Apple's Tim Cook Should Be Replaced by Jon Rubenstein: Analyst

Global Equities Research says Apple CEO Tim Cook has lost the confidence of supporters and, with his CFO, should be replaced.

Apple's shareholders, employees and developer community have lost confidence in CEO Tim Cook, analyst Trip Chowdhry, with investment firm Global Equities Research, told investors in a March 8 report.

Better suited for the job, the firm said, may be a team of Jon Rubenstein—the so-called "father of the iPod," who left Apple for Palm, where as CEO he led the development of webOS and the Palm Pre series of smartphones—and former Apple CFO Fred Anderson, who left in 2004 and was succeeded by Peter Oppenheimer.

Oppenheimer last week announced plans to retire in September and will be replaced by Luca Maestri, Apple's vice president of Finance. Rubenstein left Hewlett-Packard (which purchased Palm) in January 2012 and is currently on the boards of Qualcomm and Amazon.

Apple's lethargic product launch cycle has for some time prompted headlines and kept analysts (if not also consumers) in states between impatient and irked. The market has long been expecting new product categories from Apple—an iWatch and an iTV, namely. But these products seemingly continue to be put off.

In January, BTIG analyst Walter Piecyk told investors that his firm expected a new product capable of generating $5 billion in revenue that never materialized. "We can't say we aren't concerned," Piecyk wrote in his research note.

Apple has said it moves slowly because beauty and perfection aren't things that can be rushed. Global Equities suggests Cook has no reason to rush.

"Cook is being incentivized to operate in a comfort zone of complacency until April 2016," said the report.

It expanded, "Tim Cook's compensation package prior to June 2013 enabled vesting of 500,000 shares in August 2016. This incentive was consistent with Tim Cook being complacent about introducing new products in the near-term and allowed for the systematic destruction of shareholder value of more than $240 billion, the largest destruction of value ever witnesses in the U.S. equity market for a single company."

The report also drove home that loss another way.

"When $63 billion of shareholder wealth was destroyed at Enron, it shook everyone's confidence," states the report. "Apple's destruction of shareholder value is much larger and has occurred in just over 12 months."

The comparison is an awkward one—Enron was overstating its profits, among other sins. But money lost is money lost, and Global Equities recommends replacing Apple's CEO and CFO "sooner rather than later" to prevent "further destruction of shareholder value."

The message the firm is receiving from developers, it said, is the same.

"'Under Tim Cook, Apple has not launched a single new product … where is the iWatch, where is the AppleTV?'" the report said, quoting the developer community at large.

Where Apple did create an opportunity, with the introduction of iBeacon in iOS 7, it squandered it, says the report. Qualcomm "seized the opportunity by creating its own proximity commerce platform called Gimbal."

The firm believes Qualcomm has "beaten Apple in its own game." According to one "frustrated developer," the report added, "Qualcomm, with its Gimbal platform, is eating Apple's lunch. … What is Time Cook gonna do?"

What he should do is get out of the way, the report reiterated, adding that Apple needs a CEO who can bring innovation back to Apple and a CFO who can increase shareholder value by "fundamental innovation and not by gimmickry."

Rubenstein and Anderson, the report concluded, "would be best to turn around the destruction of shareholder value at Apple."

Cook and his team have repeatedly stated that making great devices are their priority, not sales figures. During Apple's Feb. 28 shareholders meeting, Cook reportedly became visibly irritated by a representative for a conservative think tank who asked that Cook vow to pursue sustainability initiatives only if they are profitable.

"When we work on making our devices accessible by the blind, I don't consider the bloody ROI," Cook retorted. "If you want me to do things only for ROI reasons, you should get out of this stock."

Apple, during its fiscal 2014 first quarter, sold 51 million iPhones—a quarterly record for the company—and brought in revenue of $57.6 billion (another record) and a profit of $13.1 billion.

Cook, declining to confirm during the call whether Apple will introduce a new product category this year, told analysts, "I think our customers are going to love what we're going to do."

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