Apple's Future May Not Be Its Five Year Past

Steve Jobs' tenure produced a almost eight-fold increase in Apple's stock price, something which will likely not be duplicated in the next five years, no matter who is at the helm of Apple. In the nineties, Apple was a generator of mediocre products that were neither innovative nor priced to deliver value to their customers. The list includes corporate gaffes like Newton, Pippin, Lisa ($9,995 in 1993), the 20th anniversary Mac, portable Mac ($6,500), and the G4 Mac cube ($1,600). Hand picked CEO John Sculley from PepsiCo grew revenues but disastrously chose to have the company sell against IBM in corporate markets, which led to declining profitability.

Technology companies have growth cycles, with the attendant valuation cycles. As we've written before, Apple has become a cult stock. The recent explosion of revenue, returns, and valuation metrics was generated, in our opinion, from the ability of Steve Jobs to cut through the thicket of product development projects to identify the iTunes and iPhone projects as the "must haves" for the company's success. The troops at Apple all rallied to his call, and for such a large organization to focus with great energy and deliver is a testament to executive management, leadership and organizational depth.

The Wall Street Journal asks, "How can ordinary companies turn themselves into Apples?" The answer is easy, "They can't." As framed, it's a vacuous question.

Apple's adolescence, was exemplified by lousy products and a failed strategy, as discussed above. These describe an ordinary company. However, it grew out of adolescence into the young adulthood of the digital era with ideas that revitalized music publishing and enjoyment, as well as giving consumers the iPhone which converged entertainment, information, music, video, and computing in a great package. This is not an ordinary company by any stretch.

As Chairman of the Board, Mr. Jobs has the chance to interact with his hand-picked CEO Tim Cook and form a partnership which will guide Apple through another decade of adding value, but probably not at the rate of the recent past.