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December 11, 2014 4:00 pm
More than an hour into Apple’s annual shareholder meeting in February, Tim Cook had patiently fielded questions ranging from its plans for the television market to what he thought of Google Glass. But when one audience member tried to push Apple’s chief executive on the profitability of Apple’s various environmental initiatives, such as its solar-powered data centre, Mr Cook snapped.
“We do things for other reasons than a profit motive, we do things because they are right and just,” Mr Cook growled. Whether in human rights, renewable energy or accessibility for people with special needs, “I don’t think about the bloody ROI,” Mr Cook said, in the same stern, uncompromising tone that Apple employees hope they never have to hear. “Just to be very straightforward with you, if that’s a hard line for you . . . then you should get out of the stock.”
Many investors, it turns out, are siding with Mr Cook. After a tumultuous 2013, the share price has increased by around 50 per cent since that shareholder meeting, at one point taking its market capitalisation above $700bn.
In the three years after the death of Steve Jobs, Mr Cook, 54, has held his nerve through attacks from activist investors and a loss of faith among some that Apple could succeed without its late founder. This year has seen Apple’s chief step out of the shadows of his predecessor and imprint the company with his own set of values and priorities: bringing in fresh blood, changing how it manages its cash pile, opening Apple up to greater collaboration and focusing more on social issues.
As the new iPhone continues to smash its own launch records, Mr Cook has unveiled products such as Apple Watch and Apple Pay that take the iPhone maker into the realms of fashion and finance, recapturing a spirit of innovation that many feared had died with Jobs. In the process, Apple’s valuation this year has grown by almost as much as Google’s entire market capitalisation.
But the change in Wall Street’s — and Silicon Valley’s — appreciation of Mr Cook is down to more than just the 70m iPhones Apple is expected to sell this quarter or the $42bn in sales generated in the previous.
Financial success and dazzling new technology alone might have been enough to earn Apple’s steely chief executive the FT’s vote as the 2014 Person of the Year, but Mr Cook’s brave exposition of his values also sets him apart.
This was never more powerful than when he talked publicly for the first time about his sexuality.
“If hearing that the CEO of Apple is gay can help someone struggling to come to terms with who he or she is, or bring comfort to anyone who feels alone, or inspire people to insist on their equality, then it’s worth the trade-off with my own privacy,” he wrote in Bloomberg Businessweek in October.
It was a rare glimpse into his closely guarded personal life that also put at risk Apple’s brand in less tolerant parts of the world. Mr Cook was driven to take a stand by his experiences growing up in Alabama, where he has talked of seeing discrimination that “literally would make me sick”.
“From one son of the South and sports fanatic to another, my hat’s off to you,” tweeted Bill Clinton, the former US president, in response to the article.
His eloquent defence of equality came after a year of faltering progress on gay marriage in the US and as arguments rage about the lack of diversity among the people running the Silicon Valley companies, including Apple, who shape so much of our culture.
Mr Cook has added three women to what was previously a white-male-dominated executive team and changed Apple’s board charter to commit to seeking out candidates from minorities when appointing directors.
“People claim he has a cool exterior but he’s a very passionate guy and he stands up for what he believes in,” says Bob Iger, Walt Disney chief executive and Apple board member since 2011. “That is in both his personal life and at Apple.”
As well as diversity, Mr Cook has championed sustainability and supply-chain transparency, including a commitment to reducing Apple’s use of conflict minerals. While hyper-efficient under Mr Cook’s management before he became chief executive, Apple’s supply chain has not always been something to boast about, with recurring complaints about working conditions.
But Anne Simpson, senior portfolio manager and director of global governance at the US pension fund Calpers, a prominent Apple shareholder, believes his ethical stance is more than just posturing. “He has a charming disregard for showmanship,” she says. “Tim Cook applies this Apple notion of elegance and excellence to these new arenas.”
Show must go on
Mr Cook’s lack of showmanship has not always been seen as an asset.
