Case 20 Apple Inc.
Taking a Bite Out of the Competition*
In January 2011 came the news that Apple's visionary leader and CEO, Steve Jobs, would be taking yet another medical leave of absence. He did not say when he would return or why he was leaving, but the hints were ominous. The announcement prompted speculation of the return of pancreatic cancer, which was the cause of previous medi-cal leaves by Jobs. In a letter to his 50,000 employees, Jobs handed off daily control of the company to Apple's chief operating officer, Timothy D. Cook. He referred to his management team's plans for 2011 and sounded an unusual emotional note: "I love Apple so much and hope to be back as soon as I can."1 For shareholders, the announcement of Jobs taking another medical leave was troubling news. Apple Inc. shares
*This case was prepared by Professor Alan B. Eisner of Pace University and Professor Pauline Assenza of Berkeley College. This case was solely based on library research and was developed for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2011 Alan B. Eisner.
Exhibit 1 Apple Sales
dipped, and investors voiced their concerns for the future of the world's largest technology firm. It posed yet again the unavoidable question that now loomed over 35-year-old Apple: What happens to a modern company whose innova-tions and inspirations are so closely tied to the vision of one leader when that leader's influence is in decline?2 The company tried to downplay the impact of his departure. It tried to bury the news by announcing it on January 17, the Martin Luther King holiday in the United States, and then by presenting blowout financial results the next day. During a call with stock-market analysts, Cook said, "We feel very confident about the future of the company." Apple had every reason to be confident.3 In the 2011 first quarter, Apple reported $26.7 billion in revenue, up 70 percent from a year before (see Exhibits 1 and 2).4 Although Apple may have mapped product plans for 2012 and beyond, analysts believed that without Jobs' stub-bornness and obsession about process and product details, Apple would never be the same.
Product Net Sales 2010 (in millions) Change 2009 (in millions) Change 2008 (in millions) Desktops $ 6,201 43% $ 4,324 (231% $ 5,622 Portables 11,278 18 9,535 9 8,732 iPod 8,274 2 8,091 (12) 9,153 Music 4,948 23 4,036 21 3,340 iPhone* 25,179 93 13,033 93 6,742 iPadt 4,958 N/A N/A Peripherals 1,814 23 1,475 13 1,694 Software, services 2,573 7 2,411 9 2,208 Total net sales $ 65,225 52% $ 42,905 14% $ 31,491 Cost of sales 39,541 25,683 24,294 Gross margin $ 25,684 $ 17,222 $ 13,197 Gross margin % 39.4 40.1 35.2 Research and development $ 1,782 $ 1,333 $ 1,109 Percent of net sales 2.7% 3.1% 3.0% Selling, general, and administrative $ 5,517 $ 4,149 $ 3,761 Percent of net sales 8.5% 9.7% 10.0%
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Case 20:: Apple Inc. C141