This week: A look at who could succeed Apple Chief Executive Officer Tim Cook when he eventually retires, the company settles a $100 million lawsuit with developers and gives up basically nothing, and details on plans for a larger Apple Watch.
The Starters
This past week marked Tim Cook’s 10-year anniversary as Apple Inc.’s CEO. After a decade on the job and with the end of his reign closer than the beginning, it’s time to take another look at who could one day succeed him.
In 2011, Cook had the impossible task of filling the shoes of Steve Jobs, a one-of-a-kind product mind. Of course, Cook could never top Jobs’s legacy, but he successfully charted his own path as Apple’s CEO.
Cook has grown Apple’s stock more than 1,000%, turned the company into an operations powerhouse, went all-in on custom technologies, and expanded the product portfolio with new services, wearables and a wider array of screen sizes.
While Apple’s next leader will have different shoes to fill, they will still be big. Cook, who turns 61 in November, is all but assured to be Apple’s CEO into 2025, when 1 million shares designed to keep him at the helm finish paying out. If he wanted to extend longer than that, I’m sure Apple’s board of directors would be more than happy to let him.
But there are signs that’s not likely. The belief inside Apple is that Cook just wants to stick around for one more major new product category, which is likely to be augmented reality glasses rather than a car — something that’s even further out. He also understands that running a Silicon Valley company is typically a young person’s game, and he’s not going to stay far beyond his prime.
Apple plans to unveil a mixed reality headset — which blends AR and VR — next year, but AR glasses that are small enough to resemble classic frames are in development for a launch in the middle of the decade. Of course, Cook could decide to stay on longer (or shorter), but the combination of factors — the shares paying out in 2025, the launch of the glasses, Cook already saying he probably won’t be in the job in 10 more years and his age — leads me to believe he’s going to retire sometime between 2025 and 2028.
That’s a long time away, but Cook oversees a multitrillion-dollar empire with well over 100,000 employees, products that keep much of the world running, and a stock that often swings the market and retirement accounts of tens of millions of people.
There’s no downplaying how critical the role of Apple’s CEO is, and it’s never too early to speculate on who will take on the position. With that in mind, I’ve come up with some strong possibilities. Let’s start by looking at each member of Apple’s executive team:
- Kate Adams: Adams by many accounts is a sound general counsel, but since she’s a relative newcomer to Apple — and the company is likely eyeing a tech or operations executive for its next leader — I’d be surprised if Apple picked its top lawyer.
- Eddy Cue: I don’t think Cue, a 32-year Apple veteran, will stay as long as Cook. Similar to other Apple executives in their later years at the company, Cue is well into succession planning and has prepared three deputies to eventually take over his $50 billion-plus per year services division: Peter Stern, Oliver Schusser and Jennifer Bailey. Stern has gained responsibility over much of Cue’s portfolio, including the business side of TV+, News, iCloud, Fitness+ and bundles. He’s also taken a bigger role in product development, negotiations and marketing with the departure of the head of services marketing. Stern is a shoo-in as Cue’s successor, but Schusser, who runs Apple Music, and Bailey, who oversees Apple Pay and was previously the online store chief, are also capable.
- Craig Federighi: Federighi has the charisma and outside support to take the top job. He can run a company, as evidenced by overseeing thousands of engineers that push out software upgrades each year. He’s about eight years younger than Cook, has experienced Apple in both the Jobs and Cook eras, and has the technical chops. However, he’s dismissed speculation of a rise at Apple, and he seems ideally suited to his current role as software engineering chief. I am not convinced Federighi is stepping away or getting the top job, but if he were to make a move, look for Kevin Lynch or Sebastien Marineau-Mes to get his current gig.
- John Giannandrea: Giannandrea is the newest Apple employee on Cook’s team after defecting from Google in 2018. He’s an artificial intelligence and machine learning expert. If we’ve learned anything from Apple’s efforts over the past decade, it’s that such technology is not a core competency. But Giannandrea is trying to change that — despite a difficult first couple of years transitioning to Apple — and has added new responsibilities, such as oversight of the car project. Still, I don’t believe that a relative newcomer, especially one who runs one of the currently more minor aspects of the company, will become CEO.