Critics have been eager to point out that he is not so closely involved in new product development as his predecessor, and fails to elicit the same excitement when he takes to the stage to introduce them. But Mr Cook is aware of his shortcomings and has drawn on the worlds of fitness and fashion to assemble a new team of talents, including Angela Ahrendts, formerly of Burberry, and industrial designer Marc Newson.
“I thought it would be impossible to replace Steve, and to some extent that’s true,” says Professor Michael Cusumano of MIT’s Sloan School of Management. “But internally the spirit is still alive and the company is organising around a less confrontational culture. We have to give Tim credit for that.”
Bringing harmony to Apple’s internal fiefdoms has not been easy. There is still “huge tension” inside Apple, according to one person who has worked with the company for many years. “That tension is something he uses to run the company but it can be dangerous.”
When things do go wrong, Mr Cook takes swift and merciless action. In late 2012, after the premature launch of Apple’s flawed Maps app, he dismissed Scott Forstall, who led the creation of iOS and was a close ally of Jobs, and John Browett, the former Dixons chief who had led Apple retail for less than a year. The actions sent a message that Mr Cook will not tolerate underperformance or internal politics.
At that time, the chief executive was also under pressure, given Apple’s lack of clear product direction beyond milking the iPhone. Sensing blood, activist investors began to circle the company; first David Einhorn, then Carl Icahn, have lobbied for changes to how Apple is run and manages its finances. Mr Icahn has pushed for Apple to raise huge debt to return up to $150bn to shareholders and urged it to release more products, including a television set.
With a growing need for someone to block and tackle Apple’s raiders and (given its tax investigation in Europe) regulators, Mr Cook’s focus on people, strategy and execution — rather than products — finally started to look like an advantage.
“He is very, very good at not allowing that pressure to in any way disrupt what Apple is trying to achieve,” says Mr Iger. “Clearly there were issues that were on his mind but Tim made sure they were never on the minds of the people who do what Apple does best.”
Mr Cook’s decision to expand its cash return programme of dividends and share buybacks helped to defuse the situation with the activists, returning $94bn to date. In the end, he stared down the challenge just long enough for the next wave of iPhone growth to hit and new products to emerge from Sir Jonathan Ive’s workshop.
“I don’t think there are any companies that have survived big assaults from two of the biggest beasts in the hedge fund jungle,” says Ms Simpson of Calpers. “He is cool, calm and collected — the corporate exemplar of ‘Keep calm and carry on’.”
That calm can sometimes be taken for a lack of the urgency that is vital in the fast-moving tech industry. Many were disappointed that Apple Watch was not made available to buy this year. But analysts say Apple’s approach of waiting until it has perfected a product usually leads to stronger long-term performance. Samsung, whose smartphone sales have suffered this year, is on its sixth-generation smartwatch, but has still not found a real hit.
With the momentum now back behind the iPhone and anticipation growing for the Watch, Mr Cook seems to have won back the confidence of Apple employees, something that analysts say was obvious in his demeanour at this year’s product launches.
“He’s had more of a sense of swagger and confidence” in recent months, says Jan Dawson of Jackdaw Research.
At its Worldwide Developer Conference in June, Mr Cook was mobbed by app makers who asked him to pose for selfies. By October’s iPad launch, he was even cracking jokes at his own expense. Clad in his habitual but unglamorous uniform of black untucked shirt and jeans, he said that Apple Watch had been well received by “people who know a lot about fashion and style — even more than I do”, pointing a knowing finger at the chuckling audience.
“He’s informal, candid and approachable,” says Ginni Rometty, chief executive of IBM, who praises him as “very authentic. It’s the hallmark of a modern CEO. What you see is what you get.”
A partnership with IBM to sell iPads and iPhones to big corporate customers is just one example of how Apple is looking beyond its own walls more under Mr Cook, something Jobs had resisted.
