4 Areas Where Apple's Cook Could Outperform Steve Jobs

Apple COO Tim Cook
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Apple COO Tim Cook

"Tim Cook has a different personality than Steve Jobs, and I think that he might be open to more options than Steve Jobs," explained Allen Nogee, an analyst at tech research firm In-Stat. "He doesn't want to depart too much from Steve Jobs' [vision], at least initially, but I think as time goes by we will see more deviation."

More reserved than the fiery and flamboyant Jobs, Cook nonetheless built an impressive reputation during his time role as Apple's COO.

But with the iPhone maker set to announce its fourth-quarter results on Tuesday, investors are eager to see glimpses of the 50-year-old's management style, not to mention his long-term plans for Apple.

Steve Jobs, Silicon Valley's greatest innovator, will be an impossible act to follow, although experts have identified key areas where Cook could outperform his iconic predecessor.

Carve Up the Cash

Apple remains one of the few holdouts in the tech sector that avoids dividend payments , preferring instead to sit astride its vast $76.2 billion cash pile.

The tech giant stopped paying dividends in 1995, opting to focus on growth at a time when the company was facing stiff competition from the likes of Microsoft. More than a decade and a half later, however, Apple is tech's biggest hitter but still maintains an aversion to dividends.

With the CEO change, there are calls for the gadget maker to rethink this strategy.

TheStreet reader Carrie Pollock, for example, urged Cook to implement a dividend or a stock split, in response to a question posted on Facebook. This issue, however, has divided investors, with some arguing that the size of the Apple cash mountain is now hard to justify.

Other investors see Apple's cash haul as providing security and the flexibility needed to extend the company's product line. A share buyback, which would be immediately accretive to Apple's earnings, would also be an option, although there have been no indications of Apple going down that road.

Last October, during Apple's fourth-quarter 2010 conference call, Jobs explained that the company was keeping hold of its cash for "one or more strategic opportunities" in the future. Whether this involves a major acquisition or the development of expensive new technology is unclear.

Either way, expect analysts to quiz Cook on Apple's cash plan during the company's fourth-quarter conference call.

Bolster the Board

"Maybe Cook might make some changes in the [Apple] board, bring some new blood in and expand it," said Joel Achramowicz, senior vice president of equity research at investment bank Blaylock Robert Van. "People have talked about the board being a little bit small, so expanding the board would add some perspective, something new."

Apple has a seven-person board, which includes former U.S. vice president Al Gore, J.Crew CEO Millard Drexler, and Andrea Jung, the CEO of Avon Products .

Intel, in contrast, has 11 people on its board, while International Business Machines has 12 directors.

Jung, along with Genentech Chairman Art Levinson, currently serve as co-leads of the Apple board, although there have been recent calls for Apple to appoint an independent chairman. This would be a non-Apple insider who would help Cook steer the company in the right direction.

Apple's board has faced criticism in the past for lack of transparency, particularly around succession planning, although the company's directors can point to their biggest success: Apple's share price.

The iPhone maker's stock has grown more than 4,500% over the last 10 years, a stark contrast to fellow heavyweight Microsoft, which has seen its shares slip 3% over the same period.

New Technologies

Could Cook add new technologies to the iPhone that were shunned by his predecessor? Quite possibly, according to In-Stat's Nogee, who think that this would further differentiate the phone from its competitors.

"The phone industry is tough. It's getting more competitive now with Android and Windows phone coming out," he told TheStreet.

Specifically, Nogeea thinks thatnear field communication, or NFC, a swiping technology used for mobile payments, would be a smart move for Apple.

Rival Google, for example, is using NFC for its eponymous Google Wallet smartphone app, which has the backing of Visa, Citigroup and MasterCard .

Handset makers Nokia , Samsung and LG also have jumped on the NFC bandwagon.

"There's interesting things in near field communication technology and electronic purchases with the phone," explained Nogee.

With consumers looking to use their phones as mobile wallets, there were rumors NFC technology would form part of Apple's latest iPhone announcement, although this did not materialize. It's not just NFC that could be high on Cook's agenda, according to the analyst.

The Apple chief should push exciting new display technologies such as Pico Projectors, which are miniature, laser-based image projectors, he said.

Apple may already be on this path, if a recent patent application from the Cupertino, Calif.-based firm is anything to go by.

The filing describes a technology that shares images between projected displays on different devices, hinting at mini projectors for future iOS offerings. The technology will even detect multitouch gestures on the projected displays, according to the application, a space age feature that would undoubtedly wow Apple's many fanboys.

Clean Up the Supply Chain

Cook, a logistics guru, is already facing calls to turn his attention to Apple's suppliers, particularly working conditions at some of the company's contractors.

TheStreet reader Stephen Nuchia, for example, responding to a question on Cook's strategy that was posted on Facebook, urged the new Apple CEO to "establish humane working conditions throughout the supply chain." Apple has also had to defend itself against alleged pollution by suppliers that make its products in China.

A spokesman for the tech giant told TheStreet that Apple is committed to "driving the highest standards of social responsibility" throughout its supply chain.

"We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made," he explained in an email. "Suppliers commit to the Apple Supplier Code of Conduct as a condition of doing business with us, and we monitor their compliance through a rigorous program of onsite factory audits."

Apple, unlike most tech companies, also publishes an annual report on "supplier responsibility." In this year's report, Apple noted it extended its supplier monitoring program and has also been working aggressively to prevent the hiring of underage workers.

Audits conducted by Apple in 2010, however, found 91 cases of underage labor within the supply chain, according to the report. An inspection by Apple in 2009 had found evidence of 11 underage workers.

One Area That Shouldn't Change

Cook will undoubtedly maintain Apple's iron grip over its supplier ecosystem, aiming to ensure that the tech giant gets the components it needs for future product launches. With a coveted spot inside, say, a new iPhone or new iPad up for grabs, suppliers have to jump to Apple's tune.

Just because a chipmaker is in, say, one version of the iPhone, doesn't guarantee it a place in the next generation of the product.

While the company's supply partners are bound by an omerta-style code of silence toward the gadget giant, "teardowns" of the latest gear shed some light on the component makers riding the Apple wave.

Power amplifier specialist TriQuint , for example, has been cited as the big winner within Apple's new iPhone 4S. The Hillsboro, Ore.-based company, which provided components for the original iPhone 4, did not feature in the Verizon version of the product but is back in the latest iPhone.

A teardown performed by the iFixit.com Web site, reveals two chips from power amplifier specialist TriQuint within the new iPhone 4S, sending the company's shares surging last week.


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