updated 09:01 pm EDT, Mon June 16, 2014
Short-term focus doing disservice to long-term growth, evidence already on display
On Monday -- following a New York Times editorial that many saw as a "hit piece" on Apple CEO Tim Cook's leadership, designed to crimp the stock's recent growth -- investment firm UBS issued an unusual vote of confidence in Cook's leadership, calling him "the right man for the time" and saying "we think Cook-doubters will be proven wrong" in a note to investors. The investment firm has maintained a "buy" rating on Apple's stock, predicting a 12-month target of $100 per share, which it is within striking distance of now.
Analyst Steve Milunovich echoed other pro-Apple observers, who believe Jobs chose his successor well -- based on growth of the company over the last 15 years from a niche player with big ambitions to a blockbuster powerhouse and influential market leader in nearly every area it competes in. Apple's Mac is the most popular "premium" brand of computer (defined as being priced over $1,000), the MacBook Pro is the top-selling individual brand of notebook, the iPhone the most popular single brand of smartphone (and top "premium" smartphone), and the iPad the clear dominator in tablets. Apple is king of the mobile enterprise market, and even its former "hobby" Apple TV has become the leading set-top box.
The workforce and revenue of the company has grown exponentially since Jobs' return in 1997 -- from $7 billion then to just under $171 billion in 2013 -- and has continued to experience strong growth since Jobs' death in 2011, when the company saw $108 billion in sales. Jobs himself oversaw the shift from the creative-led management team he brought with him from NeXT that was focused on innovation alone to a more balanced approach that valued operations and customer experience as highly -- or more so -- as an endless stream of new shiny objects. Few of the executives that came with Jobs in 1996-97 are still with the company. Cook might not have been the right guy for the job in 1997, but he's perfect for the job today.
Milunovich recently met with Cook, and praised the CEO for taking the company in directions that the analyst felt were more in line with the company Apple has become. During the meeting, Cook explained his reasoning for merging the leadership of Apple's iOS and OS X software teams, introducing greater cooperation and efficiency. The impressive number of new features and intersecting technologies seen in this summer's OS X Yosemite and iOS 8 would appear to show definitively that the move was a sound one.
While some pundits continue to doubt that Apple will see innovation and growth on the scale accomplished during Jobs' second reign at Apple, Milunovich believes Apple remains focused on making great products, even to the exclusion of a quick return on investment, which he sees as a path to "remarkable new market innovation success." The path Apple treads is not without risk or failure, but it leads to true innovation and unpredictable ends rather than the safer course of simply burnishing and refining a previous best-seller in the hopes of rekindling interest.
Critics have pointed out that Apple has not had another daring, all-new product since the iPad, originally introduced in 2010. Apple's record of such hits is actually quite sparse considering the long history of the company: the Apple II, the Mac, the iPod, the iPhone and the iPad (not counting Apple's innumerable software innovations) have spanned the course of 38 years -- an average "innovation gap" of 7.6 years. Most other tech companies, it must be noted, are not held to the same standard at all.
While getting no confirmation of any new products from Cook, Milunovich believes the company will again do exceptionally well in the second half of the year, continuing to dominate the holiday buying season with new versions of its iPhone and iPad products, along with possible new launches including the "iWatch" health and fitness wearble, and potentially a revamped Apple TV or other products and services.