Motley Fool Hidden Gems Investing - Motley Fool Money: 02.10.2012

Episode Date: February 10, 2012

Big banks make a deal.  Shares of Buffalo Wild Wings, Philip Morris, and Whole Foods hit new highs.  LinkedIn connects.  And Groupon disappoints.  Plus, Fortune editor Adam Lashinsky shares some insights from his new book, Inside Apple. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill. And joining me in studio this week, for Motley Fool income investor, James Early, and for Million Dollar Portfolio, Charlie Travers and Ron Gross. Gentlemen, good to see you. Chris, how are you? We've got earnings from Whole Foods, Buffalo Wild Wings, and more. Adam Leshinsky from Fortune magazine will take us inside Apple.

And as always, we've got a few stocks on our radar, but we will begin with the big macro. Guys, several stories this week. The NASDAQ is at a 10-year high. Jobless claims were down once again. And there were reports of a debt deal in Greece, which, of course, were followed by reports that the deal might fall apart due to politics. Ron Gross, I'll start with you. What's your headline of the week? I'm intrigued by a survey that just came out on Friday by the Philadelphia Fed that

showed that economists see unemployment falling at a much faster rate than previously expected, and maybe dropping closer to an 8 or 8.1, I think it was, by the fourth quarter, just in time for the election. Probably good news for Obama. So, 8.3 now, 8.1 then. Not huge, but faster than expected. That could be good. Probably good news for Warren Buffett, too, because if you'll recall, last year, He said on CNBC he made a $1 bet that unemployment by the time of the election would be below 8%. Getting closer.

Buffett, I don't think he's strapped for cash, but everybody likes to win a bet. Every dollar counts. Absolutely. James, what's your headline? Chris, I've got to go to Greece. It's funny. Greece seemed to have agreed on a deal to cut spending until they realized they would have to fulfill their end of the deal and actually cut spending, and now they're rioting.

Greece is kind of like the jumper on the bridge. The IMF and the European countries don't want to see anything bad happen for a number of reasons, but Greece's main threat is that it's just willing to self-destruct, apparently, and it's unfortunate. It doesn't really have much leverage other than that. So the line we always use about kicking the can down the road, once again, there's just the can. Consider the can kick. I don't even see the can, yeah.

Five big U.S. banks accused of abusive mortgage practices have agreed to a $25 billion settlement with the government. James, we're talking about Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and Ally Financial. What is the deal that has been agreed to? Sure. Well, it depends on your perspective. The PR deal for voters might be that people affected by this get to take a $20,000 hit or reduction of their principal, and about 750,000 people, I believe, who were foreclosed on in some certain period will get a check, $1,500 or $2,000. So, ostensibly, it's helping people who are taken advantage of by these banks. So, that should make up for the fact that their house was foreclosed upon.

Yeah, or maybe they lied on their applications in the first place. But the real problem here is that the banks, these principal write-downs, banks are doing them presumably on loans that they're servicing, but they don't actually own. So, someone else is an investor in these loans, and the banks are just marking them down, which is a problem because the banks do own most of the second lien loans. and those are the ones that should actually take the first hit in a situation like this. So this is very much sort of a bailout or a way to help the big banks. I don't think it's going to do much at all for the housing market

or for these people who are severely underwater, and that's my gripe with this. So to the extent that there's a big winner in this deal, even though the fact that they had to shell out $25 billion, it's the big banks? Yeah, I wouldn't call them big winners. They're winners. They had reserve for this, so it's not going to be a huge financial impact. And yes, they are now free and clear of civil lawsuits related to robo-signing or improper foreclosures, I understand it. The CEO and CFO of Diamond Foods have been relieved of their duties. An internal investigation discovered the company improperly accounted for payments to walnut growers.