Among dozens of small, technology-focused acquisitions, the $3bn purchase of Beats Electronics, the celebrity-endorsed headphones and music streaming service, stands out as Apple’s largest ever deal. The acquisition still bemuses many Apple analysts, but in Jimmy Iovine and Dr Dre, Beats’ founders, Mr Cook has instantly regained credibility with the music industry after years of neglecting the iTunes download store. If Mr Cook is guilty of missing the rapid growth of subscription services such as Spotify, he has moved swiftly to compensate for it — though for a high price.
Prof Cusumano sees all this as evidence that the company is opening up more, including in allowing developers to customise more of its iOS software.
Mr Cook must balance that with the secrecy that surrounds its product development. Already, there are whispers on Apple’s campus about another secret project, on the scale of the iPhone or Watch, which is pulling in talent from across Cupertino.
But whether another hit product can emerge to fend off questions about Apple’s life after Jobs, Mr Cook learnt long ago to be patient and trust his instincts, just as he did when he ignored the doubters to join the then-struggling company in 1998.
“Even though I’m an engineer and an analytical person at heart, the most important decisions I’ve ever made had nothing to do with any of that,” he told an interviewer at Duke University, where he studied for an MBA, last year. “They were always based on intuition.”
Buybacks, iCloud hacks and big sales — a year at Apple
January Shares in Apple fall 8 per cent after iPhone sales miss forecasts, in part due to supply shortages of the 5s.
February Cook says Apple TV has made $1bn in the last year in hardware and content, making it no longer just a “hobby”. However, the $99 device only received a software upgrade this year, leaving some waiting for a bigger push in to TV.
March In a key appointment, Luca Maestri becomes Apple’s new chief financial officer, paving the way for an expanded share buyback programme.
April The iPhone’s comeback begins, with a 17 per cent jump in unit sales in Apple’s March quarter beating Wall Street expectations. A TV ad, narrated by Cook, trumpeting Apple’s environmental achievements accompanies a relaunch of its sustainability web portal.
May Apple buys Beats Electronics for $3bn, the company’s largest ever acquisition by a huge margin and a clear break from past strategy by Mr Cook.
June The launch of the Healthkit and Homekit platforms prepares the ground for Apple’s move into new digital health and smart-home markets. App makers are pleased by a broader opening up of its iOS mobile operating system at its annual WWDC event.
July “Off the charts” demand in China helps Apple again beat earnings forecasts for its June quarter. Susan Wagner, BlackRock co-founder, becomes the second woman on Apple’s board. Cook strikes a partnership agreement with IBM to sell iPhones and iPads to enterprise customers, later unveiling a dedicated range of apps in December.
August On the eve of Apple Pay’s launch, private photographs of celebrities including Jennifer Lawrence, apparently hacked from their iCloud accounts, are posted to internet forums. Apple tightens up the security for users of its online storage service in the aftermath but denies its systems were breached.
September Cook unveils Apple Watch and Apple Pay, marking its first launches into new product categories since the iPad in 2010 and Jobs’ death the following year, as well as the iPhone 6, which goes on to a record launch. Before the launch, it emerged that star designer Marc Newson was joining his longtime friend Sir Jonathan Ive on Apple’s design team. Later in the month, Cook takes a swipe at Google and Facebook in an open letter about Apple’s position on privacy, saying: “When an online service is free, you’re not the customer. You’re the product.” New encryption technology to protect the data on an iPhone angers many in the law enforcement world. But Apple’s tax deal with the Irish government also comes under scrutiny as the European Commission publishes the initial findings of its investigation.
October A strong start for the iPhone 6 sees Apple beat Wall Street forecasts for the third earnings in a row. “I’ve never felt so great after a launch before,” Mr Cook says. Later in the month, he talks publicly about his sexuality for the first time, writing in Businessweek: ‘I’m proud to be gay.” He is the Fortune 500’s first openly gay chief executive.
November Apple’s market capitalisation hits $700bn in nominal terms on enthusiasm about iPhone sales, setting a new record for a US public company.
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