Can Apple’s Stock Withstand the Absence of Steve Jobs?

25 Comments

Steve Jobs announced on Monday that he is taking another leave of absence from the company — of unspecified length — to deal with his health. Although he will remain CEO, Apple’s (s aapl) chief operating officer Tim Cook will be running things in Jobs’ absence. While the company is on firm financial footing, and is expected to beat most analysts’ estimates with its quarterly earnings tomorrow, the news is almost certain to rattle investors, and could put continued pressure on the stock as the markets try to figure out what Apple might be like without its charismatic leader.

The company appears to have deliberately chosen to release the news on Martin Luther King Day, in order to give investors some time to think about it, since U.S. stock markets are closed. But Apple shares dropped dramatically on foreign markets, falling as much as 7 percent in Germany at one point after the news was first reported. Apple likely also chose to make its release just before it comes out with its financial results, since that should focus investors’ minds on the performance of products like the iPad and the iPhone 4 instead of on the CEO’s health. Most analysts have said they are expecting another blockbuster quarter from the company.

Despite what is expected to be good news on the financial front, the Jobs announcement is almost certain to re-ignite criticism that Apple has not been as forthcoming as it should be about his medical status. Jobs was widely expected to appear at a recent press conference announcing Verizon’s (s vz) launch of the iPhone, but Tim Cook appeared instead. Others noticed that during the Apple developers conference in September, Jobs handed off a lot of the presentation to Cook and others — although he has been doing that more over the past year, in what is likely an attempt to shift the spotlight away from himself and show that Apple has other executives who can carry the torch if necessary. (The company continues to argue with shareholders over its succession planning.)

Apple came under fire in 2008 over repeated reports that Jobs was more seriously ill than the company had acknowledged — based in part on his gaunt appearance at several events — but there was no official news until Apple announced in January of 2009 that he was taking a medical leave. Shortly thereafter, Jobs was required to have a liver transplant. Some argued that his personal health was no one’s business, but SEC rules require companies to inform shareholders and the public markets about material facts, and Jobs having complications as a result of potentially fatal illness was seen by many as a material fact. One of Apple’s own directors later said that the company should have gone public with the news, and that he regretted not resigning over Apple’s decision to keep quiet.

The focus on Jobs and his health stems from the fact that Apple is one of the few major corporations whose fortunes are tied so closely to its founder and CEO. Most other companies with a $300-billion market value and revenues in the $25-billion range may have prominent chief executives, but few of them are seen as having so much control over the products their companies produce — and even fewer are as charismatic and widely admired as Jobs. Some have estimated that the stock trades between 10 and 25 percent higher than it otherwise would, based solely on Jobs being the CEO. During the latter part of 2008, after rumors of Jobs’ health began to accelerate, the stock lost more than 50 percent of its value, although several analysts have told Reuters (s tri) that they don’t believe the latest absence will affect the stock that much.

On the weekend, a Smart Money columnist wrote a piece entitled “Are Apple’s Best Years Over?” In it, James Stewart argued that while the company has been hugely successful with the iPad and the iPhone and its MacBook laptops, “I’m not sure what worlds there are left for Apple to conquer,” and said the stock could come under pressure because it has climbed more than 80 percent in the past year, and is up by over 400 percent from its low in 2009. Rightly or wrongly, the news of Jobs departure is going to cause many investors to echo Stewart’s question.

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25 Comments

Karen

We certain need someone like Steve to breakthrough all the technology barrier especially comes to Computer interfaces, it has so much change our way of working and using technology in our personal life. No one else like him dare to make a big shift for us. Without him I cant think anyone can take the leadership. He is not only the leader in Apple but also among us. It serious affect our progress of life. And the stock price is just fraction of what going to cost. Losing him would means a lot to us, at least this century.

Spanwite

Princess Diana all over again; he is not dead yet! Sharks who smell blood; Dell had a wish in 1997 or so! It’s FB + T age no respect anymore. It’s so sad.

Clay Loveless

“Regretted not resigning”??

What a bullshit thing to say. It’s never too late to hop off the gravy train, Rich Hypocrite Dude.

Mathew Ingram

Jerome York, the guy who made those comments, died of a brain hemorrhage not long after he talked to the WSJ. He was the head of Apple’s audit committee for 12 years.

Chris

Weird how this announcement happens on MLK, because U.S market is closed. Sucks for those who will lose a lot.

