How Apple's empire has grown with Tim Cook as CEO

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New York (CNN Business) -

When Tim Cook took over as CEO of Apple, it was a corporate transition like no other.

He stepped out of the shadow of one of America's best-known CEOs and took the reins of one of the world's largest tech companies that faced some uncertainty about how successful it might be.

After ten years of work, Cook now runs the most valuable company in the world, technological or not, and continues to be among the most influential.

More than a billion people around the world use their devices and tens of millions of developers have built businesses on their software platforms.

Cook took over from Steve Jobs as CEO on August 24, 2011, less than two months before the Apple founder passed away.

Since then, Apple's market capitalization has grown by around 600% to nearly $ 2.5 trillion, and its annual revenue has more than doubled.

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If Jobs was known for his ability to create innovative devices that redefined the consumer experience with technology, Cook may become known for expanding Apple's ecosystem, creating a suite of subscription services and other hardware products that complement the main iPhone business that Jobs launched.

Under Cook's leadership, Apple has grown from a premium device maker to a huge, multi-faceted company with businesses ranging from paid services to an Oscar-nominated film and television production studio.

He has overseen the acquisition of more than 100 companies, including Beats for $ 3 billion in 2014 and the purchase of Intel's smartphone modem business for $ 1 billion in 2019.

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Inside Apple, Cook inherited a company culture known for being relentlessly demanding and is now leading at a time when tech workers are increasingly speaking out on social issues.

(Cook himself, who in 2014 became one of the first top-tier CEOs to go public that he is gay, has been involved in advocating for LGBTQ + rights.)

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Cook has also been at the forefront of big corporate mistakes like the "Batterygate" and allegations of poor working conditions at his suppliers' factories.

A recent announcement about a new child protection initiative also turned into an unexpected public relations nightmare.

And it has weathered a number of external threats to Apple's business over the years, including, recently, feuds with the Trump administration, the US-China trade war and the Covid-19 pandemic.

What Cook hasn't done is launch another product as successful and disruptive as the iPhone, but he has found ways to keep Apple growing without it.

"It's possibly the most successful handover from force to force in corporate history," Mike Bailey, research director at FBB Capital Partners, said of Jobs' transition to Cook.

"Apple, frankly, needed an entertainer and a politician, possibly more than a stressed-out founder and micromanager," he added.

Bailey added, "He's maintaining the empire, rather than building it."

The growth of services

A month after taking over as CEO, Cook announced the launch of the iPhone 4S.

Since then, Apple has released nearly two dozen more versions of the iPhone in a wider range of prices, along with new generations of the iPad, Mac, and MacBook.

Cook has also overseen the introduction of new hardware products: the most successful, the Apple Watch in 2015 and the AirPods in 2016.

But even more important than the new devices that have seen the light under his leadership is the growth of Apple's services business.

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"From a hardware standpoint, I think you can argue that it has been more iterative than revolutionary, but I think that would minimize its contribution to the company," said DA Davidson analyst Tom Forte, adding that Cook expanded the notion. of what is Apple.

"He said ... 'What can Apple be? Apple can be a music subscription service, Apple can be a fitness subscription service, Apple can be much more than the App Store.'"

Even in the first five years of his tenure, Apple was drawing significant revenue from its Services division, which included products like iCloud, which launched in October 2011;

Apple Podcasts, which launched in 2012;

and Apple Music, which launched in 2015. In January 2016, Apple revealed for the first time that it had generated $ 20 billion in service sales in the previous year.

A centerpiece of Tim Cook's strategy has been the expansion of Apple services such as Fitness +.

Credits: Daniel Acker / Bloomberg via Getty Images

Since then, Apple has launched even more services, such as Apple Arcade, Apple TV +, and Apple Fitness +, along with a subscription package, which have further boosted the business.

In fiscal 2020, Apple generated about $ 53.8 billion in service revenue, which is about 20% of the company's total sales.

(Apple does not break down the sales of individual services.)

Apple's focus on services has allowed it to be less reliant on iPhone sales, which can be volatile from quarter to quarter and have started to stagnate, even falling under Cook at times.

One of Cook's main goals has been to offset the slowdown in iPhone growth.

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"He kept the iPhone party going, but solved a boom and bust problem by blowing up his service business," said FBB's Bailey.

Apple keeps making lots of money each year from iPhone sales.

But now it also has the more consistent and higher-margin benefits of subscription services to act as a buffer, as customers keep their devices for longer.

The services also give consumers more reasons to choose Apple hardware over others, and help the company get more dollars from each person who buys one of its devices.

What is expected in the future?

Cook has already said that he does not plan to remain at Apple in 10 years.

But most of the company's fans expect him to stick around for at least a few more years.

In that time, you will have many things on your plate that could shape the future of the company, including the long-rumored launch of an Apple car and augmented reality headset, as well as your continued efforts to build your own chips for your devices. devices.

But it will also face big challenges, like Apple's ongoing antitrust fight with app developers and regulators.

Forte also questioned whether Apple will be able to maintain its leadership position if the growth of Internet of Things devices makes consumers less dependent on smartphones.

Apple has yet to gain the same traction on connected home devices as Amazon's Alexa, and earlier this year it discontinued its original HomePod in favor of the cheaper mini version.

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"It can be argued that they [still] rely heavily on the iPhone," Forte said.

"I'm still trying to imagine what the future will be like and what happens when the smartphone is no longer the center of the universe," he added.

Under Cook's leadership, Apple has also been working to address its impact on the environment, including plans to achieve carbon neutrality by 2030. But since the company relies on a complex global supply chain and rare earth metals non-renewable to build its products, Cook will likely have to push the company's efforts further in the coming years, as climate change poses an increasingly existential threat.

Then there is the question of who will take over at the helm of the world's largest company when Cook leaves office.

Jeff Williams, Apple's current chief operating officer, dubbed Tim Cook's Tim Cook in the tech press, would be an obvious choice if he took over now.

But being only two years younger than Cook, that succession plan could be more questionable in a few years, Bailey said.

"It doesn't seem like there's another internal person, number two, ready to come out, so I think that's something Apple is going to have to start addressing in the next two years," he said.

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