Shares were down more than 40% on the news, Charlie. That's nuts, yeah. Thank you, Ron, for coming strong to the hoop with our first nut analogy. Go ahead. Charlie, what do you think? So, yeah, Diamond Foods may not be a household name, but most people have probably heard of some of their brands, including Kettle Brand Chips and Pop Secret Popcorn. This company was in the process of buying Pringles from Procter & Gamble,

which would have made it the No. 2 snack company in the country. Ah, however, good plans have gone awry, with the audit committee finding that some payments to these growers, as you mentioned, were not accounted for properly, which served to inflate their profits over the last two years. So, they actually didn't make as much money as they reported. So, they have to go back and restate two years of financials. The CEO and the CFO have been technically placed on administrative leave, which I'm not sure if that counts as a managerial change or not as it relates to the Pringles deal. Because with the situation here, Procter & Gamble is most likely to back out, and Diamond Foods is not going to get a crown jewel kind of brand in Pringles. But just to be clear, for people like me who actually care and consume snacks,

not James, but for people like me, they're still going to be making Pringles, right? Yeah, Procter & Gamble will make the Pringles. And, you know, they do have some good brands, so this is a recoverable situation. I believe the new CFO comes in from a restructuring specialist firm. So there is a future here, but it's a little hairy for the time being. There's a shell game. Yeah. But there is a kernel of truth to it all.

How much credit should we be giving the board of directors at Diamond Foods here? Because on the one hand, I'm inclined to applaud them, because certainly we've talked before about boards of directors just sort of rubber stamping whatever the CEO does. On the other hand, presumably the board of directors was the board of directors when all this stuff was going on in the first place. Yeah, it's actually a little hairier than this even, because if you go back a year when the stock really started quite a plunge, A director actually committed suicide, a director who was a part of the audit committee. And whether we actually know this is part of the whole thing or not is unclear. But perhaps the board knew what was going on for some time. And now it's again just more is coming to light, which caused the ousting of these two guys.

The Nuclear Regulatory Commission has approved the first new nuclear power plant in the United States in more than 30 years. The license for two new reactors went to Southern Company. James, that's a company that's on your radar. It is. Southern is in Georgia. It's a southern U.S. power company that has mostly coal energy and some nuclear. Those are both very, very cheap sources of power. Coal is very dirty. Nuclear is very clean. And as you said, it's been 30 years since they've built plants.

So Southern is not a huge user of nuclear, but this could be the start of a few more dominoes falling. Now, I will say Obama, two years ago, approved loan guarantees for these very two plants. So this has been in the works for a while, even well before that. Nobody would build a plant without loan guarantees because so many things can fall through. But this is sort of the big linchpin. There will be further opposition, I'm sure, but this is an important step that could bode well for other nuclear companies, too. There are companies that do depend heavily on nuclear power. Pinnacle West is one of them.

What are a couple that you think could benefit from a couple more diamonds falling? Inter-G, mostly those guys, I would say, the big nuclear power companies. They have the other catalyst, too, of tightening clean air standards. Eventually, it's going to happen, and nuclear is very clean until you have to dispose of the waste. Coming up, two high-profile internet companies recently went public, but only one of them is smiling this week. Stay right here. You're listening to Motley Fool Money. There is nothing quite as wonderful as money. As always, people on the program may have interest in the stocks they talk about,

and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in the studio with James Early, Charlie Travers and Ron Gross. Guys, a bunch of companies reporting earnings this week. We'll do a few quick takes. Philip Morris stock was up 34% last year and it is off to a strong start in 2012. Shares up this week on its latest earnings. Ron, what's the story here? Better than expected guidance, Higher global market share, fourth year in a row, strength in Asia. People still love to smoke. Are you a tobacco stock lover?

I am not. I do not own any tobacco stocks. Shares of Buffalo Wild Wings hit an all-time high this week after its latest earnings. Charlie, some people just do the research. You actually, very selflessly, did some on-the-ground research at the Buffalo Wild Wings. I like to get out in the field, check it out. That's great. Put down some 18 wings at the last UFC event at the B-Wild. What did you think of their quarter?

