Challenges in Apple as Jobs steps down

Rarely has a major company been so dominated by a single individual, and so successful

But his resignation as chief executive of Apple raises the question whether the company he co-founded will be able to maintain that status.

“I have always said that if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know,” Jobs said in a letter released by the company. “Unfortunately, that day has come.”

Jobs, 56, has been on medical leave since January, his third such absence. He underwent surgery for pancreatic cancer in 2004 and received a liver transplant in 2009. But as recently as a few weeks ago, Jobs was negotiating business issues with another Silicon Valley executive.

Jobs will become chairman, a position that did not exist before. Apple named Tim Cook, its chief operating officer, to succeed Jobs as chief executive. Rarely has a major company and industry been so dominated by a single individual, and so successful. His influence went far beyond the iconic personal computers that were Apple’s principal product for its first 20 years.

In the past decade, Apple has redefined the music business through the iPod, the cellphone business through the iPhone and the entertainment and media world through the iPad. Again and again, Jobs gambled that he knew what the customer would want, and again and again he was right.

“The big thing about Steve Jobs is not his genius or his charisma but his extraordinary risk-taking,” said Alan Deutschman, who wrote a biography of Jobs. “Apple has been so innovative because Jobs takes major risks, which is rare in corporate America. He doesn’t market-test anything. It’s all his own judgment and perfectionism and gut.”

Cook, an expert in logistics, has been instrumental in locking up contracts in advance for critical parts in the company’s devices. It has had the effect of securing favorable prices, keeping Apple’s profit margins high. But it also has prevented rival companies from producing competing products at significantly lower prices.

While Cook is well-respected in the industry, he is little-known outside of it. Analysts and Silicon Valley experts said new Apple products were in the pipeline for the next few years, but its success beyond that was already being debated.

Tim Bajarin, president of the technology research firm Creative Strategies, said the news about Jobs was “a shock because it’s abrupt.” But Bajarin said that “while there’s definitely concern for Steve as a person,” he had little concern for the company.

“Steve has built a very deep bench of managers, including the leadership of Tim Cook, who clearly understands Steve’s vision, goals and direction,” said Bajarin, who has followed Apple for 30 years. Others were not so sure.

“You could make the case that Steve has injected so much of his DNA into Apple that Apple will continue,” said Guy Kawasaki, who was an Apple executive in the late 1980s.

“Or you can make the case that without Steve, Apple will flounder. But you cannot make the case that Apple without Steve Jobs will be better. Hard to conceive of that.”

Control and loyalty
The technology world has never been short of strong-willed leaders (think Bill Gates at Microsoft or Larry Ellison at Oracle). But even in this select group, Jobs was noted for the control he exerted and the loyalty he commanded. Without him, his devoted team might soon fracture.

“I think the key question is whether the Apple team will continue to work as effectively as a collaborative without the single person to rely on for the final decision,” said Charles Golvin, a Forrester Research analyst.

Cook, 50, joined Apple in 1998. He was promoted to chief operating officer in 2007, overseeing the day-to-day operations. Wall Street has long assumed the soft-spoken Cook, who was raised in Alabama and is an Auburn University graduate, would be the likely successor to Jobs. While Jobs convalesced, Apple thrived with the continuing rise in iPhone sales and huge growth in the iPad, the dominant tablet computer.

The company and Jobs had been criticized in the past for revealing little information about his health to investors. The news of Jobs’ resignation came after the market closed Wednesday. In after-hours trading, the stock fell 5 percent.

The early years of Apple long ago passed into legend: the two young hippie-ish founders, Jobs and Steve Wozniak; the introduction of the first Macintosh computer in 1984, which stretched the boundaries of what these devices could do; Jobs’ abrupt exit the next year in a power struggle. But it was his return to Apple in 1996 that started a winning streak that raised the company from the near-dead to its current unmatched position.

More than 314 million iPods, 129 million iPhones and 29 million iPads have been sold, according to A M Sacconaghi Jr., an analyst with Bernstein Research. This summer, Apple briefly exceeded Exxon Mobil as the most valuable US company.

Apple does not announce or even telegraph its product pipeline. But there has been a strong indication that it is very close to revealing a new iPhone, which would probably include a more powerful processor to handle the expanding multimedia demands.

The new iPhone is also likely to be thinner and lighter, as every new version has been since the original’s release in 2007. A higher-resolution rear camera has also been expected, as well as more powerful voice-recognition features borne out of Apple’s purchase of Siri in April 2010.

Twitter, the instant messaging service, filled with an outpouring of grief and gratitude Wednesday night. The few ill-spirited comments or wisecracks were met with immediate retorts.

“Steve Jobs is the greatest leader our industry has ever known,” wrote Marc Benioff, chief executive of Salesforce.com. “It’s the end of an era.”

“Funny how much emotion you can feel about a stranger,” wrote Susan Orlean, the author. “And yet every phone call I make, every time I’m on a computer, he’s part of it.”

“Very sad news about Steve Jobs at $AAPL,” wrote Jim Cramer, the CNBC host. “He is America’s greatest industrialist. Perhaps the greatest ever.”

Andy Baio, a tech entrepreneur in Portland, Ore., put it most directly and effectively: “We’ll miss you, Steve.”