- Greg Joswiak: “Joz” is the longest-serving Apple employee on Cook’s executive team. He was promoted to the senior vice president level just last year, but he has been in Apple’s innermost circle of important leaders for far longer. He’s been heavily involved in product management and marketing for all of Apple’s products for several years, knows the company inside and out, has technical savvy, and could certainly be capable of being Apple’s next leader. Being about four years younger than Cook and a clear Apple lifer, as well as coming from the product side, could put Joz in line to be a key candidate when Cook hangs it up.
- Sabih Khan: One of the newer members of the executive team, Khan was appointed upon the resignation of Jony Ive. His presence on the team means a third of its members — Khan, Cook, Williams and O’Brien — are ops executives. Operations is what allows the company to reach the scale it has over the past few years. With today’s top two executives both from that world, it wouldn’t be improbable for Apple to continue that formula. In that scenario, operating chief Jeff Williams would be chosen over Khan. But Khan is three years younger than Williams and could theoretically be a fit if Cook were to be replaced further down the line.
- Luca Maestri: Likewise with Adams, Maestri is clearly sound in his role as Apple’s finance chief and could probably run Apple capably. But I don’t see Apple picking its finance chief to run the entire company.
- Deirdre O’Brien: O’Brien has seen it all in her three decades at Apple. Before becoming Apple’s retail chief in 2019, she held several sales, operations and finance roles. She was also key to launching Apple’s retail stores a couple decades ago. As head of retail, she oversees the bulk of Apple’s employee base. As head of human resources, she runs one of the company’s key functions. She’s also about five years younger than Cook, so she could have a long Apple career ahead. Given her vast knowledge of Apple’s culture and involvement in many of the company's most important functions, O’Brien could certainly be a CEO candidate.
- Johny Srouji: Srouji has arguably been the most critical Apple leader over the past half-decade. His group is responsible for the chips that enable the iPhone, iPad, Apple Watch and now Mac, bringing yearly performance boosts. Without his team, Apple likely wouldn’t be as successful as it is today. Known as a no-nonsense leader, Srouji has the respect of his thousands of engineers globally, pushed Apple to expand its footprint, oversaw the company’s third-largest acquisition (Intel’s modem unit), and has expanded his scope to include new projects like an in-house cellular modem and custom cameras and screens. His importance to Apple certainly makes him deserving of a CEO role, but I don’t think a chip executive’s expertise is necessarily suited to the entirety of Apple.
- John Ternus: As the youngest member of Apple’s executive team, Ternus could have the longest runway at Apple. If he theoretically became CEO in five years, he could probably hold that role for well over a decade — perhaps longer than anyone else on this list. He took over as Apple’s hardware engineering chief earlier this year and has been in charge of iPhone hardware since last year, in addition to the AirPods, Mac and iPad long before that. If Apple is looking to put a manager of product development in charge of the whole company for a long time, the charismatic and well-liked Ternus could certainly be an option.
- Jeff Williams: If Cook were to step down in the next five years or so, you can look no further than Chief Operating Officer Jeff Williams to take over. He runs Apple’s entire supply chain and operations — from manufacturing to component sourcing to technical support. He’s involved in the day-to-day development of all of Apple’s hardware and oversees both the hardware and software groups for the Apple Watch. He recently took over Apple’s hardware and software design teams, which were once run by Ive. Williams is undoubtedly the second most important person at Apple, but only being about three years younger than Cook probably precludes him from being a decade-or-longer replacement — if that’s what Apple is seeking.
That leaves us with the four people who I think are real possibilities to take the role: Williams, Joswiak, O’Brien and Ternus. With Cook’s departure probably at least five years away, that list could change quickly — and someone could appear out of left field. But with one decade of Cook’s tenure in the rearview mirror, we’re right on schedule to start looking toward the future.
The Bench
Apple Watch Series 7 is set for a screen size boost. New Apple Watches are nearing, and this year’s highlight feature is an updated design, as I reported a few months ago. While last year’s upgrade centered on the blood-oxygen sensor, this year’s is all about a new design with a flatter display and edges, a faster processor and slightly larger screens. I don’t expect any major health upgrades until at least next year, when we may see a body-temperature sensor.
