Apple CEO Tim Cook is staring down the barrel of his latest career-defining moment in the wake of a shocking financial warning to investors. And how he responds will go a long way to solidifying his legacy as CEO of the tech giant.
“Tim Cook’s legacy will be determined by what happens in 2019,” veteran tech analyst Dan Ives of Wedbush Securities tells Yahoo Finance. Ives believes that Cook has to prove a lot to investors this year and do it quickly in order to set Apple up for longer term success. “There is a lot of pressure on Cook to make sure Apple gets to its next chapter.”
Cook is no stranger to pressure cooker moments at Apple.
Promoted as Steve Jobs’ chief operating officer in 2005, Cook was immediately tasked with getting the latest iPhones — among other products — to market as profitably as possible. Having proved himself in that difficult arena, Cook was appointed as CEO successor to the ailing Jobs in 2011.
Since grabbing the CEO baton from the larger than life Jobs, Cook has unveiled several iterations of the iPhone and led the rollout of wearables like the Apple Watch and AirPods. Cook has also pushed Apple deeper into services such as the Cloud and video content.
Up until this point, Cook’s legacy could be viewed as a CEO that didn’t mess up what the innovative founder created. At the same time, Cook has expanded Apple’s reach into the lives of people globally — and its social influence. Not a bad few lines on the ole resume.
But a $7 billion revenue warning now has Cook on his back heels with the media, investors and even Chinese consumers amid rising trade tensions. In effect, Cook’s resumé suddenly has a host of new asterisks.
Apple said in a filing released after market close Wednesday that it now sees first quarter revenue of about $84 billion. It previously anticipated $89 billion to $91 billion. In the filing, Cook attributed the reduced guidance to weakness in emerging markets and in Greater China as well as supply constraints on new products. Cook also hinted strongly that Apple felt resistance from consumers to the new $1,000-plus iPhone XS line.
While Cook tried to hype strong demand in AirPods and Apple Watches, investors weren’t buying it.
Trading was halted Wednesday for Apple shares at about 4:25 p.m. ET in advance of the release of the announcement. The stock declined 8.49% to $144.51 per share when trading resumed 25 minutes later, hitting the lowest level since July 2017.
Shares dropped about 9.9% in Thursday’s trading session.
Cook’s next steps will be closely watched
Most sources Yahoo Finance talked with think Cook will be forced to aggressively ramp up stock buybacks and M&A. Doing so, says sources, would signal to investors that Cook is prepared to use Apple’s massive cash pile ($250 billion-plus) to fundamentally change the investment narrative. Cook must also speed up new product introductions outside of the iPhone, which could range from launching a new streaming service to entering the autonomous car scene.
“Tim Cook needs to stay with Apple, I don’t think there is any chance he is going to leave in the next several years. I think he is a steady force inside the company and especially in the transition here,” contends long-time Apple analyst Gene Munster of Loup Ventures. “We will learn a lot about Tim in the next year.”
Whatever paths Cook chooses, scrutiny rightfully will be high. And it should be: Cook and his management team failed to properly guide investors to slowing global demand for its most important product, the iPhone. Supply constraints for new Macs and Apple Watches are also a black eye for Cook considering his operations background.
“This is one of the darkest days in Apple’s history,” Ives says. “It’s the most defining moment for Tim Cook as CEO.”
Head down Tim, it’s time to get to work on a whole other level.
Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi
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