Awesome. So, they did 30% EPS growth for the year. They forecasted they're going to do 20% in 2012. And Buffalo Wild Wings is a restaurant chain that has a long growth runway ahead of it. They're only at 800-plus stores. They think they can peak out at 1,500. So, there's a lot of room left to grow here. Will you take me on your next research trip? Absolutely. Okay. Shares of Whole Foods hit an all-time high this week as well, after reporting its latest quarterly earnings and also raising guidance for the full year.

Ron, dare I say it, are they firing on all cylinders? They really are firing. Same store. Sales were strong, increased visits, higher prices. Their newer thing is building smaller stores in suburbs and college towns, which are cheaper to build, and they're more profitable than the larger stores. So, the company really continues to execute very well. Shares of Six Flags Entertainment were up this week after the company announced it was raising its dividend. James, they're raising their dividend by a factor of 10. That's, I mean, is that, that's got to be like Christmas morning for a dividend guy like you.

It is interesting. They're starting from a small number. It's like paying a dime versus a penny or something like that. So it's easier to get a big percent. Competitor Cedar Fair yields 10%. So they're only about halfway there. But this is really one of many companies jumping on the dividend bandwagon, in my view. It's fashionable. I'm stunned. I mean, even taking into account what may have already been a very low dividend. That's an enormous increase. Does that say that they were just hoarding money? Yeah, until some of their problems were behind them. I think they're maybe a little afraid to hire, like a lot of companies, so they just shell out the cash. The Wall Street Journal had a story that so far, just in the month of February alone,

more than two dozen companies have raised their dividend. Is this going to continue? And if it will continue throughout the year. Is there any way we can contain your euphoria? Oh, it cannot be contained, Chris. Dividend is something that comes and goes in terms of fashion, corporate finance fashion. I mean, it's officially some numerical thing that the board decides and capital budgeting, blah, blah, blah. But it's really what they think the market wants. It's really, there are just certain times that it's cooler to pay a dividend. And now it's sort of becoming one of those times, now that we've had so much interest. And with interest rates so low, it makes stocks even more attractive because people are searching

for yield. So, the higher dividends are going to just continue to be good for the stock market. A tale of two recent IPOs, Groupon and LinkedIn. Both companies reported earnings this week. Shares of Groupon down double digits, while shares of LinkedIn were up double digits on Friday. That's in percentage terms. Charlie, let's start with Groupon. What's the sad story there? Well, I think people are concerned that the stratospheric kind of growth they turned in last year, where they had revenue up 400%, is going to slow down to a crawl due to competition from LivingSocial and others. I will say some nice things about Groupon. They have a very clean balance sheet with a billion cash and no debt, and a lot of free cash flow. So,

it's a solid business here, just the growth is kind of not what people were hoping for. Ron, we've talked about LinkedIn before. You said pretty much from the start, hey, this company is at least profitable. What did you make of their quarter? Their quarter's great, revenue doubled, profit was up 30%. Their three lines of businesses all grew, and that's their online advertising, recruiting services, and the premium service that users can sign up for and pay, and all are doing well. Costs were less than expected because they actually hired less people than they had guided, so things continue to look pretty strong for them. Valuation-wise, I'm a valuation guy, it's still 50 times cash

So, they have to really grow into that valuation, but they're doing well. We've got the Facebook IPO coming up in a few months, assuming that there are no stumbles along the way. And it would seem like Facebook would be a threat to both of these companies. Is there a greater threat to one more than the other? Charlie, what do you think? I would say the threat to Groupon is probably bigger. I think LinkedIn has a very secure niche that's focused. James? I would agree, yeah. LinkedIn's shtick is that it's not Facebook. It's more business targeted.

Ron, when it comes to LinkedIn, we're all on LinkedIn, all four of us. Yes, I'm friends with you, Chris. Yes, yes. As am I. We are linked together. Do you have a general rule of thumb when it comes to LinkedIn requests? Is it just, is it anybody in your world, anyone who's ever known you? I'm pretty liberal about it. Anyone that I know, whose name I can identify, I will accept. Okay. James, is that your policy as well?

