Apple's Tim Cook seeks the 'mother of all opportunities'

If Apple is to maintain its momentum, Cook and team need to do what they did with the iPhone and iPad -- spawn entirely new markets.

Dan Farber
4 min read
CEO Tim Cook (Credit: Josh Lowensohn/CNET)

In a recent meeting with employees at Apple's headquarters, CEO Tim Cook reportedly addressed the steep drop in the company's stock price that came after Apple posted $54.5 billion in sales last quarter and $13.1 billion in profit -- both records. As reported by 9to5 Mac, Cook took a shot at the highly lucrative oil industry in his cheerleading efforts. "The only companies that report better quarters pump oil," Cook reportedly said. "I do not know about you all, but I do not want to work for those companies."

Predictably, creating and manufacturing the most beloved technology gadgets is viewed as more personally and professionally fulfilling by Silicon Valley than drilling, refining, and distributing the fuels that power the planet. An iPad is cool and innovative, whereas a gallon of gasoline is a polluting liquid gold one cannot live without.

Apple and ExxonMobil factory workers earning their livings. (Credit: Foxconn/ExxonMobil)

Apple and oil giants like ExxonMobil are in a rarefied club, generating enormous amounts of revenue and profit. After Apple's recent stock price drop, ExxonMobil replaced it as the most valued company, with a market capitalization of about $417 billion compared with Apple's $412 billion.

But as Cook likes to say, following in the footsteps of Steve Jobs, Apple has higher aspirations than just turning silicon, or oil, into profits.

"The most important thing to Apple is to make the best products in the world that enrich customers' lives. That's our high order bit," Cook said during the January 23 first-quarter earnings call. "That means that we aren't interested in revenue for revenue's sake. We can put the Apple brand on a lot of things and sell a lot more stuff, but that's not what we're here for. We want to make only the best products."

The question now is whether that make-the-best-products mission will translate into a strong stock performance anytime soon. Of course, making Wall Street happy is not only about making the best products. It's also a game of setting expectations and then exceeding them, something Apple had down to a science for many years.

That pattern could get a shot in the arm with some new products and updates, says Nomura Securities' Stuart Jeffrey. But that's unlikely to happen right away.

"To re-accelerate growth, Apple likely needs to launch new products, yet few seem likely before June," Jeffrey said in a note to investors last week. "iOS 7 could have the greatest impact, yet recent management changes suggest a major advance is unlikely in the near-term. A China Mobile deal could also boost the stock, yet the timing of this remains uncertain...This leaves only a $300 iPhone or a premium iPhone as likely catalysts."

Apple quarterly reports

For the near-term, Cook appears to be betting that the iPad, which was introduced three years ago, will fuel Apple's growth engine. In last week's earnings call, he described the iPad as the "mother of all opportunities" in reference to taking advantage of the shrinking PC market.

"On iPad in particular, we have the mother of all opportunities here, because the Windows market is much, much larger than the Mac market is," Cook said. "And I think it is clear that it's already cannibalizing some, and I think there's a tremendous amount of more opportunity there and as you know I've said for two or three years now that I believe the tablet market will be larger than the PC market at some point, and I still believe that. And you can see by the growth in tablets and the pressure on PCs that those lines are beginning to converge."

Cook noted that last quarter Apple fell short on fulfilling demand for the iPad Mini, but he expects to fix that problem this quarter. Apple sold 22.86 million iPads last quarter, up from 15.4 million in the same quarter of 2011. The company did not break out the number of iPad Minis sold, but it's clear that the smaller iPad is helping to drag Apple's overall iPad margins downward.

Expectations are that Apple will refresh the iPad family in the second half of the year, and sell more than 100 million iPads for the calendar year, driven in part by cannibalizing sales of Macs and Windows PCs. Since the iPad began shipping in April 2010, Apple has sold more than 121 million units.

But Apple is facing increased competition and margin pressure as the smartphone and tablet categories mature. In Singapore and Hong Kong, for example, iPad and iPhone market share have been falling over the last year as Android-based devices pick up momentum, according to StatCounter.


If Apple is to maintain its momentum, Cook and team need to replicate the unique successes of the iPhone and iPad, getting a head start on competitors by spawning new markets. Some speculate that an Apple TV solution will be the next "mother of all opportunities." Perhaps Apple's version of Google Glass, or other kinds of wearable devices will keep Apple at the head of consumer adoption of emerging technologies. Cook invokes the cone of silence on Apple's future breakthroughs.

Regarding Apple TV, Cook said last week, "I have said in the past this is an area of intense interest for us, and it remains that. And I tend to believe that there's a lot we can contribute in this space, and so we continue to pull the string and see where it leads us. But I don't want to be more specific."

Cook can continue to pull the string, but it's uncertain whether he can produce the next big thing, another "mother of all opportunities," needed to maintain Apple's cool factor and superior margins. Ultimately, Cook's success as CEO will be judged on how well he does inventing the future rather than exploiting the past.