This year’s watches will come in 41-millimeter and 45-millimeter sizes, up from 40 and 44 millimeters. I’m told that Apple will bundle multiple new watch faces to take advantage of the bigger screen, including an updated Infograph Modular face. This will be the second time in the Apple Watch’s history that the company has increased the display size, following the Apple Watch Series 4 in 2017.
Apple settles with U.S. app developers, but basically gives up nothing. The big Apple news at the end of the week was that the iPhone maker settled a lawsuit with a group of U.S. app developers who alleged that they were overcharged for years by Apple’s revenue cut. The settlement indicates Apple knows there was some wrongdoing (it wouldn’t settle otherwise, trust me), but the company made few major concessions. It is paying out $100 million collectively to developers who generated under $1 million annually apiece over the past several years.
It’s not changing its pricing structure, it’s still banning third-party app stores and sideloading, it’s not changing its review process, it’s not allowing apps to advertise outside payment methods within their software, and Apple is still requiring developers to use its payment system. Basically, developers got none of the big changes they’ve been asking for.
Beyond the $100 million, Apple said it is committing to keeping its existing search engine algorithms and 15% revenue share program for developers making under $1 million annually for the next three years (I would be surprised if Apple was going to change those anyway). It’s also going to publish an annual transparency report, which it essentially already does on its website.
The biggest change is that Apple is giving developers full permission to advertise alternative payment methods and pricing (outside of the apps themselves) via email and other communications — based on emails collected with permission from users. This practice was previously frowned upon, but was done by several app developers. So nothing is really changing here except Apple is putting that policy in writing, rather than just turning a blind eye to the practice.
And don’t look past the fact that the judge in this lawsuit is the same one nearing her verdict in Apple’s showdown with Epic Games Inc.
South Korea is likely to bar Apple and Google from requiring the use of their in-app purchase systems. Something to look out for this week: South Korea will likely rule that Apple and Google can’t require developers to use their in-app purchase systems for the App Store and Google Play. That would be the biggest shoe to drop in the ongoing scrutiny of the App Store and would undermine Apple’s business model.
But such a change wouldn’t break the bank for Apple in South Korea. The company has paid out $7.3 billion to developers there since 2008. Some back-of-the-envelope math based on that figure indicates that only about 3% of Apple’s total App Store revenue comes from the country.
There is definitely reason for Apple to be concerned, though: If one country enacts legislation that upends the App Store, other countries could feel the urge to follow. Apple is under plenty of scrutiny stateside, and local legislators will take any international movement as fodder for their own efforts.
Peloton slashes original Bike price by 20% while profit sinks. Some positive news for those waiting on ordering a Peloton: The company has cut the price of the original Bike from $1,895 to $1,495, making it quite a bit more affordable. They’re also lengthening payment plans to 43 months from 39 months to lower your monthly payment on the Bike+ and Tread. In other news, the cheaper Peloton treadmill is back on sale tomorrow after a few months’ hiatus due to a recall (the Tread’s screen was found to detach and, in some cases, fell on users). A bigger concern: the pricier Tread+, which was recalled after a child died by getting pulled under the device. That product remains unavailable, but Peloton said last week that it was “working on design modifications with an eye toward making it one of the safest products in fitness.” If the company can’t pull that off, it might just want to phase out the product. Executives could be looking for a reason to cut costs anyway, with profitability out the window and not expected to return until fiscal 2023.
The Schedule
Device launches are near. Apple, Amazon.com Inc. and Alphabet Inc.’s Google like to hold their launch events in September and October. So watch out for new iPhones, AirPods, Pixel phones and Echo devices in the coming weeks.
Post Game Q&A
Q: This year’s iPad upgrade was pretty minor aside from the M1 chip. Will next year’s be a larger change, and what should we expect?
Q: What are the chances WWDC 2022 is in-person?
Q: Why is Apple not (yet?) requiring employees to get vaccinated like many other companies?
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