I don't really have Apollo. I've never sent a friend request. I've just accepted some, but I think I might friend Ron. Nice. Charlie, what about you? I'm lonely. I don't think I've ever turned anyone down. Wow, really? Yeah, see, I think I'm in the same boat as Ron. If I know you, if I do business with you, certainly here at The Motley Fool or I think somewhere down the line, yes, maybe. Let's get our man Steve Broido in from the other side of the glass.

Steve, are you on LinkedIn? I am, yeah. I'm not great at it, but I am on there. I wouldn't be great at it. I don't know. I don't check it very frequently. So, is it safe to say you do not have a general rule of thumb when it comes to ... I generally accept all. I love people. On that note, let's move on to the stocks that are on our radar. Ron Gross, we'll start with you. Today I was looking at a company called

Nuance Communications, N-U-A-N. Stocks down 14% today. It looks like they delayed some big clients, some big deals. They make voice recognition software. They're not Siri, which is important, but they might be in your car. You know how cars can talk back to you nowadays. Dragon dictation software. That pullback makes me a little bit interested. I'm going to take a look. O' So, you're not worried that this is a value trap? You think it might actually be a value trap? It's definitely not a value trap, because multiples are still high. Valuation is still pretty, pretty significant. O' It could be worse than a value trap.

Right. It could be a growth trap. O' James, what's the stock on your radar this week? I'm going with Pepsi, which is an income investor buy first. It just raised its dividend 4%. It's going to slash, I think, 8,700 jobs, which is about 3% of its workforce. This is pretty big news. Pepsi has struggled against Coke lately. The past couple of years, actually, they've resisted splitting the firm into snack food and beverage. And I think snack has been half or sometimes more than half of its revenues in recent years. They are spending 20% more now on marketing. They're going back to marketing the bad-for-you stuff. They divided their products

into good-for-you and fun-for-you, but really good-for-you and bad-for-you. And they ran their first Pepsi Super Bowl ad in years. So this might help. As a general, that seems like they're almost sending mixed messages in a way, where they're saying, we're going to cut costs on the employee side. We're actually going to ramp up spending on the marketing side. But you're okay with that? If it works, I'm okay with it. Yeah, we don't know. And that's why the stock has not really risen that much. It's not been a good performer the past two years. Now that Pringles could potentially be available, would you think Pepsi would have an interest? I would hope not. I think they're done doing a lot of acquisitions, they said, but that's what they say.

As long as they keep making Pringles, that's all I care about. Whoever owns them, I'm agnostic. Charlie Travis, the stock on your radar this week? I'm intrigued by Nintendo, the ticker's NTDOY. They had a home run when they launched the Wii. It was a very innovative console. However, in recent years, they've really struggled with competition, not just from Microsoft's Xbox, Sony's PlayStation,

but also from gaming on smartphones and tablets. outlets. So, Nintendo, once again, is in the position of trying to innovate and build back its revenue and profitability. They're having a new console launch later this year, which could be the catalyst for that to happen. And I do think they have a portfolio of very strong brands that resonates with gamers, particularly the younger crowd. What is the key, whether it's Nintendo or any of these gaming companies, what is the key metric that investors should be focused on? Is it something in the balance sheet, or is it just sort of whatever is going to be the next big thing for them?

Well, so, they have been struggling, but they have a very fat war chest on the balance sheet. So, they have the financial resources to survive and keep innovating. What they have to do is move the units of the consoles, which is then the platform through which all the games come afterwards. Alright, Steve Broido, you've heard the stocks from the guys, Nuance Communications, Pepsi, Nintendo. How about one question for the guys on all three stocks? Go for it. Sure. I'm looking for which Which stock has the most opportunity? I look at Nuance as kind of a groundbreaking technology.

