Adventures of Apple

"Tripp Mickle recently joined The New York Times to cover Apple, after nearly eight years at The Wall Street Journal. He has a book out this month, “After Steve: How Apple Became a Trillion-Dollar Company and Lost Its Soul.” I’ve edited his answers.

When Steve Jobs died in the fall of 2011, many thought Apple wouldn’t be able to thrive without him. Of course, the opposite has come true as Apple has become one of the most valuable companies on the planet. To what do you attribute that?

A.: Tim Cook and the rest of the Apple leadership team deserve a great deal of credit for proving the skeptics wrong. Early on, Cook did an admirable job of keeping together the team Jobs assembled and encouraging it to find a new way of working. He empowered Jony Ive, Apple’s design chief, to lead the development of the Apple Watch. The project gave birth to AirPods — and a nearly $40 billion annual business. It also alleviated, for a time, questions from customers and Wall Street about whether Apple could create another new product category.

Perhaps more important, Cook increased Apple’s financial discipline, controlled costs and found a way to squeeze more sales out of the iPhone through apps and subscription services. The profitability of that business increased Apple’s value in the eyes of Wall Street. Essentially, Cook recognized that the iPhone had made Apple more powerful than any cable or wireless company in history because its signature product, as Oprah said, was in one billion pockets.

Apple has turned in consistently spectacular financial results. Who deserves the credit: Tim Cook or the iPhone itself?

The two are inseparable. When Tim Cook stepped in as chief executive in 2011, Apple was shipping 20 million iPhones a year. Today, it ships 200 million. It has done so without a major slip-up — and even benefited from a calamity at rival Samsung, which was challenging Apple until exploding Galaxy phones caused its business to founder.

Meanwhile, it was Cook who laid the groundwork for the iPhones to take off. He negotiated the signature deal with China Mobile that made the iPhone available to a potential 700 million new customers in China. He later identified and leaned into the iPhone’s power as a distribution system to sell more services.

In much the same way Jobs expertly marketed Apple devices to customers, Cook expertly promoted the potential of services to Wall Street, assuring investors in 2017 those sales would more than double in the coming years. In typical Cook fashion, he delivered on that promise ahead of schedule.

Apple seems to be firing on all cylinders now, so what are the biggest challenges it faces in the future, leaving out the stock market declines of late?

China. China. And China. In a world of rising geopolitical tensions and deepening awareness of the plight of Uyghurs in Xinjiang, Apple is likely to face pressure from United States lawmakers, employees and customers to diversify its supply chain and begin manufacturing products at scale outside China. Doing so won’t be easy. Apple has struggled with initial efforts to spin up product assembly in India, where poor workplace conditions at a Foxconn plant required an investigation.

Apple also faces trouble in the West. Regulators and lawmakers in the United States and Europe are both scrutinizing the 30 percent cut it takes of App Store sales. New rules or penalties could impair that all-important services business that Cook built.

What are the sectors Apple needs to move into and what is the overall timeline for the next big thing for the company?

A.: There’s a principle that business leaders refer to called the law of large numbers. Essentially, once a business’s sales swell, a company has to find an even bigger business to move into in order to deliver sufficient revenue growth. Many years ago, Apple recognized that it had saturated the consumer electronics industry and would have to jump into new and enormous sectors to find growth. It has looked at health care, transportation and energy. Its foray into health has delivered limited sales upside so far beyond the Apple Watch.

The most promising — and confounding — opportunity is probably in transportation. The company began working on a car in 2015 and wanted to release it in 2019. But it has been stymied by differing opinions internally about what it should be. Should it be an electric vehicle that competes with Tesla? Or a fully autonomous vehicle that leapfrogs others in the market? It is still sorting through those differences. The latest projections are that it would launch a car at the earliest in 2025."