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Does Apple's Tim Cook have a lucrative exit strategy?

Rob Enderle | April 29, 2013
Apple profit fell in the quarter that ended March 30. CEO Tim Cook also announced that the company plans to give shareholders $100 billion of Apple's massive reserves.

It was hard to listen to the second quarter financial report from Apple and not imagine Steve Jobs spinning like a top in his grave.

When Jobs took over Apple, the company was awash with debt, mere months from going bankrupt and selling way too many products to manage. Cook's stated plan is to eliminate Apple's cash reserves, increase debt and build a lot more variety into Apple product lines. It reads like he's planning to return Apple to how it was when Jobs took over-hopefully short of the "nearly bankrupt" part.

What's really going on? Did Cook really miss everything Jobs should have taught him in the years the two worked together-or is there a plan afoot that we don't understand? Assuming someone at Cook's level is an idiot isn't in itself wise; rising to that level requires a certain amount of intelligence and, as COO, if nothing else Cook should understand numbers.

Here's what I think could be going on.

Tim Cook Is Toast as Apple CEO

At the outset, Cook had to know that the only reason Jobs wanted him for CEO was because Jobs thought until the very end that he could come back. Given the choice, Jobs believed Apple's board would pick him. In other words, Cook was selected specifically because Jobs knew he couldn't do the job and would be an excellent placeholder because he was so badly matched.

Even if Cook missed that mythical board meeting, watching the company shed value at a nearly unheard of rate-basically undoing years of slow-valuation increase in a few short months-would be enough to put him on the short list of soon to be ex-CEOs anyway. Given his astronomic salary, it's unlikely he'd ever get another CEO job-unless he founded a company, and he really isn't the entrepreneurial type.

Cook likely knows his days are numbered, but he likely wants two things: To maximize his stock holdings, which he'll likely have to divest soon after leaving Apple, and to leave a legacy of being better than any Apple CEO who follows him. What happens to Apple after Cook leaves will reflect directly on him. If Apple gets better, Cook will look like an idiot. If Apple continues to decline, the impression will be left that no one could have stopped the free fall, and the board will look like idiots for letting Cook go.

Cook's Stated Plan-and a Possible Plan

Cook's plan is to give back nearly $100 billion of Apple's reserves to stockholders, to build a new Apple headquarters (currently estimated to cost $5 billion) and then institutionalize a dividend program that will make it nearly impossible to build back up a reserve. In addition, because most of the money is held overseas to avoid U.S. taxes, Apple will have to borrow most of the $100 billion it has slated for a stock buyback. This will tie Apple to a massive amount of debt.

 

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