"Steve Jobs had an artist's eye as well as a definition
of what great engineering is," Eric Schmidt, the chairman of Google, said
in his keynote speech at the Edinburgh Television Festival on Friday.

If Apple's arch enemy is paying tribute to the company's
departing chief executive in this way, his replacement, Tim Cook, could be
forgiven for feeling daunted about the challenge which lies ahead of him.

Cook may be well-versed in the company he now finds himself
in charge of, but as Apple vies with Exxon Mobil to be the biggest company in
the world, it feels as though it has reached something like corporate maturity.
And companies at the top of the pile have only one way to fall.

That's not to say Jobs' exit marks the start of an immediate
descent. Far from it. Cook is a skilled operational leader while Jobs, widely
recognised as the creative force of Apple, will continue to make his presence
felt in his new role as chairman for which he has volunteered himself.

The markets clearly have faith in the new set-up, together
with the world-beating team of senior managers that they have gathered around
them. However, Cook must keep sharply focused on Apple's life blood – its
relentless conveyor belt of innovation – if he is not to oversee the slow
demise of the most successful technology company in the world.

Apple's success in the past decade has been defined by a
succession of hyper-designed, game-changing gadgets that consumers never really
knew they needed – until they were launched and became indispensable.

Jobs had instinctive faith in Apple's new products – he
eschewed market testing – but that is a rare skill. Among the many tributes to
Jobs' legacy this week, rivals have told how they underestimated Apple
innovations.

Dan Hesse, the chief executive of Sprint Nextel who was a
director on the iPhone board when it launched in 2007, said: "Everyone
underestimated how incredibly successful it would be. We took the iPhone
seriously, but we were much more concerned with RIM [the maker of BlackBerry]."

Nick James, at Numis Securities, agrees. "It's never
been easy to guess where Apple might go next, even though within 12 months of
launching a new product, it is hard to imagine it could ever have been any
other way," he said. "Apple doesn't so much create new markets as
change the way we do everything."

Its products rebalance and in some cases redefine entire
industries. Apple may be a technology company first and foremost, but in the
past decade it has arguably been the single most dominant force in each of the
music, telecoms and print media businesses.

It does this not through introducing brand new inventions,
but by perfecting existing ideas. Microsoft had been playing around with
tablets for years before the iPad launch, but they had never taken off until
Apple's sleek version. However, the company's pitch-perfect aesthetic should
not be allowed to overshadow the rapidity with which Apple has kept these new
products coming to market – and the speed with which they have entirely
restructured its revenues.

In 2008, Apple achieved nearly half of its income from sales
of Mac desktops and laptops and around a quarter from the iPod. The iPhone had
been in existence for a year but barely registered 6pc. Fast forward to Apple's
most recent results, covering the three months to June 25, and iPhones
accounted for half of Apple's revenues with iPods contributing just over 6pc.

It's a dizzying recalibration, and one that works just fine
if Apple can keep on coming up with those game-changing ideas.

Apple has not given any indication of what it will tackle
next, but speculation is rife that it will take on the television.

"Apple likes to sell a global product, but television
is traditionally quite fragmented in the way it is delivered," James said.
"If Apple goes all the way down the route of the video distribution model,
there is a real threat of it effectively disrupting the business models of
stalwarts like Sky."

But just imagine if Apple hadn't come up with that
iPhone, or if it had been out-smarted by a sleeker, faster competitor? What
sort of decline would Apple be seeing then? Or, rather more pressingly, if
Cook's team does not keep delivering products that are of the same level of
success as consumers have come to expect from Apple, what sort of decline could
happen when the two-year pipeline that Steve Jobs left in place starts to run
dry?

Unfortunately for Apple, Jobs' resignation has come at a
critical time for the company. It has been used to out-running traditional
hardware behemoths but now it is standing on the edge of an altogether
different sort of battlefield.

Google, a new-generation tech giant with ambitions and scope
on the same scale as Apple's, has decided to move into hardware. Its $12.5bn
(£7.6bn) deal to acquire Motorola Mobility, the mobile phone maker, signals its
intention to take Apple on at its own game. It wants its Android operating
system to dominate smartphones (and, almost certainly, other spheres as well)
at the expense of the iOS in iPhones, and Motorola's war-chest of patents give
it the legal might to protect Android's customers.

