AMITIAE - Friday 19 October 2012


Tim Cook, Criticism and the Legacy of Steve Jobs


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By Graham K. Rogers


Apple


This week is likely to be important for Apple with the release of its 2012 Q4 figures on 25 October and an event at San Jose two days before at which a product (or products) are to be released. Rumours have an iPad mini, as well as a Mac mini revision, and the possibility of a new range of iMacs. A new version of iTunes is expected this month. If there is an iPad mini, it would make sense to release it at the same time. But Tim Cook and his team knew this at the last Apple event when the iPhone 5 release was announced along with iOS 6.


Tim Cook Apple and Cook have come in for an unprecedented amount of criticism in the last few months. Cook's major difficulty for many commentators is that he is not Steve Jobs. Ergo, he can never replace Jobs. Thus he must fail.

So the argument goes; but this is based on little more than the desire for hits. Stunning headlines draw users to a site; clicks on the site translate to income; so the more outrageous the title of an article, the more the potental income. As many sites these days simply clone each others articles (and no amount of synonym use can cloud this lack of originality) outdoing the next man is essential to stay ahead in the clicks game.

I do play this game myself to an extent. Had I written a title like "Tim Cook is doing a good job" then (understandably) many would yawn and pass me by. Indulge me.

Often some of the critics forget that Tim Cook is the head of a team, as was Steve Jobs. As much as many would like to think that Jobs did it all, he was at pains to point out the support he had from the major memebers of the management team at Apple, of which Tim Cook was one. Before Cook joined Apple, he had already displayed (and honed) his skills at Compaq where he was Vice-President for Corporate Materials: and you do not get to be VP straight out of business school. He had earlier been COO of the Intelligent Electronics computer reseller division

The faces are known, especially Jony Ives, Phil Schiller and Scott Forestall. There are others, with less public prominence who are all part of the round table that Apple exectutives form. This team with the "disappointing" Tim Cook as head, are expected to turn Apple into the first trillion dollar company in the next few years, but not according to those analysts and pundits who sense disaster at every turn.

I found an interesting comment on Steve Jobs while looking for information for this article, concerning Steve Wozniak with whom he co-founded Apple. Rich Karlgaard wrote in Forbes, "If someone had the potential for greatness, Jobs could sense it and bring it out -- almost by force if necessary." The same might well apply to Jobs and his recruitment of Cook, whom he later decided should be the one to take the CEO position: to run the company that Jobs had built to last.


Criticism of Cook began the day before Steve Jobs' death at the release of the iPhone 4S. Cook was downbeat and, while never particularly exuberant on stage, was even more subdued. The critics laid into him but had to eat humble pie the following day when it became clear why he was undemonstrative. Never mind, the iPhone 4S was the same as the iPhone 4, so they could lay into that instead.

Except it wasn't. And nor was the iPhone 5 this year when many looked at the outer form and declared the iPhone, Apple and Tim Cook all duds. While some of us actually listened to the presentation (I always download the video before making any comment) and were impressed, it was not really until the smart guys at AnandTech and others began the teardowns that the implications of the A6 processor began to emerge.

As well as having unique features, it sets the stage for more such developments that may well steer Apple away from dependence on the standard forms of processors that everyone else can have made by companies in Taiwan and South Korea: an individuality that means Apple can bring on features that no other hardware manufacturer (computer, handset or tablet) could have.

It would seem that many consumers grasped some of this as over the first weekend, there were record sales of the iPhone 5: some 5 million; which Apple was happy to announce. Of course, this was not good enough for some analysts who managed to turn record sales into a disappointment, because they had (wrongly) estimated the figures would be higher.

Wrong estimates seem to be the bane of analysts. Corporations pay these people vast sums of money for their guesses, which they get wrong most of the time. Most notable, especially in the last year, have been the estimates for quarterly financial figures which Apple is usually conservative on. The analysts are not, but also fail to learn the lessons quarter after quarter.


2012 Q3

Apple announced that "The Company posted quarterly revenue of $35.0 billion and quarterly net profit of $8.8 billion, or $9.32 per diluted share. These results compare to revenue of $28.6 billion and net profit of $7.3 billion, or $7.79 per diluted share, in the year-ago quarter. Gross margin was 42.8 percent compared to 41.7 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter's revenue." Among others, the so-called Smart Company -- among a number of others expressing similar dismay -- had the headline, "Apple releases disappointing quarterly figures - we find out why".


2012 Q2

The relatively partisan MacWorld were quite happy with the April 2012 figures: "Apple nearly doubles its profits in iOS-driven quarter" adding that there was a net profit of $11.6 billion on revenue of $39.2 billion for the quarter ended March 31, 2012. Those are respective increases of 94 percent and 59 percent from the 2011 second quarter. 94% eh?


2012 Q1

Apple Q1 2012 Results Obliterate Expectations was the headline from the Huffington Post who are usually less than pro and quite happy to jump on the slightest chink in the armour. Nilay Patel on AppleInsider reported that there was $13.06 billion profit on $46.33 billion in revenue, marking the biggest quarter in company history - well over 50 percent larger than its previous record in Q3 2011. 50%, eh?

A clue as to the Q3 negatives was in that HuffPost report with a sentence near the end: "It sets up Apple well for the rest of the year," Canaccord Genuity analyst Michael Walkley told Reuters." That analyst was not right, was he?


2011 Q4

This was a year ago and again was viewed as disappointing. Apple announced, "The Company posted quarterly revenue of $28.27 billion and quarterly net profit of $6.62 billion, or $7.05 per diluted share. These results compare to revenue of $20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted share, in the year-ago quarter. Gross margin was 40.3 percent compared to 36.9 percent in the year-ago quarter. International sales accounted for 63 percent of the quarter's revenue."

That was not enough for some with Rue Liu on Slash Gear reporting, "Apple Q4 2011 earnings results miss estimates despite record iPad, Mac sales" Not that the figures were reporting losses -- indeed there was an increase over the previous year -- but that Apple missed analysts' estimates, not its own.

Apple's own estimates suggested revenue of about $25 billion so beat that by 13%. Conservative, but in the ball park. If that was a disappointment, the analsyst had hit the ball out of the stadium in trying to outdo one another and this disappointment is more a way to cover their reputations: "I wasn't wrong, Apple was."



iPhone 6 In the last year, Apple has seen a number of product releases starting with that iPhone 4S:

  • iBooks 2, iBooks textbooks, iBooks Author, and iTunes U app at an Education event in January 2012
  • iPad (sometimes called iPad 3) and Apple TV (March 2012)
  • Mac OS X Mountain Lion, MacBook Pro with Retina display
  • iPhone 5, iOS 6, iPod touch, iPod nano, and iTunes

There are few manufacturers in the IT field that can match this range. And there are more products to come. In the world according to headlines, however, this is nothing to do with Tim Cook. All of these items are legacy products: ideas that Seve Jobs left as works in development and Cook is simply reaping the benefit.

That idea is past its shelf life now.

Along the way, there have been a number of messy patent trials and manufacturing of new products has been expanded, with some difficulties and some political fallout, both in the US and China. Odd, isn't it that when there are problems (such as with the Maps app in iOS 6) these are Tim Cook's responsibility, but the successes are from Steve Jobs.


Graham K. Rogers teaches at the Faculty of Engineering, Mahidol University in Thailand. He wrote in the Bangkok Post, Database supplement on IT subjects. For the last seven years of Database he wrote a column on Apple and Macs.


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