Don't Blame Tim Cook for Apple's Fall

Most of the time, the CEO has to answer for a company's cratering stock price. Investors clamor for accountability when things go bad, and typically a stock's decline is the direct result of a deteriorating business. Dropping share prices should usually be commensurate with aforementioned fundamental deterioration, if there is any. That's not always the case, though.

Back in 2011, when Netflix (NASDAQ:NFLX) cratered from $300 to $60 over the span of four months, investors called for Reed Hastings' head. Much of that drop was tied to the Qwikster debacle and associated 60% subscription price hike, but shares have recovered since then. Hastings has regained investor confidence primarily by focusing where it matters: domestic paid streaming subscribers were up 26% and international paid streaming subscribers soared 238% last year. It's all water under the bridge now.

That's why investors should stop trying to blame Tim Cook for Apple's (NASDAQ:AAPL) fall.

The fall guy
Over the weekend, Forbes contributor Gene Marcial posted an article that's been making the rounds today speculating that Apple is currently looking for a replacement CEO, citing "[s]ome Wall Street sources close to some Apple executives."

Marcial also said that some large investors "assert privately that it's time for Apple to oust Cook, under whose tenure Apple's stock has lost about half of its market value since October 2011, when he took over as CEO." The latter part of statement is inaccurate on two levels: Shares are still up marginally from when he became CEO in August 2011 (this inaccuracy has since been acknowledged and removed by Forbes editorial).

AAPL data by YCharts.

What's entirely true is that shares have given up nearly all of the envious gains that they had previously enjoyed under Cook's leadership. However, amid a gut-wrenching decline and the search for answers, investors are losing sight of how to really assess Cook's performance as Apple's CEO.

Cook has delivered numerous records for shareholders. Both holiday quarters that he has presided over set all-time highs for all of Apple's most relevant performance metrics (other than share price).

In nearly every quarter, Cook has put up iPhone unit sales higher than anything Apple ever reported under Steve Jobs. iPad units under Cook have also soared to levels unseen under Jobs.

Source: SEC filings. Calendar quarters shown.

Revenue and net income have similarly skyrocketed during Cook's tenure, as a testament that he can indeed put up results where it counts.

Source: SEC filings. Calendar quarters shown.

Last quarter was quite literally the strongest quarter Apple has ever posted in terms of revenue, net income, and unit volumes for the iPhone and iPad, even if it wasn't enough for investors.

Scrooge McCook
Other critics have cited Cook's seemingly hesitant attitude toward increasing Apple's dividend as a reason he has to go. Apple's cash hoard continues to swell and Cook continues to give little more than vague assurances that Apple is in "very active" talks about cash options.

It's entirely true that Apple needs to give more back to improve its capital allocation policies, but remember that Cook is the only reason why investors are getting a dividend in the first place. It was very clear that Jobs was quite content with growing Apple's cash position to infinity, and had no interest whatsoever in returning cash to shareholders.

In the grand scheme of things, Apple's current dividend has been in place for less than a year, and most companies tend to stick to an annual dividend cycle. Apple's being held to a different standard due to its declining share price and soaring cash position. Under other circumstances, investors would have more patience while they await the inevitable dividend boost announcement.

Cook thinks different
If investors were truly this disappointed with Cook, they wouldn't have given him a 99.1% investor approval rating at Apple's annual meeting in February. There have been no official developments in the past two months (even as the Apple rumor mill does its daily thing), so there's no reason for investor approval to change much from then.

None of the above comparisons to Steve Jobs are intended to suggest Cook is better than Jobs overall as a CEO; Cook is just different. Rather, investors need to refocus on the company's fundamentals over the share price when assessing CEO quality. In those aspects, Cook has performed admirably.

It's not Cook's fault that there's been a distinct disconnect between Apple's share price and Apple's fundamentals, since its prices are entirely dominated by emotion in the current environment. There are some legitimate headwinds that Apple faces in its core businesses, but those challenges hardly warrant a nearly $300 billion loss in market cap.

Instead of blaming Cook for Apple's fall, investors should blame their fellow investors for losing confidence in a company at the top of its game.