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The interim CEO, more a pragmatist than a visionary, should lead Apple capably in Jobs' absence
As Apple Chief Executive Steve Jobs steps away from the helm for a six-month medical leave, the eyes of investors, customers, and employees are intently focused on his No. 2, Chief Operating Officer Timothy D. Cook.
Cook, who will handle day-to-day operations while Jobs is away, is known as a skilled manager who makes up in operational chops what he lacks in marketing and design savvy. There's little question Jobs will be missed. Yet Cook, who ran Apple in 2004 when Jobs was recuperating from cancer surgery, is widely expected to guide the company with a steady hand.
A veteran of IBM (IBM) and Compaq Computer before it was bought by Hewlett-Packard (HPQ), Cook joined Apple (AAPL) in 1998 just as the brightly colored iMac PCs were breathing life back into Apple's sales. Jobs, himself carrying the "interim CEO" title he'd held since 1997, praised Cook's "rare combination of experience." At the time, Cook carried the title of senior vice-president of worldwide operations.
Eleven years later, as COO, Cook is an indispensable member of Apple's corporate bench. Where Steve Jobs is Apple's public face and its final arbiter of product design and positioning, Cook is responsible for day-to-day operations, outside observers and former employees say. "Steve is the visionary," says one former employee who asked not to be named. "Tim is the guy who makes the trains run on time."
"Gets Things Done"
Well-liked by employees, the 48-year-old Cook is in ways the opposite of Jobs. Where Jobs is variously described as volatile, mercurial, and hard to please, Cook is usually described as soft-spoken, calm, and less prone to raise his voice in tense situations. "He's one of those guys who just gets things done," says Tim Bajarin, head of Creative Strategies, a tech consulting firm. "But he's been with Steve long enough that he knows how he thinks. He's been working for years with this steady mantra of, 'What would Steve do?' And then whatever he decides, he puts solid business principles behind it."
That was certainly the case early on when Cook helped reverse the company's financial fortunes. The fiscal year before he arrived, Apple had reported a $1 billion loss on sales of $7 billion, a drop of more than $2.8 billion from the year earlier. One of the company's biggest problems was managing its supply chain and product inventory. With sales dropping, Apple had ordered more components than it needed. It also had a bad habit of keeping more computers on hand than it could sell quickly, typically a month's worth. Cook cut the inventory kept on hand to about a week's worth, slashing costs, while at the same time tightening distribution channel arrangements.
By fiscal 1999 these changes had helped push Apple's gross margins up to 28% from 19% in 1997, and the company had swung to a $600 million profit even as sales slumped further. "Cook dramatically cleaned up the balance sheet," says Charles Wolf, analyst at Needham & Co. in New York. "He has been crucial to managing these things, and they translate directly into higher gross margins."
Operational Star Power
Cook was named COO in 2005. At the time, Jon Rubinstein, then senior vice president of the iPod division, departed and went on to become chairman at Palm (PALM). Cook is now responsible for worldwide sales, operations, service, and support in all markets and countries. He is also the head of the Macintosh computer division.
For all his operational star power, Cook isn't the master of marketing and products that Jobs is. In Jobs' absence, product design decisions will likely fall to Jonathan Ive, senior vice-president of industrial design, the man behind the design of the iMac, the iPod, and many other products. "When it comes to design, they most often defer to Ive," Bajarin says.
But don't underestimate Cook, cautions Gartner (IT) analyst Mike McGuire. Having spent more than a decade in Jobs' closely guarded executive circle, Cook will have learned more than a thing or two about how to launch successful products. "I don't know Cook that well, but my guess is he isn't just an ops guy," McGuire says. "I don't think you survive at Apple as just an operations guy. I don't think you get let into the inner sanctum as just an operations guy."
Products Updates Set
In any case, many of the company's planned product releases are likely fully teed up by now and will probably come off without a hitch, even with Jobs sidelined. The next upgrade of the Macintosh operating system, code-named Snow Leopard, is expected sometime this year. There's also the prospect of an update to the iPhone, introduced in 2007 and upgraded in 2008. Some analysts expect a third iteration, a smaller version, sometime in 2009. Other products like the iMac desktop computer and the MacBook line of notebooks, which were updated recently, might be due for incremental improvements, but no major revisions.
"They have a very strong product lineup and a good position in the market," says Michael Capellas, CEO of First Data and former COO of HP. "The challenge is how to deal with the economy as consumer spending drops off."
Jobs is due back in June. In the interim, analysts and other observers say, Apple is in capable hands. "There is no question he's the right guy for the job," says Piper Jaffray (PJC) analyst Gene Munster.