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Challenges await Jobs' successors at Apple

SAN FRANCISCO — Departing Apple chief executive officer Steve Jobs leaves the company he co-founded in the hands of deputies who will have to prove they can keep building best-selling products that change how people compute and communicate.

Apple's next set of challenges includes expansion in China, the release of new versions of the iPhone and iPad tablet, and the introduction of an online service that lets customers store music and information across a broad range of Apple devices.

Chief Operating Officer Tim Cook, who succeeds Jobs as CEO, will lead executives responsible for designing the next generation of Apple electronics. His team will need to extend Jobs' legacy for entering new markets while fending off rivalry from companies including Google and Samsung Electronics.

"Given the depth of its pipeline and its execution, Apple will continue to be the benchmark in the technology sector," said Ashok Kumar, an analyst at New York-based Rodman & Renshaw. "We do not see anything on the horizon that can even remotely match what Apple has offered."

Jobs, who is becoming chairman of Cupertino, Calif.- based Apple, told the board he intends to be active in the new role, according to a person familiar with the matter.

"I believe Apple's brightest and most innovative days are ahead of it," Jobs said in his resignation letter. Jobs has fought a rare form of cancer and survived a liver transplant.

Apple may be poised for success in the immediate aftermath of Jobs' departure because it is releasing products whose design he set in motion.

The iPhone, Apple's top-selling product, is set for a refresh by October, while analysts predict another version of the iPad next year. The Mac computer line is growing at a faster pace than the personal-computer market.

All three are the fruit of Jobs' attention to detail and preoccupation with creating elegant devices that are reliable and easy to use. The company Jobs co-founded with Steve Wozniak in 1976 may face stiffer challenges in the coming years, when strategic vision is set and products are approved by his successors, said Fred Anderson, former chief financial officer.

"Apple probably has its product pipeline set for the next 18 months, so Tim won't have to worry about vision for that long," said Anderson, who resigned from Apple's board in 2004 and is now a managing director at Elevation Partners. "But can they come out with the next great iProduct. What's going to come out in 2013 and 2014? They need to start thinking about that."

Apple's growth in smartphones has come at the expense of rivals including Nokia and Research In Motion. Hewlett Packard Co. has struggled to produce a viable competitor to the iPad and is aiming to spin off its personal-computer unit.

Apple's biggest competition may come from Google, the maker of the Android mobile operating system, said Abhey Lamba, an analyst at ISI Group in New York. Google said on Aug. 15 that it's spending $12.5 billion on Motorola Mobility Holdings to bulk up in smartphones.

"The new management team will have to prove itself in terms of innovation and the next thing that will keep themselves ahead of the competition," Lamba said. "Investors are going to be a little careful."

An area where Apple has room for growth is in China, where sales rose more than six times, to about $3.8 billion last quarter from a year earlier.

"We're just scratching the surface right now," Cook said of the region in a July 19 conference call. Apple has yet to land the iPhone on China Mobile, the country's largest mobile- phone carrier.

Apple will soon start selling iCloud, which adds features that let users access content on multiple Apple devices. The service will automatically store photos, videos, and changes to documents, calendars and contacts in Apple's data centers, and then sync it on all of a person's other Apple devices.

That could attract new users who don't want to bother with uploading, downloading or syncing multiple devices, and spur existing customers who may own one or two Apple devices to buy into Apple's more closed approach completely, said Walter Price, managing director of RCM Capital Management.

"ICloud could be one of the biggest things in Apple's history," said Price, an Apple shareholder in San Francisco. If the service works as advertised, it could add $100 billion to Apple's market value.

Even under Jobs' successors, Apple has a shot at becoming a trillion-dollar company in five years, said Tony Ursillo, an analyst at Loomis Sayles in Boston. It can do that by increasing sales about 15 percent a year for five years to $220 billion, which translates to about $50 billion in net income.

For Apple's leadership team, maintaining confidence may be toughest of all without Jobs as the visionary, said Guy Kawasaki, a former Apple manager and a founder of venture investor Garage Technology Ventures in Palo Alto, Calif.

Jobs routinely took risks that few executive teams or boards would agree to support. Examples range from killing the iPod Mini at the height of its popularity to building a chain of retail stores even though other computer companies had failed.

"For so many decisions at the company, Steve said, 'It's this way or this way,' " Kawasaki said. "And now it could be less clear.

"The worst-case scenario is Apple deciding it's going to be a customer-driven company, and they start running focus groups and market research to determine what customers want. If anything, Steve has proven customers can't articulate what they want."

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