Technology

Atop the Apple Tree, Almost


Tim Cook just moved up in the Apple Computer (AAPL) world -- or so it might appear. Cook, Apple's vice-president for worldwide sales, was named chief operating officer on Oct. 14. Apple explained the move by saying it's a job that Cook, in effect, already had.

"Tim has been doing this job for over two years now, and it's high time we officially recognized it with this promotion," Apple Chief Executive Steve Jobs said in a statement. "Tim and I have worked together for over seven years now, and I am looking forward to working even more closely with him to help Apple reach some exciting goals during the coming years."

The promotion also comes 15 months after Cook briefly stepped in to run day-to-day operations as Jobs was sidelined to undergo surgery for pancreatic cancer. Jobs was back at work full-time a little more than a month after the surgery.

"STEVE JOBS IS APPLE." What does the new title mean for Cook's role as a would-be successor to Jobs? Apple certainly needs to resolve the matter at some stage. Succession "is the biggest risk to Apple's story," says Piper Jaffray analyst Gene Munster. Yet, while the promotion would appear to bolster Cook's position as a front-runner, it by no means seals the deal.

First of all, there's no indication that Jobs is giving any thought to leaving. "As the head of a public company, Steve has a fiduciary responsibility to think about having a succession plan," says Creative Strategies analyst Tim Bajarin, a longtime Apple observer. "But Steve isn't going to retire for a long time. He loves what he's doing, and barring a major problem, I don't seem him stepping down now or anytime in the near future."

What's more, Jobs is a tough act to follow. "They have the most charismatic leader in the business world, and Steve Jobs is Apple," says Munster. "When he wasn't there, Apple had a lot of problems. You can't find a successor to Steve Jobs. There's no one that could replace him, within the company.... It's not what Apple is thinking. It's what does Steve think."

STRESSING ON THE STREET. Besides adding COO to Cook's title, Apple also said Tony Fadell will head the fast-growing iPod product division and replace Jon Rubenstein, who will retire Mar. 31. Fadell, who was promoted to vice-president for iPod engineering in 2004, will report straight to Jobs. Cook will remain as head of worldwide sales and operations, and he'll continue to lead the Macintosh division.

The personnel changes round out a mixed week for Apple. On Oct. 12, it unveiled a long-awaited iPod that plays video (see BW Online, 10/13/05, "Apple's Baby Step Toward Movies"). That was a day after Apple announced earnings that spooked investors and Wall Street analysts as it fell short of aggressive expectations for iPod sales (see BW Online, 10/12/05, "Apple's Unexceedable Expectations").

CLEANING THE STABLE. If anyone at Apple is qualified to be No. 2 behind Jobs, it's Cook. He came on board in 1998 as senior vice-president for operations and was promoted to executive vice-president for worldwide sales and operations in 2002. Before that, he was vice-president at Compaq, now a unit of Hewlett-Packard (HPQ). His time at Compaq followed a 12-year stint at IBM (IBM).

Cook came on board when Apple was still rebuilding after the period when Jobs was absent. The original iMac computer had been Apple's first consumer hit in a long time, and got the outfit's juices flowing. But 1996 and 1997 were painful years. After Jobs took over as interim CEO, following the firing of Gil Amelio in 1997, Apple needed to get its operations under control.

Enter Cook, who had built a reputation for running a tight operational ship. Cook made his mark early. Within seven months he had cut Apple's bloated inventory from 30 days to 6, soldered closer ties to suppliers, and streamlined manufacturing and logistics operations, saving costs in the process.

HANDLING THE BOSS. And in that time, he has earned Jobs's trust, which doesn't come easily. "If you're talking about people internally at Apple, Cook is easily the best choice without going outside," says Bajarin. "And I don't see how you could easily bring in someone from the outside. They would have to know Apple's culture and how to work with Steve. Cook clearly has both of those things on his side."

He'll need those key credentials as he guides Apple through what analysts say is likely to be a slowdown in the torrid growth pace of recent quarters. So whatever Cook's shot at the top job, his hands are full in the interim.

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