It's been around forever. Voice recognition stuff, I know some people think it's taken off, but I don't know, it's not so sold. Pepsi's more staid. And Nintendo, I don't know, is that Wii thing still going strong? It seems like it's lost some love. So which one has the biggest opportunity ahead of us? Fight it out amongst yourselves, guys. I'd say not Pepsi.

I would say not Pepsi. Can we rule Pepsi out? Pepsi's probably the least downside stock. Pepsi's just kind of a flat. I'm going to go with Nintendo. I think you've got the real home run potential. They get their magic back. I think you can do pretty well on the stock. Now, I think the voice recognition has a huge future, and obviously there's a lot of growth

potential. Who will be the winner of most of that market share is up in the air. Will it be Apple's Siri? Will it be Nuance? That is hard to say, but there certainly is tremendous growth opportunities ahead. And who has the most downside here, too? Well, from a valuation perspective, I would have to say, just having looked at it briefly, Nuance is pretty richly priced, even with the 14% pullback today. I don't know. I've played Wii Sports, and I'm not so sure.

You got to get a bit of jump shot, Steve. What are you going with, Steve? I don't know. I might have to go with Pepsi. Nuance, I've just, I think I've owned Nuance at one point. The one we ruled out right off the bat. I believe I've owned Nuance at some point. Yeah.

Anyway, not for me. All right. Charlie Travers, Ron Gross, James Early. Guys, thanks for being here. Thank you, Chris. I thought money, it was everything and was all I needed. Coming up, Fortune Magazine editor-at-large Adam Lashinsky takes us inside one of the most secretive companies in America. That's Apple.

Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Apple is one of the most successful companies in the world. It is also one of the most secretive. Adam Lashinsky covers Silicon Valley and Wall Street for Fortune Magazine, and he is the author of the new book, Inside Apple,

How America's Most Admired and Secretive Company Really Works. Adam, thanks for being here. Thank you so much for having me. You have covered Silicon Valley for years. I am guessing you have not been lacking for opportunities to write a book. This is your first book. What made you choose Apple and the way that they do business as the topic for your first book? Well, you're right.

I'd been waiting for a topic that really grabbed me and that I thought merited the heartache and effort that goes into writing a book. And the reason I wanted to write about Apple, it started as an assignment from my editor at Fortune magazine to do an article in Fortune. And it was our idea that everybody believed that they know about Apple because we have this visceral connection to its products, and we know its advertising, and we knew its co-founder, Steve Jobs. And yet, as a business journalist, we realized we really didn't know much about the company at all

because they work so hard to keep everyone focused on their products and not on how they make those products. So it became almost like the great whale hunt to figure out what goes on behind the closed doors. And when you spend some time on the subject, it's a very satisfying subject because it's darn interesting. Well, and one of the things you touch on in the book is that, obviously, all companies have secrets. But at Apple, everything is a secret. It's not just that they keep secrets from the outside world. They're keeping secrets from one another. Yeah, that's absolutely right.

The normal corporate stuff, don't let your competitors find out what your products are. Don't let your customers know until you're ready to give them the product and so on. Apple's very good at that sort of thing. But the real revelation is that their paranoia extends within their own walls. And part of this has to do with, again, keeping secrets from the outside. It's the old loose lips, sink ships mentality. If your people don't know certain things, then they can't tell the outside world. But it goes even deeper than that.

I've likened Apple employees to horses fitted with blinders. You know, you can't look to the left. You can't look to the right. All you can do is charge forward. And at Apple, you pay attention to what you're doing. Your business is not my business unless I'm specifically told that your business is my business. And, you know, we can discuss how this can be difficult on people's psyches and whatnot, but the obvious upside, or maybe the not-so-obvious upside, I should say, is that it reduces politicking at Apple. Below a certain level, there's very little politics played, because after all, how can I play politics if I don't have any of the information I need to gossip about your work, for example? You're listening to Motley Fool Money, talking with Adam Lashinsky, author of the new book Inside Apple, How America's Most Admired and Secretive Company Really Works. Let's talk a little bit about the corporate culture at Apple, because it seems all the rage today to have companies focused on empowering employees and providing all of these great benefits and that sort of thing. And one of the things you write about in the book is that Steve Jobs was essentially the opposite of that. He had no interest in empowering employees.

