and effort to develop the approaches to Natural Language Processing that power Alexa and the others.
It’s a Culture Thing
Boxing great Marvin Hagler once said, “It’s hard to get out of bed to do roadwork at 5 AM when you’ve been sleeping in silk pajamas.” That would seem to be true for Apple as well.
Like so many mega organizations it’s hard to trade consistent returns and predictable outcomes for risk and possible disappointment. It’s also important to keep in mind that Apple is in its heart of hearts a hardware and design organization. Sure the App Store gets a cut of most of the mobile software in the world but Apple’s DNA is mitered out of brushed steel and aluminum. So it was no surprise when, instead of focusing on an application like Siri, Apple instead decided to go all in on VR ala it’s Spatial Computing initiative.
But legacy hangups are only part of the problem. It has become increasingly clear that Apple may well have waded out past Tim Cook’s core competency. That may sound like me taking a shot but it’s not. Tim Cook has grown Apple well beyond where Steve Jobs could have taken it which is a testament to Cook’s ability and Jobs’ genius - passing the baton to the right person, at the right time. But stop and think about it.
Apple’s only had few leaders. While there have been a smattering of CEOs over the years Jobs, Scully and Cook make up the bulk of the leadership tenure. Jobs resurrected Apple as a premium design and innovation brand. Cook then built on that foundation turning Apple into the largest company in the world through global operations and distribution. But those skills don’t seem to be in demand any more.
Ballmer’s Personality Was His Own Undoing
Microsoft is an interesting analogue when we look at how things might shake out at Apple. A lot of folks think Steve Ballmer left his role as CEO because Microsoft’s core business was suffering but nothing could have been further from the truth. Under Ballmer, Microsoft’s revenue nearly tripled from ~$25 billion to $70 billion. That’s no small feat.
Like Cook, Ballmer was essential to getting the company off the ground before taking over the CEO role. When Steve Jobs stepped down as CEO, he handed the reigns over to his trusted #2 who’d been every bit as responsible for the company’s success. Bill Gates did the same thing with Ballmer.
Ballmer’s crime wasn’t incompetence, it was his personality, his worldview and the fact he lacked investor confidence. The company’s growth was stratospheric on paper but barely budged in the stock market. His passion was undeniable but also hard to love. Case in point - his famous, sweat-drenched “developers!” speech.
Anyone who saw his Windows 95 Launch dance knew Ballmer was instrumental and enthusiastic, but also maybe not the best face man for Microsoft long-term.
His lack of charisma was only part of it. Ballmer was also a slavish adherent to the idea that the PC and Windows revolution would go on for forever. And why not? Those were the cash cows that had put Microsoft in a near-Monopoly position. While he talked a good game about innovation and disruption, his organizational management approach rewarded a sort of Game of Thrones brinksmanship among competing teams as Cloud technology threatened to leave Microsoft’s traditional business in the dust.
Ultimately it was his inability to inspire the market (externally) and to inspire change (internally) that did him in which necessitated the company’s shift to now CEO Satya Nadella.
AI is the Perfect Storm for Tim Cook
And so we see Tim Cook in a similar position. If investor confidence and the ability to inspire change are the pre-requisites for longevity then things don’t look promising for him. This is particularly true given the fact Generative AI isn’t just threatening Siri, it’s a direct threat to the mobile computing market. OpenAI just announced the acquisition of legacy Apple design Chief Jony Ivey’s AI device start-up. When you couple that with Alphabet’s rapid advancement of the Gemini platform and its deep roots in mobility through Android things get worse for Apple. But that’s just the tip of the iceberg.
The challenge Apple faces now is the fact that AI isn’t a feature that needs to conform to the Apple standard. It has unique interactional characteristics and different design support requirements. Generative AI thrives on consuming data regardless of where it comes from which stands in opposition to Apple’s public stand on restricting third party data access.
Most importantly - if investor confidence is important to Cook’s long-term survival it’s important to point out how investors are rewarding future returns ala Tesla. Apple’s and Tesla’s financial performance in present-day terms aren’t even remotely close. Apple is a better company in every way whether that be revenue growth, margin, you name it. Yet its stock hums along at a rational 30:1 P:E ratio compared to Tesla’s 180:1. Tesla is routinely rewarded for projecting fantastical future visions like autonomous robots and FSD taxis allowing investors to ignore the fact the company routinely misses its earnings projections. The market craves the future. Don’t hate the player, hate the game.
All of this spells trouble for Apple’s CEO who’s mild mannered personality has been perfect so long as the market sentiment was positive. This will be less so if Apple continues to fall behind. While it may not seem fair to talk about Apple changing leadership the fact is Apple is falling behind at a critical moment. Each quarter that gets worse it becomes more likely Cook may have to hand over some or all of his responsibilities to shift culture and restore investor interest.