Apple Under Cook: A Strong Year One, but With Challenges Ahead

Tim Cook's first year as CEO saw Apple continue to sell massive numbers of products and become the most valuable company in the world.

When Tim Cook took over as Apple CEO a year ago, replacing an ailing Steve Jobs who would die only weeks later, the question was whether Cook, a strong operations guy as COO, could bring the same vision and innovation that had defined his predecessor.

Cook had served as interim CEO several times before, during times when Jobs temporarily stepped down for health reasons. However, the job became permanent Aug. 24, 2011, when Jobs officially resigned and urged the board of directors to take on Cook, the longtime Apple executive, as CEO.

Fast forward 12 months, and it's hard to imagine a year going much better. If nothing else, four days before Cook's anniversary in the top seat, Apple's market capitalization reached about $623 billion, surpassing Exxon Mobil and making it the most valuable company in the world. Ever. The previous market of $618.6 billion was reached by Microsoft in 1999.

In addition, Apple's year got better Aug. 25, when a jury in California ruled that rival Samsung had violated iPhone and iPad patents, and ordered Samsung to pay Apple $1.05 billion in damages.

And that topped off a 12-month span in which, for the most part, Apple's hits just kept on coming. In October 2011, Cook, in his first such presentation as CEO, rolled out the iPhone 4S. Some analysts and fans were upset, having expected an iPhone 5, but the iPhone 4S-with such new features as the Siri "digital personal assistant"-quickly became the company's best-selling model.

In addition, Apple released the iPad 3 in March, adding to the company's dominance in the fast-growing tablet market and dwarfing its Android-based competitors. In August, IDC analysts said that of the 25 million tablets sold in the second quarter, iPads accounted for 17 million of them.

"The vast majority of consumers continue to favor the iPad over competitors, and Apple is seeing increasingly strong interest in the device from vertical markets-especially education," Tom Mainelli, an IDC research director, said in an Aug. 2 statement.

However, for all the product success under Cook's year-long tenure, the challenge for him will be over the next year and beyond. While the iPad 3 and iPhone 4S were released under his watch, they were the end results of development that began under Jobs. Even the upcoming iPhone 5-whose release will be the "biggest handset launch in history," Jefferies & Co. analyst Peter Misek wrote in an Aug. 17 note-is said to have Jobs' significant fingerprints on it.

After that, the products hitting the market will be Cook's to own, and analysts and fans will be looking to see if they carry the same innovation and the same flair for decision that had become commonplace under Jobs. And that will be among the key challenges ahead for Apple under Cook. Jobs seemed to have a particular understanding of what consumers were looking for-almost to the point, some said, where he anticipated those desires before consumers even knew it themselves. It will be crucial for Apple to continue with that trend.

That's because despite all of Apple's successes, competitors are not standing still. The various device makers that rely on Google's Android mobile OS are continuing to roll out myriad smartphones and tablets that are continuing to improve, and are waiting for any sign of weakness from Apple

And there have been some dings in the armor over the past year. Most significantly, Apple's stock took an uncharacteristic hit in July when Apple reported a slowdown in iPhone sales in the second quarter, as consumers held off buying the device in anticipation of the upcoming release of iPhone 5, which is expected this fall. The new phone is expected to offer a thinner profile, larger display and a quad-core processor, among other new features, though none of this has been confirmed by the notoriously close-mouth Apple. However, rumors of such features was enough to convince some buyers to hold onto their money until the iPhone 5 comes out.

Then there was the decision by Apple in July to remove its products from the EPEAT environmental registry, a move that was met by a significant backlash from journalists and bloggers, analysts and officials in such cities as San Francisco. Seeing the reaction, Apple executives quickly reversed the decision, saying they were putting their products back on the EPEAT registry.

Apple also found itself still under fire for working conditions at the Foxconn factories in China, where the bulk of the devices are made. In an email to employees in January, Cook refuted claims that the company didn't care about issues in the supply chain. "Any suggestion that we don't care is patently false and offensive to us. As you know better than anyone, accusations like these are contrary to our values. It's not who we are," he said in the email. In addition, in an un-Jobs-like move, Cook traveled to China to visit the factory himself.

Despite such bumps, Apple's first year under Cook was a strong one; it'd be hard to say otherwise, given the numbers-of products sold, and of money earned. And that's where Cook's challenges will come from. He'll have to find a way to maintain the high level of innovation in his products to ensure that the rabid fan base will continue buying them. And while it's an extraordinary feat to become the world's most valuable company, staying in that position is no easy task, particularly in a highly competitive industry where strong rivals are always gunning for No. 1.