So how was Apple able to achieve such a high level of success by bucking this huge trend? So people at Apple have described working there to me as a mission. People will say out loud using this language, I subscribe to the mission of Apple, which is to make these incredible products. And once you've signed on to the mission, and once you've passed this sort of hazing phase, if you will, then everything else falls into line. You know, you could almost think of it in a religious sense. You know that you're contributing to something that is bigger than you. Now, this is not going to be for everyone. Some people have an ego, for example,

and they're going to want to have a profile in their industry among their peers to be able to brag about what they're accomplishing to their family, for example. And none of this is consistent with the Apple way. And at least over the last 15 years, while Jobs was alive, this was the deal. You want to be part of this company? Then this is how you have to behave. And there are rewards. It's not like these people are impoverished, and it's not like they're not accomplishing anything.

They're accomplishing quite a lot. One person said to me that he got a huge kick out of being in a bar or a restaurant and looking around and seeing 90% of the people in the room using a product from his company. And so you can see the cyclic reward is quite high, but there is a cost. Well, and it kind of goes against the public-facing message that Apple put out for a long time, the slogan think different as opposed to a corporate culture where employees are expected to follow orders and in a lot of cases just be in the dark about stuff. This is one of the great ironies, and I'm glad you asked me about it. I described Steve Jobs and Apple as being a person

and a company of paradoxes, and this is one of those paradoxes, only it's a glaring one. You're absolutely right apple people are given instruction they are expected to work hard and they are expected to do what they're told um they're they're valued of course for their skills and they're hired for their skills but you're right not only do they not think different or differently but they're not by and large entrepreneurial um they're they're bureaucratic within this company that itself has been incredibly entrepreneurial. How does the corporate culture at a place like Apple compare with another big Silicon Valley tech giant, Google? I've argued that the culture of Apple and Google are almost 180 degrees opposite from each other.

So Google is a very open environment where debate and dissent is encouraged. Apple is a very closed, secretive environment. In the way that they approach products, Google has a very democratic approach in terms of using computer algorithms to see how people react and then adjusting the product accordingly. Apple has long championed this idea that it will tell customers what they want, not the other way around. And then even the superficial aspects of the culture, Google has become famous for its free food and and free everything at apple you pay for your lunch you even pay for your gym membership at apple really yeah and and that's assuming that you have time to go to the gym because you're very busy i want to point out because this seems to be a an

incredibly important bone of contention in silicon valley where people are obsessed with the food that their companies offer something that i can't quite figure out to tell you the truth or at least as a journalist, maybe I just can't relate. But Apple people will be quick to tell you that the food is quite good, and I've eaten in the cafeteria. It is good, but you pay for it. You're telling me that over at Fortune magazine, it's not free lunch every day? Yeah, and I got to go get it myself. Isn't that horrible? What surprised you the most when you were working on this book? What surprised me is the number of ways that Apple breaks the rules of business and how it

It really thumbs its nose at what American business schools, American in particular business schools, teach. My favorite example of this is that Jobs was disdainful of the concept of general management, which is a hallmark of modern business. The general manager is supposed to be this person who could be groomed to run the whole corporation and runs his or her fiefdom within the company. And Jobs essentially said, that's nonsense. I don't want there to be fiefdoms. and I don't want a jack-of-all-trades. What I want are people who are experts at what they do, and we'll have them do that function for the entire company.

