Steve Jobs’ after hours announcement of his medical leave of absence was unexpected. Shareholders are now forced to confront a Jobs-less Apple much earlier than anyone anticipated. The prospect is worrisome and it calls into question how forthright the Jobs and Apple have been about a succession plan and his likelihood of continued involvement at the Company longterm. The market responded by immediately chopping 7% off of the stock’s already depressed share price and it stands to open tomorrow around $79/share, a 52-week low. And, it’s anyone’s guess how the stock will move when markets open.Â
This, however, is not a situation without precedence. Jobs announced that COO Timothy Cook would take over as interim-CEO and that Jobs will continue to be remain involved in major strategic decisions. Cook was at the helm in 2004 when Jobs underwent treatment for pancreatic cancer and Apple’s stock tripled from $21/share to $64/share in 2004.Â
No one really knows to what extent Steve Jobs is responsible for Apple’s success. Is he a guiding light? A visionary? A salesman? A product designer? A shrewd operations specialist? All of the above? What we do know is that Steve Jobs’ vision for Apple and personal computing in general has been long in the making from his time at Apple guiding the creation of MacOS to his tenure in exile at NeXT creating computers years ahead of their time (yes, the cube/mini and his love for magnesium were alive in well even in the 1980s) to the hit parade of trendy and innovative products that Apple has released since his return in 1997. And, no one knows just how much of his vision for the future has been communicated to Apple or that anyone but Jobs himself could execute on his vision.Â
What we do know, however, is that Jobs has assembled a cast of very talented executives at the firm. In fact, I profiled these men in my post, “The men who could replace Steve Jobs,” a few weeks ago. Interim CEO/COO Timothy Cook is an operation maven who is credited with running the day-to-day operations of the Company for the last few years. He knows how to control costs, manage the supply chain, and has an eye for the balance sheet. Apple’s retail presence is, in fact, not a Steve Jobs creation but the brain child of Ron Johnson, SVP of retail. Jonie Ive will still be around creating beautiful designs for Apple’s products. Apple is in good hands.Â
The only thing missing in this cast is a bona-fide “visionary” who shareholders can trust to deliver regular, innovative products and drive Apple’s 15-20% growth rate. But, the stock is no longer priced like a growth stock. In fact, it’s trading at levels last seen at the beginning of 2006 when earnings were more than 60% lower. Does anyone really believe that, even in the event that Steve Jobs chooses to retire rather than return in 6 months, Apple is not a better company today than it was 3 years ago? Or, that Apples cast of all star execs will bumble so badly as to destroy 60% of earnings power?Â
Full Disclosure: Long shares of AAPL at the time of writingÂ
By Dan Hung
www.thecuriousinvestor.com
This, however, is not a situation without precedence. Jobs announced that COO Timothy Cook would take over as interim-CEO and that Jobs will continue to be remain involved in major strategic decisions. Cook was at the helm in 2004 when Jobs underwent treatment for pancreatic cancer and Apple’s stock tripled from $21/share to $64/share in 2004.Â
No one really knows to what extent Steve Jobs is responsible for Apple’s success. Is he a guiding light? A visionary? A salesman? A product designer? A shrewd operations specialist? All of the above? What we do know is that Steve Jobs’ vision for Apple and personal computing in general has been long in the making from his time at Apple guiding the creation of MacOS to his tenure in exile at NeXT creating computers years ahead of their time (yes, the cube/mini and his love for magnesium were alive in well even in the 1980s) to the hit parade of trendy and innovative products that Apple has released since his return in 1997. And, no one knows just how much of his vision for the future has been communicated to Apple or that anyone but Jobs himself could execute on his vision.Â
What we do know, however, is that Jobs has assembled a cast of very talented executives at the firm. In fact, I profiled these men in my post, “The men who could replace Steve Jobs,” a few weeks ago. Interim CEO/COO Timothy Cook is an operation maven who is credited with running the day-to-day operations of the Company for the last few years. He knows how to control costs, manage the supply chain, and has an eye for the balance sheet. Apple’s retail presence is, in fact, not a Steve Jobs creation but the brain child of Ron Johnson, SVP of retail. Jonie Ive will still be around creating beautiful designs for Apple’s products. Apple is in good hands.Â
The only thing missing in this cast is a bona-fide “visionary” who shareholders can trust to deliver regular, innovative products and drive Apple’s 15-20% growth rate. But, the stock is no longer priced like a growth stock. In fact, it’s trading at levels last seen at the beginning of 2006 when earnings were more than 60% lower. Does anyone really believe that, even in the event that Steve Jobs chooses to retire rather than return in 6 months, Apple is not a better company today than it was 3 years ago? Or, that Apples cast of all star execs will bumble so badly as to destroy 60% of earnings power?Â
Full Disclosure: Long shares of AAPL at the time of writingÂ
By Dan Hung
www.thecuriousinvestor.com
