Apple Inc. (NASDAQ: AAPL) announced after the close on Thursday that Chief Design Officer Jony Ive is departing from the company. Ive is one of the most respected executives of Apple based on name recognition. What matters here is that Ive has a 27-year tenure after having joined Apple in 1992, and he is leaving to start his own business. Ive has been called the lead behind the designs of the iPod, iPhone, iPad, MacBook, and even parts of Apple’s iOS user interface. It is hard to say if this figure will actually hold, but this might actually be close to a $7 billion hit on Apple’s total market capitalization because the company is so large.
While the formal press release indicated that Ive is going to continue to work closely with Apple, Ive’s new design company will count Apple “among its primary clients on a range of products.” That also means that Ive’s design ideas may go outside of Apple in the future. Also as a risk, some investors may be surprised by the move and see the departure as a changing of the guard. Ive was instrumental in the iMac vision up through the iPhone launch, and some of the products have more to do with him than they do Tim Cook.
The departure of Ive is also after news from late-April that Rico Zorkendorfer and Daniele De Iuliis had decided to leave the company as turnover was up in the industrial design team. Dow Jones reported at the time that the two had over 35 years of combined at Apple.
Apple’s announcement indicated that design team leaders Evans Hankey (Industrial Design) and Alan Dye (Human Interface Design) will report to Chief Operating Officer Jeff Williams. Both are said to have played key roles within Apple’s design team for many years.
Wedbush Securities already has issued a brief note to its clients. The firm’s Daniel Ives reiterated his Outperform rating and his $235 price target. That report said:
Ive is leaving a hole in the company and is clearly irreplaceable as he has been one of the most important figures at Apple throughout the past few decades; from his iMac vision to the stunning iPhone launch and transformation his fingerprints are deeply woven within Apple’s core DNA. The major question now going forward is around future product innovation with one of the key visionaries of the Apple brand gone. In our opinion this news only adds to the current agita around the Apple story as the company is branching out into television and gaming all while it is currently the poster child for the US/China UFC trade battle on the heels of the G20 summit. While this is a bit if a shocker to Apple and its investors we are not overly concerned as Ive will continue to work closely with Cook & Co.
Wedbush’s note still shows a positive risk/reward scenario for Apple shareholders and said the stock is compelling at current levels. Another issue acting as a plus in the Wedbush report is that Apple is viewed as the most safe from antitrust issues today in technology stocks.
While the Apple release gave no formal indications of when Jony Ive would be leaving, nor about specifics on how involved the company would be with Apple, there has been little reporting about Ive’s salary and share ownership basis recently.
Apple shares closed at down six cents at $199.74 ahead of the news and the shares were down an additional $1.49 (or 0.75%) at $198.25 in the after-hours session. There is no way to know if that after-hours share price drop will stick into Friday’s trading session or not. Still even a 0.75% stock drop in a stock with a $919 billion market cap would imply a loss of $6.9 billion in market value.
Apple CEO Tim Cook said of Ive’s departure:
Jony is a singular figure in the design world and his role in Apple’s revival cannot be overstated, from 1998’s groundbreaking iMac to the iPhone and the unprecedented ambition of Apple Park, where recently he has been putting so much of his energy and care. Apple will continue to benefit from Jony’s talents by working directly with him on exclusive projects, and through the ongoing work of the brilliant and passionate design team he has built. After so many years working closely together, I’m happy that our relationship continues to evolve and I look forward to working with Jony long into the future.
Ive said of his tenure with Apple:
After nearly 30 years and countless projects, I am most proud of the lasting work we have done to create a design team, process and culture at Apple that is without peer. Today it is stronger, more vibrant and more talented than at any point in Apple’s history. The team will certainly thrive under the excellent leadership of Evans, Alan and Jeff, who have been among my closest collaborators. I have the utmost confidence in my designer colleagues at Apple, who remain my closest friends, and I look forward to working with them for many years to come.