And we wouldn't dream, by the way, of taking that person and moving them around and exposing them to other parts of the corporation. And think about General Electric in the back of your mind here, because that's how they would do it. Why would I want to take somebody off of what they do to broaden them when they're already doing a hell of an important job for the shareholders and for the company right now. Coming up, we'll talk about the future of Apple

and play a round of Buy, Sell, or Hold. You're listening to Motley Fool Money. You're listening to Motley Fool Money, talking with Adam Lashinsky, author of the new book, Inside Apple, How America's Most Admired and Secretive Company Really Works. One of the things that you illustrate in the book is how successful, well-known companies can flounder after their leader is gone. You cite Disney, after Walt Disney died.

Where do you see Apple going? We're just a few months into the post-Steve Jobs era. How is the company looking right now, and what do you see as its greatest challenge over the next couple of years? Well, I think for all but true insiders, people who are very much into the nitty-gritty of Apple, we actually remain in the Steve Jobs era. So, you know, the product pipeline is a product pipeline that he was intimately knowledgeable about before he died. And the structure and the processes and the relationships and the important people doing the work essentially are Steve Jobs' team.

So where do I think things are going? I mean, this is the $400-some billion question right now, and I think a couple things. I think that, first of all, the company is going to continue to do really well because it's a company of excellence with excellent people and that has just got the competition by the throat, in my opinion, and they're undoubtedly playing this chess game where they already know the next thing that they're going to do, and they've been consistently ahead of the competition for years now. Now, having said that, number one, they just lost the ultimate key man.

This is a guy who had his fingers in everything and made the final decision on everything, and that cannot be replicated, and they're going to struggle with that no matter what. But the other sort of more philosophical challenge I think they're going to face is that Apple has just been through what I would argue is the most phenomenal 15-year run in the history of the modern corporation. They did very little wrong, not nothing, but very little wrong. And I think even had Jobs lived and if he were healthy today, the next 15 years couldn't possibly be like the last 15 years, and for no other reason, because 15 years ago they were this relatively irrelevant company

that had the benefit of being small and everybody wasn't paying attention to every hiccup and burp that they made, and now that's not the case. They are under the microscope, and that's going to make it difficult. Let me ask you about a couple of the key players at Apple now, and one of them is someone that I'm assuming you have some insight into, and that's Tim Cook, the new CEO. The reason I say that is because back in 2008, you wrote a cover story for Fortune entitled The Genius Behind Steve, Could Operations Whiz Tim Cook Run the Company Someday? You were certainly prophetic with that article.

you look at Tim Cook, what do you think is his biggest strength and to the extent that he has them, his biggest weakness as CEO? I'll start with his weakness. And it's sort of a it's an unfair one, but an easy one is that Tim Cook is not Steve Jobs. And I don't think from what I know about Tim Cook that he's the least bit insecure about that. He's a nobody. Nobody is steve jobs and uh that's that's that it's easier to understand because cook is so different from jobs so cook is this uh he has an mba by the way although he got it from he got it at night school so i think he's forgiven for that in the jobsian view of you know business school people um but he's an engineer and he's uh he he doesn't have a lot of emotion he's a workaholic he doesn't have

this eclectic, artistic, poetic network that Jobs had. He's what the psychotherapist Michael McAbee referred to as a productive obsessive, not a productive narcissist, which is what Jobs was. So what I think he has going for him from everything that I've heard is that he's an extremely intelligent, demanding, hardworking, competent, and even well-liked person. I don't know if he's beloved around Apple, but Apple people want to follow him. He had Steve Jobs' trust. He already essentially was running the company for quite a few years. So flipping around back to the original part of your question, there's no evidence that he's any sort of a creative or artistic genius. And so what we'll be looking for out of Cook will be evidence that he

recognizes that, and then evidence of how he intends to compensate for it. I was going to say, because one of the things you illustrate in the book is how Steve Jobs, while he was looming large over this entire company, there were large parts of the business that he was relatively disengaged from. And those were things that Tim Cook, when he was his right-hand man. He focused on supply chain. He focused on logistics. And that freed Steve Jobs up to focus on design and on marketing and that sort of thing. Is anyone stepping up to fill that void now for Tim Cook? Well, all we know is from what we can see from the executive team members and look at what their roles are. So Phil Schiller, for example,

