Apple's Ternus era begins, and startups want to know if the cheque book opens

John Ternus became chief executive of Apple on Tuesday, September 1, ending Tim Cook's 15 years in the role. Mr Cook, who moves to executive chairman, sent a farewell memo to staff on Monday; Arthur Levinson, chairman for the past 15 years, becomes lead independent director, and Mr Ternus joins the board. The handover was announced in April, approved unanimously by the board, and has been rehearsed in public ever since. Investors greeted the first day calmly but warmly: the shares, which closed at $316.85 on Monday, were up about 2.5 per cent by late Tuesday morning in New York, according to figures cited by MacDailyNews, which put the gain since the succession was announced at about 37 per cent.

The interest for this newspaper lies less in the stock than in the ecosystem around it. Apple is the gatekeeper of the most lucrative consumer platform in the world, a buyer of small technology companies, and, increasingly, a customer of other people's artificial intelligence. Every one of those roles is now in the hands of an engineer who spent 25 years building hardware. For founders who sell to Apple, build on Apple or hope to be bought by Apple, the question is what changes.

An engineer inherits an AI problem

Mr Ternus joined Apple's product design team in 2001, became a vice president of hardware engineering in 2013 and a senior vice president in 2021. He oversaw every major product line and is credited with a central role in the move of the Mac to Apple's own silicon. His successor in hardware is Johny Srouji, named chief hardware officer in April, who now runs a combined hardware engineering and hardware technologies organisation.

What he inherits is a company that, in CNBC's words, "hasn't yet fully executed its strategy in artificial intelligence." Apple's most important AI decision of the year was to look outside. In January it announced a multi-year agreement under which "the next generation of Apple Foundation Models will be based on Google's Gemini models and cloud technology," after concluding that Google offered "the most capable foundation". The deal is not exclusive; ChatGPT remains integrated with Siri. Apple says its models will keep running on devices and on its Private Cloud Compute servers.

That choice is significant for the startup economy. It signals that Apple is prepared to treat frontier models as a component to be sourced, much as it once sourced processors, while competing on integration, privacy and distribution. Mr Ternus has said that "there is so much opportunity for us with everything that's happening in this space", but he has not yet set out how much of the stack Apple intends to own.

The acquisitions question

The most direct signal for venture investors came over the weekend. Bloomberg reported that Mr Ternus would probably stop having Adrian Perica, Apple's long-serving head of mergers and acquisitions, as a direct report, with his responsibilities possibly divided between the services and finance teams. Mr Perica was left off Apple's new leadership page. As 9to5Mac noted, some analysts expect the new chief executive to be more willing than his predecessor to pursue larger deals.

Apple under Mr Cook was a frequent but modest buyer. It absorbed teams and technologies, usually without disclosing prices, and avoided the multibillion dollar platform acquisitions that Alphabet and Microsoft have made. For AI startups this mattered: Apple was a plausible home for a small team with a clever on-device model, but rarely a bidder that set valuations for a whole category.

A reorganisation of the deal function does not by itself mean a change of appetite, and nothing announced so far commits Apple to anything. But the combination of a new chief executive, an acknowledged gap in AI and a balance sheet of Apple's scale makes the possibility worth taking seriously. If Apple does decide that some capabilities must be owned rather than licensed, the natural targets are companies whose technology sits close to the device: model compression, on-device inference, speech, vision, sensors and the software that makes them work together. Founders in those fields should expect more inbound interest, and their investors should expect Apple to be a more active price setter than in the past.

Memory costs and the price of the platform

The second inheritance is a supply shock. A global shortage of memory chips, driven by demand from AI servers, has already pushed Apple to raise prices on MacBooks and iPads in June, as well as on Apple TV and Apple One. Many analysts expect higher iPhone prices early in the new tenure, and Mr Cook has said Apple would pass higher costs on to customers. Brandon Nispel of KeyBanc, one of few analysts with a sell rating, has warned that "investors don't pay a premium for growth coming from price increases because it's not sustainable."

For app developers and consumer startups, more expensive devices are a slow but real headwind. Upgrade cycles lengthen, the installed base ages and features that depend on the newest hardware reach fewer users. Companies whose products rely on Apple's latest AI capabilities should model adoption on the assumption that only a minority of users will have capable devices in the first year.

The first test is a week away

Mr Ternus's first public test is Apple's event on September 9, where new iPhones and Apple Watches are expected, along with Siri and other AI updates. Apple's marketing chief, Greg Joswiak, has promised "more to say September 9." Gene Munster of Deepwater Asset Management argued that Apple must "light up recruiting and bring in awesome talent" because it still needs to reinvent itself. Kathy Gersch of the consultancy Kotter put the point more bluntly: "What worked for Tim Cook is not going to be the same that works for John Ternus."

Early personnel moves suggest a more direct management style. Laura Legros, a former Apple vice president recruited out of retirement in July, is reported to be taking a chief of staff style role, which Mr Cook did not have. Luca Maestri has left his corporate services role, which passed to the chief financial officer, Kevan Parekh. People close to Apple expect Mr Ternus to be less inclined than Mr Cook to keep departing executives in smaller roles.

Our view

Apple's succession was orderly, and the market's response suggests investors are content with continuity. The startup economy should not be. Mr Cook's Apple was an excellent platform owner and a cautious acquirer; it preferred to build quietly or partner, as it did with Google. Mr Ternus has every reason to be bolder, because the company's AI position is weak and the hardware cycle is under cost pressure, and the early reshaping of the deal team is a hint, not yet a policy.

Founders working on device-level AI should prepare for a more active Apple, both as a buyer and as a competitor that may build what it once licensed. Investors should be cautious about pricing Apple exits into their models until the new leadership shows its hand. What to watch: the September 9 event, any statement on how much of Apple's AI stack will remain outsourced, who ultimately runs mergers and acquisitions, and whether iPhone prices rise.

Sources

• CNBC: Apple enters John Ternus era as AI challenges and memory crunch intensify
• 9to5Mac: Apple executive changes continue as Ternus becomes CEO
• The Apple Post: Today is John Ternus' first day as Apple CEO
• MacDailyNews: Apple stock soars as John Ternus becomes CEO
• MacDailyNews: Apple enters its John Ternus era
• Campus Technology: Apple and Google strike AI deal to bring Gemini models to Siri

Filed under Big Tech. Written by InvestTimes Editorial under our editorial standards. Commentary and analysis for information only, not investment advice.