Microsoft CEO Search Drama Is Reason for Apple Investors to Be Thankful


The continuing CEO search drama at Microsoft should give Apple investors reason to appreciate Tim Cook and the job he's done over the past 28 months.

While Microsoft's search drags on, storylines have emerged about rifts among the board and that candidates were being driven away by worry over potential conflicts with meddling directors. Lately, some have called for Bill Gates to resign from the board of the company he founded.

Microsoft's stock, meanwhile, has missed out on the NASDAQ Composite's better than 16% growth over the past six months. Granted, that's partially due to the stock getting clobbered after a bad quarterly report on July 18, three days into that window. But even over the past three months -- with that quarter in the rearview -- Microsoft has trailed the composite's 10% gain by nearly 4 percentage points. That comes despite the company offering some of the most innovative products than it has in years, and despite its better position for growth in mobile, an area it had been conspicuously absent from for far too long.

The "steady hand"
Investors don't like uncertainty. In fact, nobody really likes uncertainty. And that's what's made Cook such a great person for the Apple job. Knock him for being a supply chain guy instead of a product guy. Rap him for not being an innovator or product visionary like Steve Jobs or Jony Ive. But one thing Cook offers is a steady hand.

For all the criticism Cook has taken in the press over the past two-plus years, many big news and tech outlets painted a prescient picture of Cook's time to come in 2009, when he was tapped to step in for Jobs as the founder took a medical leave to address his pancreatic cancer.

"Cook a steady hand to fill in for Jobs," read the headline in The New York Times. "Tim Cook: A Steady Go-To Guide for Apple," was how Bloomberg Businessweek titled its article.

You can't underestimate that effect on how Apple performed after Jobs' cancer returned and Cook became the permanent successor. With the passing of not only the company's founder, but also its main product visionary, Apple investors would have had every reason to believe shares would crater over the months that followed Jobs' death in August 2011. But that's not what happened. In fact, the share price took off, defying logic.

Two tales of succession
The post-Jobs Apple stock price that rocketed up past $700 per share did come back to Earth, of course, and criticism of Cook intensified with the drop. But let's put things into perspective. Apple after Jobs has fared far better than Microsoft did after Gates handed the reins to Steve Ballmer, despite the fact that Gates remained with his company.

Let's have a look:

MSFT Chart
MSFT Chart

MSFT data by YCharts

AAPL Chart
AAPL Chart

AAPL data by YCharts

An argument could certainly be made that the two companies were facing much different circumstances when these transitions happened. Ballmer became CEO when the dot-com bubble was bursting, dooming Microsoft to a big drop from which it never really recovered.

But Cook took the reins at a company with problems, too. Chief among them: the maturity of the mobile market that had driven explosive growth for Apple. Apple's share of mobile grew fast from 2007 to 2011. Its market share in smartphones doubled from 2008 to 2009. And then it better than doubled between 2009 and 2010.

But by the end of 2011, it faced stiff competition in smartphones and tablets from Google's Android on the software side and Samsung on the hardware side. As of the last IDC mobile survey, it was Android that was posting better than 50% growth in market share of the prior year, compared to Apple's 25.6%. Slowing growth, declining market share overseas, and tightening margins reflect the new reality: The mobile world that Apple revolutionized no longer belongs to the company.

Cook is a big reason why investors should continue to have faith. He may not be the product visionary that Jobs was or that Jony Ive is. And he may not inspire those "Oh wow!" moments at Apple events the way the company founder did. But Cook understands Apple culture. He is a great upholder of it.

That may be why the clearest articulation of what Apple is all about carries the name not of founders Jobs or Steve Wozniak, but of Jobs' successor. And it's the last line of the so-called "Cook Doctrine" that the now-CEO delivered in 2009 that sheds the most light on Apple's steady approach: "And I think, regardless of who is in what job, those values are so embedded in this company that Apple will do extremely well."

Investors have good reason to remain confident that Cook is right. And if he is, the innovation that kept Apple at the front of the pack will continue, even though the CEO's not the guy drumming up the ideas.

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John-Erik Koslosky owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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