Apple After Steve Jobs? Disney May Hold a Clue

Apple CEO Steve Jobs
Apple CEO Steve Jobs

Steve Jobs's surprise appearance at last week's unveiling of the iPad2 made a few things clear: Jobs may be on a medical leave of absence, but he hasn't lost his ability to turn a standard product upgrade into a media event, creating free publicity most gadget makers would kill for.

But Jobs's presence at the event also underscored how vital he's been to Apple's (AAPL) success and how hard it will be for his successors to replace him. I've argued here that Apple after Jobs will likely be successful, although maybe not the cultural phenomenon it is today. To further imagine how Apple might fare without Jobs's leadership, it's also helpful to look at another hugely successful American company that decades ago lost its iconic CEO -- Walt Disney Co. (DIS).

Like Apple, Disney started out in a California garage, growing in time into a global brand that became a part of the everyday culture of millions of people. While Apple's achievement was in making personal computers so intuitive they became intimately integrated with our lives, Disney was a dream factory, creating stories and images that shaped childhood imaginations for generations. (Jobs has also served on Disney's board of directors since Disney's 2006 purchase of Jobs's Pixar animation studio.)

Without Missing a Step

In its heyday, Disney's cultural influence was as large as Apple's is today. During the Depression-era 1930s, Disney changed the animation industry with Snow White and the Seven Dwarfs, the first feature-length cartoon and at the time a wildly ambitious project many considered foolhardy. Snow White became the highest-grossing movie up to that time, paving the way for other animated films like Dumbo, Cinderella and Bambi. Disney extended its media empire into TV with longtime staples such as Mickey Mouse Club and the Disneyland series of programs.

In December 1966, Walt Disney died of lung cancer, leaving the company in the hands of his brother Roy. The following six years turned out to be some of the company's most productive as Roy -- a co-founder -- took the reins. During Roy's tenure, Disney released The Jungle Book and The Love Bug -- the latter was the top-grossing movie in 1969 -- and it opened Walt Disney World in Florida in 1971. Roy Disney died in December 1971, leaving the company in the hands of lesser-known managers trained by Walt and Roy.

Roy Disney not only furthered the vision he had shared with Walt, he managed Disney through some of its best years. The chart below shows Disney's stock performance against the Dow Jones Industrial Average for the six years after Walt Disney died. By December 1972, Disney's stock had appreciated 1,140% from December 1966. The Dow had gained only 30%.

After 1972, however, Disney's stock entered a prolonged slump. The cultural climate shifted toward darker, edgier movies and away from the wholesome, family-friendly fare that was Disney's stock in trade. The new management had trouble navigating the changing market. Titles like Freaky Friday and The Rescuers were not only out of step with the times, they were a far cry from the caliber of Disney movies in earlier decades.

Disney would reemerge as a powerful media company in the late 1980s under the management of Michael Eisner, who joined as Disney's CEO in 1984 and served until 2005. But as the following chart shows, Disney's stock would underperform the Dow significantly for 15 years between 1972 and 1987.

What lessons does Disney's history offer Apple? While it's dangerous to read too many similarities into two companies in separate industries, Disney's performance after the loss of its iconic leader has some bearing on Apple's future. Disney thrived for several years after Walt's death for two key reasons: The company was able to build on his vision, and it was managed by Roy, a man who knew Walt's way of thinking as well as anyone.

What Happens Five Years From Now?

Apple seems to be on track for a similar period of success once Jobs ceases to have input into the company's management. Apple's main franchises -- iPhones, iPads, Macbooks and iTunes -- are positioned to continue growing for some time. Tim Cook may not be as experienced as Roy Disney was when he took control of Disney, but Cook's handling of Apple's day-to-day operations has left investors confident in his ability to succeed Jobs.

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Instead, the risks for Apple lie, as they did for Disney, several years down the road after the departure of its visionary leader. When Disney's market changed in the '70s, the company wasn't able to adapt as effectively as it might well have under Walt Disney. It simply lacked the instincts and insights needed to keep evolving with the times.

Apple could well face a similar period of crisis down the road. With the iPad, Jobs has achieved his decades-old vision of an immersive, easy-to-use home computer. What vision will guide Apple five years from now? That's a vital question with no clear answer.

Of course, for investors concerned with the next few quarters, what happens to Apple in several years is largely an academic discussion. But for Apple's loyal consumers, and the culture that the company has helped shape over the years, any loss of the company's innovative edge would be felt for a long time.

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