Apple needs more formal delegation of Jobs’ power

January 17, 2011

By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

NEW YORK — Apple needs a more formal delegation of Steve Jobs’ power. The tech giant’s chief executive is handing day-to-day control to chief operating officer Tim Cook due to health issues. Yet he retains his CEO title. This is the third such move, and this time the handover is indefinite. However painful, a more formal transfer to an acting CEO would have been better.

Both the company and its shareholders can take comfort from the fact that the last two transfers — also to Cook — took place smoothly. Apple’s operations showed no signs whatsoever of impairment under caretaker management. Cook has worked at Apple for more than a decade and has been COO for several years. He’s clearly a safe pair of hands. Moreover, Jobs has promised to retain control over big strategic choices.

But Jobs’ fitness is, sadly, an increasing concern. The company hasn’t said exactly what the matter is, but this latest setback follows previous treatment for liver pancreatic cancer and an organ transplant. Furthermore, the open-ended nature of Jobs’ current respite will add to the worry for employees and investors alike.

In these circumstances, Apple would have been better served by explicitly naming Cook as acting CEO. That would leave Jobs as chairman where he could retain say over the Apple’s strategic direction without the gruelling daily chores of running the company. That is where he is most valuable anyhow. Such a division would provide clarity and give Cook a proper mandate given the responsibility of overseeing a $300 billion group.

Jobs plays an outsized role at Apple. He is arguably the best executive in technology. But his reputation also depends keeping the company on the soundest footing possible — even if that means formally loosening his grip.

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This sounds pretty ham-fisted I’m afraid. Jobs spearheaded the initiatives that have made Apple a world beater with products that have revolutionized the tech market… to remove him entirely from the picture at Apple or to severely diminish that capacity is to destroy that which makes Apple what it is. I would expect that barring a miraculous recover for Jobs (part deux) that the pricing premium that Apple stock receives should be cut down to industry standards, namely from 20+ times earning down to the 10-12x range – which means Apple below $200, and probably rather quickly.

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