It is already gaining ground. In the second quarter of 2011,
the Android operating system was installed in 43pc of all smartphones shipped,
compared with 18pc from iOS.

Meanwhile early Apple loyalists, many of whom once loved its
underdog status, have started to rebel against its dictatorial approach. The
new underdog, Android, is improving with each iteration allowing users more
freedom and, as with Apple, so turning many of them into evangelists.

However, Crispin Reed, managing director of Brandhouse, a
branding agency, said: "Although Apple's products are exciting and
somewhat intoxicating, some believe that its technology and software isn't as
sharp as it used to be."

But while Google is arguably the most pressing threat to
Apple's domination, it is far from the only one. The new hardware start-ups in
Silicon Valley have grown up with Apple kit and understand the importance of
aesthetic design and apparent (if not actual) simplicity.

Companies that are unknown, or that are still a project in a
teenager's bedroom, will develop with that model and endgame in their sights,
and as is well established, technology companies have a tendency to go from
0-100mph very rapidly.

Other threats comes from the Far East, where manufacturers
such as China's pithily-named Semiconductor Manufacturing International
Corporation (SMIC) or the mobile phone business Huawei are starting to move
away from designing and producing goods for others, and towards a model where
they do it for themselves.

They already have the expertise and the facilities. What is
more, many make goods for Apple, giving them the potential to inconvenience
their would-be competitor.

They couldn't easily pull the plug – in his position as
chief operating officer, one of Cook's most far-sighted achievements was to tie
up a series of exclusive contracts with its suppliers – but Apple is going to
feel the pressure. And it can only sustain the reported 62pc margin on its
iPhones if it is the only place where customers can get their hands on the
goods. The growth of Chinese competitors could also put a dent in Apple's plans
for China to play a starring role in its future growth. In the three months to
June 25 it turned over $3.8bn in "Greater China" – China, Hong Kong
and Taiwan – something Cook described as "just scratching the
surface" of the opportunity he sees there.

But perhaps it's a red herring to focus on ways that Apple
can keep on growing. It is true that its goal to date has been to expand in
size and scope, but Jobs' resignation could signal a new phase in its evolution
– one more defined by focus and profitability than in the past.

On Wall Street, some Apple-watchers have started to suggest
that the company would be better placed to manage the next stage of its growth
path if it were to split in two. One part could house the hardware business,
producing the gleaming gadgets which have made Apple so beloved by consumers.
Meanwhile the much faster growing iCloud and iOS businesses could be spun out
into a software company. According to US reports, some analysts believe the
latter businesses, which are just three years old, could already be worth more
than Apple's current market capitalisation of $346bn. Separating the two units
out would help Apple to play to their strengths and manage their growth
strategies accordingly.

In the meantime, it also has to think of what to do with the
$51bn cash on its balance sheet.

Simon Clements, global equity fund manager at Aviva
Investors, says the "upside" of Jobs' resignation could be the
softening of the Apple's board policy on returning cash to investors.
"Given Jobs remains chairman, that is unlikely in the short term, but the
return of cash to shareholders is a very interesting possibility in the future.
From a valuation perspective Apple remains very attractive," he says.

The alternative to returning that cash to investors would be
some sizable acquisitions. While its Silicon Valley competitors have been busy
hoovering up other companies, Apple has been pretty restrained for a company of
its magnitude. According to Bloomberg data, Apple invested just $1bn in new
companies in the past decade, compared with an average of $15bn by each of its
largest US rivals.

If Google is spending $12.5bn on a strategic shift in
direction, and hardware giant Hewlett-Packard is paying nearly that amount for
Autonomy, the UK company based around cloud, Apple will be under pressure to
put its money to work.

As it knows only too well, in the world of technology and
stoking consumer desire, no company, however large, can afford to stand still
for a moment, and Apple's war-chest may be Cook's trump card to help it sustain
its momentum.

"They're sitting on a cash pile," says Arvind
Malhotra, an associate professor at the University of North Carolina, and an
expert on Apple's strategy. "[Jobs] always grew from within. If [the] lack
of his vision and availability of his position causes the future pipeline not
to be there, that's when the acquisition model comes into play."

http://www.telegraph.co.uk/technology/apple/8727043/What-next-for-Apple-after-Steve-Jobs-resignation.html