- Is Tim Cook and the management to blame for Apple stock price falling below $100?
- Trip Chowdhry had some harsh words for the CEO and board and placed blame on them for destroying shareholder value.
- But under Cook Apple has experienced huge growth in its top line, great margins in its bottom line, and solid returns to shareholders.
A quality management team is very important for investors. For some investors, it is the most important feature worth measuring to determine whether a company is investable or not. So when Trip Chowdhry from Global Equities went on the attack against the management team of the world's most valuable company, it may have come as a shock to some. Calling Apple (NASDAQ:AAPL) board "callous," and stating Tim Cook has "zero vision/ zero passion," Chowdhry cites the company's shrinking PE multiple under current management to justify why shareholder value is being destroyed. But are the comments really justified? Are Tim Cook and management really destroying shareholder value?
A lot of people complain that Tim Cook hoards cash, but then what did Steve Jobs do? Under Cook, Apple stock offers a reasonable dividend yield, which would have likely never been a thought under Jobs considering he had never paid out a regular cash dividend to investors. Apple's $200 billion capital return program is an example of how the company is returning capital to shareholders under Cook. Do you think shareholders would have the same level of benefits from dividends and buybacks under Jobs as they do under Cook? I don't think so. The chart below shows Apple stock performance since Tim Cook became CEO on August 24, 2011.
Many people might give credit to Jobs for the vision of the iPod, iPhone, and iPad, as well as his ability to market them, but that's simply not enough to stimulate continuous growth. Trying to chalk up the largest company to an idea and a good marketing plan is oversimplifying it. Under Cook revenue grew 116% from 2011 to 2015. And as competition in the smartphone industry increased, Cook was able to maintain perhaps the most impressive operating margin. Maybe he doesn't have the tech savvy imagination of a Jobs, but when we overlook the importance of manufacturing and supply chain management, we are overlooking how much of an impact Cook has had on Apple's top and bottom lines. Huge revenue growth and great net margins have been constant under Cook.
For people who use Apple products and are awaiting the next groundbreaking innovation, I can understand why Steve Jobs might be missed. But for those who are complaining that Tim Cook has not don't right by shareholders, I disagree. Shareholder value should be measured with a heavier emphasis on financial performance than innovation, and that is where Tim Cook has done right. Incredible growth, great margins, and capital returns to shareholders are some of the most important things that Tim Cook has brought to Apple.
However, I also agree that innovation should be better when competing against a growing number of powerhouse tech companies. Many smaller companies are outspending Apple significantly on R&D which is perhaps a driver for their higher PE multiples, but many of them don't distribute cash to their shareholders and return is tied exclusively to their stock price performance. I don't have a crystal ball to see what is in store for Apple in the future, however, I think Tim Cook's track record with Apple speaks for itself. I would not sell Apple stock because of the current management.