heads product marketing and did this under Jobs for years. He's going to have to bear the brunt of the advertising hole that Jobs had. You had a CEO who approved every television spot, for example, and that's no exaggeration. So that's something that Schiller is doing, and we'll find out over time if he does it well. Scott Forstall is the head of mobile software, which in Apple lingo accounts for 70% of the company's revenue now, and that's a euphemism for iPhones and iPads, and so he's somebody who has the technical expertise and some theatrical flair about him, which is unusual for the nerds, and so there's a lot of hope for Forstall. And then lastly is Jonathan Ive, the design chief of Apple, who's been the design chief

the entire time that Jobs was back at the company. You can assume that he'll continue to be in charge of design. He has a group of rock stars who work for him, by the way, people who are very prominent in the industrial design world, but who you and I don't know because they keep them hidden away. And the thing that he won't have, that Jonathan Ives won't have, is Steve Jobs as his editor anymore. And that will be, you know, it will be very interesting to see who makes the call on Ives' work going forward. But presumably he's going to have to step up and say to Tim Cook, these are the design decisions I think we should be making. Before we wrap up with a round of buy, sell, or hold, I want to ask you just one question about China. Because there's been a lot of attention recently about the harsh work environment for some of Apple's manufacturing plants in China.

Do you think that stories like that and that perception poses a real threat to Apple and its image? I actually do think so. I think Apple doesn't care about much of what the world thinks about it, but this I think they do care about. I think, based on my interactions with them, I think Apple people consider themselves to be, you know, upright, ethical, progressive people in the world, and I think they think they've tried very hard to get this right.

And I think, again, this is just my opinion, that this distresses them. I think they feel picked on, and this is a new feeling for them to be number one. Their culture is actually a culture of an underdog. So, yeah, I think they take this to heart, and they haven't done anything about it yet publicly, but I do think we'll see them do things. You're listening to Motley Fool Money, talking with Adam Lashinsky, author of the new book, Inside Apple, How America's Most Admired and Secretive Company Really Works. Adam, we're going to wrap up with a round of buy, sell, or hold.

This may or may not be the next big thing for Microsoft. buy, sell, or hold Windows 8? Believe it or not, buy. I've heard so much positive buzz that I, more buzz, more positive buzz than I've heard in years about Microsoft. Her performance at the Super Bowl got some rave reviews. Buy, sell, or hold Madonna? Sell. I'm a huge Madonna fan, and I was bored to tears. Now, I didn't see it myself, but it was, just tell me, like right from the outset, You're like, nope, this is not working? Yeah, she wasn't moving fast.

I want her to move faster. This is a controversial technique used to extract natural gas from the ground. Buy, sell, or hold fracking. I thought there was some connection with Madonna there. Hold. I think that it's inevitable, but the scrutiny is only going to get higher. and finally we've seen other books based on investigative journalism turned into feature films buy seller hold inside apple the movie i'd like to say from your mouth to god's ears

uh on that so i'll just uh humbly give you a hold on that and uh and and i mean if you get some input who are you getting to play you i'm ready for my debut i think it'll be i think it'll be me. Because, you know, I mean, Bob Woodward got Robert Redford to play him. That's pretty much the gold standard in terms of, you know, in terms of good looks. It would be somebody with more hair than I have, for sure. Absolutely. The book is Inside Apple, How America's Most Admired and Secretive Company Really Works. It is already a bestseller. Go out and get a copy. It is fascinating stuff. Adam Lashinsky, thanks so much for being here. Chris, this was a great interview. Thanks for your time. That's all for this week. Check out our daily podcast,

MarketFoolery. It's on iTunes and online at MarketFoolery.com. And for video highlights of our daily podcast and our weekly radio show, you can go to FoolTV.com. That's FoolTV.com. That's it for this edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We will see you next week.