‘Tim Cook, you’re fired!’ More dumb advice from Wall Street

If you want to see how Wall Street’s view of the technology world is out of sync with the real value of Apple and other companies, simply go to a site like Yahoo Finance and call up a chart comparing the market share value of Microsoft and Apple over the last two years.

Since March 2012, Microsoft’s share price has climbed 20 percent, while Apple’s has slipped by more than 11 percent. In the same time period, Apple launched a bevy of successful products, including the new iPhone 5s and 5c, which sold more than 9 million units in just one weekend. What’s Microsoft done? It launched Windows 8, arguably the least popular OS the company has shipped since Windows ME. Oh, and it lost a nearly $1 billion on the initial versions of the Surface tablet.

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Almost as telling, and certainly more ironic, is what happened to Microsoft’s shares on Tuesday: They jumped to a level not seen since the dot-com boom. Why? Because of the rumors that its next big product will be … drumroll, please … Office for the iPad.

If that product turns out to be disappointing (how much do you want to bet?), the share price will likely slip, but the point remains: Wall Street can be clueless about the real value of technology. If its judgement affected only investors, many of us might not care. But when bubbles pop or good companies get massacred, a lot of people suffer beyond the trading floor.

There’s already been plenty of digital ink spent on discussions the wildly inflated values of startups and lunatic prices paid for tiny companies (hello, WhatsApp). But the disconnect goes deeper than startups, and it extends across the whole technology landscape.

There are few better examples of this myopia than the recurring calls on Wall Street and the punditocracy to fire Apple CEO Tim Cook, a move that would be a huge mistake.

The sanctity of Steve Jobs and the sins of Tim Cook Cook pulls down a huge paycheck, but sometimes he must wish that all he has to worry about is Apple’s supply chain, which is what he did as COO before Steve Jobs died. Following in the footsteps of Jobs has to the toughest act in all of business. Jobs brought Apple back from the dead, invented new product categories, and cultivated a ninja-like persona that captivated the media beyond all critical bounds (and both inspired and terrified Apple employees).

It’s no wonder that the media (I’ll get back to Wall Street in a bit) has a ready-made story line, represented very well by the title of the newly published book “Haunted Empire: Apple After Steve Jobs.” The book’s author, Yukari Iwatani Kane of the Wall Street Journal, writes that Apple is “a cult wrapped around a dead man.” I have no idea if Apple employees really feel that way, and I’m not sure Kane does either, but I’m pretty confident that the legions of media fan boys who have turned so viciously on Cook are part of that cult. The Guardian’s Charles Arthur has an interesting review exposing the book’s flimsy case for its premise.

In the worldview of the unhappy cultists and writers, it’s clear that no matter what Apple does, it ain’t what Jobs would have done. Anything good the company does occurs only because Saint Steve put it in the pipeline; anything bad occurs because Cook screwed it up.

For example, although the Maps debacle was rooted in the Jobs era, Cook took the hit. Sure, he’s the CEO and he’s responsible for what happens to the company, but if you’re trying to paint a balanced picture — and while I’ve just started reading Kane’s book it appears that she doesn’t — you need to understand that Apple wasn’t reborn on Aug. 24, 2011; it merely hired a new CEO that day.

A common complaint about the Cook-era Apple is that there is not enough innovation. During his last 15 years at Apple, Jobs invented three new product categories: digital music stores and devices, smartphones, and tablets. In Cook’s 30 months on the job, Apple has lost its leadership position (in terms of market share but not income share) to Android overall and Samsung in particular.

But to be fair, the entire industry has been resorting to incremental improvements, rather than revolutionary new products — I don’t consider a fitness band or smart watch to be revolutionary. Any time a new product category is invented, the inventing company will invariably lose share as competitors jump in. Despite all the new competition, Apple sold 9 million iPhones in one weekend. Even Jobs would have been happy with that.

Wall Street misses the point when evaluating Apple What exactly is Wall Street’s beef? The numbers. Here’s how one analyst who says Cook should be fired makes his case: “Apple’s stock is at $530, which is 23 percent below its high of $702, while the S&P 500 is up 27 percent and Nasdaq is up 36 percent.” Therefore, “Cook and [CFO] Peter Oppenehimer have systemically erased $130 billion of shareholder value. Which is twice the value erased in the collapse of Enron.”

Yikes. That’s a lot of value.

Or maybe not.

Anytime you look at value, you have to pick a starting point. If you start in late September 2012, you’re looking at a point when Apple’s stock was pushed to an all-time high (just over $700 a share) that briefly made it the most valuable publicly held company in the world.

Apple’s real earnings and revenue didn’t support that stock price, so it declined. That would have happened no matter who was the CEO. The runup was fueled by speculative investors, and when their unrealistic expectations scared those investors, the stock dropped. But the Wall Street analysts blame Cook (not themselves or the foolish investors) because it happened when he was CEO.

Is it fair to use the stock’s inflated high as a yardstick to judge Cook? No. When he took over, the stock was then trading at $374; this week, it is trading $527 — a gain of 41 percent. The company’s market cap (share price times number of shares) went from from $349 billion to $474 billion. Viewed that way — and why wouldn’t you? — Cook has helped create $125 billion in shareholder value. And he’s done it without the help of the Wall Street geniuses who think that Apple buying Tesla would be a good idea.

There are plenty of reasons to be critical of Apple — recent security mishaps are one example. Cook’s the boss, and he’s a legitimate target of criticism. But it’s not legitimate to target him for not being Jobs.

I welcome your comments, tips, and suggestions. Post them here (Add a comment) so that all our readers can share them, or reach me at bill@billsnyder.biz. Follow me on Twitter at BSnyderSF.

This article, “‘Tim Cook, you’re fired!’ More dumb advice from Wall Street,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.