Tom

This is a pleasant and most civil forum. Contrast with Yahoo. All the best, Steve.

Apple Turnover

The absence of Steve Jobs is the kiss of death for Apple. Even if there was an unfounded rumor of something seriously wrong with Steve it would leave the stock in shambles. Now that it’s official, the value of Apple is ruined. It’s been said many times that Apple as a company is worth almost nothing without Steve Jobs which makes any investment in Apple now a foolish thing. The hedge funds are going to dump all their Apple stock in a matter of days, causing remaining investors to dump their stock. Apple’s decline will come very quickly if it hasn’t already started. Steve must be very ill to make such an announcement on the eve of earnings which he knows will drive the stock well below $300. I didn’t think the end of Apple would come this quickly, but that’s how it is when investors know a company CEO is dying. Another wasted quarter for Apple shareholders as the stock is quickly sold off while Steve is in the hospital getting treatment.

The saddest part is that Steve will have to watch the hedge funds gut the company before he dies. After working so hard the past few years trying to rebuild the company, seeing the company collapse overnight won’t be good for Steve at all. The rapid rise and even faster fall of Apple, will go down in history as the company that was being physically carried by its CEO and it indirectly killed him. Neither Steve or Apple will recover from this unfortunate incident.

eideard

So, would you like to sell your AAPL shares to me — cheap?

Poisonally, I’m canceling my normal stoploss and preparing to take advantage of fools who panic easily and have no perception of value investing.

eideard

Well, here we are noon, Tuesday, and Apple is now down a grand total of less than 2%.

So much for stick tips from dolts.

kwyjibo

Did you say this in 2009 as well? “Another wasted quarter”? When was the previous one?

No one else believes that Apple is a one man show. One man does not carry a ~$300B company.

AK

I wish all the best to SJ. Now I’m going to say something foolish: I think in the long term, Apple could even be a better company without SJ. The stock will take a dip tomorrow but will come back throughout the year. The iPhone, iPad, Mac Apple stores mean years of growth ahead. Not to mention the future of Apple TV and who knows what else is in the pipeline. Today Apple needs something that only someone else than SJ can bring. Apple needs to rely a lot less on the realease whatever new iDevice or whatever is trendy. Like James Stewart said “I’m not sure what worlds there are left for Apple to conquer,”. SJ is the conqueror, but now it’s time to build on the conquered territories. It takes another strategy. I hope SJ spend a nice time with his family and get better. I think his job is done. Apple has grown up to become a $100B revenues/year company. SJ has more important things to do for himself and his family. If ever he’s back, it should just be as a chairman or strategic advisor or the like. Nothing more! The stock will do just fine in the long run, when people calm down and more cash comes in.

AK

Correction, I meant “Apple has grown up to become a $100B year company.” Profits would be more in the 20B/year.

Lou Covey

This sounds like the same commentary the last time Jobs took leave. Everyone predicted the end of Apple. Yet the company continued to grow all the while. What has happened since is the company’s effort to create a chain of succession. Steve Jobs is an incredibly important figure in the consumer electronics world. I’m more concerned that the entire industry will lose its focus without having him to target.

kwyjibo

Apple’s PE ratio is already slightly lower than that of Google. It’s way South of Amazon and Netflix.

I don’t think Apple’s share price is overvalued, but it might go on a bit of a wild ride come earnings tomorrow.

Paul

Apple stock then rose over 60% during Steves absence in 2009. The market tends to overreact and overtrade on news, this is mostly the result of day traders and hedge funds locking in profits and realigning positions.

Keep in mind that Apple is going to release some stellar earnings results later in the week, and the stock will jump right back up.

RattyUK

Apple will have outrageously stellar earnings tomorrow. But it will all be for naught as this news will allow Wall Street to do what it likes with the stock.

Rich

I’ve always thought Steve Jobs is the only person who can run Apple – at least, as successfully as it’s been run. It’s widely recognized that Jobs is a unique visionary; therefore he is essentially irreplaceable. Not to say Apple wouldn’t do well without him, but it wouldn’t continue the same amazing innovation.

Re “I’m not sure what worlds there are left for Apple to conquer,” that sounds like the Patent Office claiming in the late 19th century that there would be few inventions in the future.

Mark

Apple’s stock should be determined by growth and since they’re still growing that’s what’ll drive it.

Is Appel overvauled? Probably. Is it going to crash? No chance.

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