Last Monday, Apple Inc. (AAPL) announced that its chairman and CEO, Steve Jobs, would be taking another leave of absence from the company after receiving a liver transplant only a year and a half ago. The news made national headlines beyond the business and financial media, and the buzz it created is a testament to the power and influence of one of the world’s most dynamic CEOs.
The exact nature of Jobs’ illness is unknown, but it can be assumed to be serious, and we all wish him well in recovering his health. But what about holding on to Apple Inc. in our stock portfolios? It seems that when Steve Jobs catches a cold, the stock market sneezes, and the rest of us try to keep our investment statements from blowing off our desks. Let’s take a step back and look at some of the factors we should consider when deciding if it’s time to sell our Apple stock.
Steve Jobs: No ordinary CEO
Let’s put it this way: If the current CEO of the Ford Motor Company (F), Alan Mullaly, fell ill, we can reasonably expect that there is a replacement nearby who knows the inner workings of the company and would be able to maintain its status as one of the largest car companies in the world. But what would have happened had Henry Ford fell ill back in the 1920s? Ford was the innovator behind assembly-line manufacturing and the Model T, and was the man most responsible for the growth of the auto industry in our country. Devastating, right? Who knows how history would have played out had Ford been struck down in his prime?
That’s how Jobs is looked upon in the field of high-tech consumer products. He’s not just a guy sitting in his big office wondering who he should fire next. He’s intricately involved in the development and design of Apple products. So, yes, he is different.
What does his absence mean?
As a manager, Jobs has been described as aggressive and demanding. So are a lot of managers. But his strength is his vision. One of his favorite quotes comes from hockey legend Wayne Gretzky: “I skate to where the puck is going to be, not where the puck has been.”
Right now, when Jobs announces a new product, it creates tremendous excitement and interest among consumers, because he alone is associated with such unique and revolutionary products as the MacBook, iPod, iPhone, and so on. His innovation and dedication to quality are unparalleled, so people are right to be concerned about whether that can continue in his absence.
Is he just a good manager?
No. He’s more than that. He knows how to get deals done. Consider that he was one of the initial founders of Apple, essentially in his garage, in 1976. The Macintosh is released in 1984 and literally causes a revolution in personal computing (remember the Super Bowl commercial?). Then he’s forced out in an internal power struggle in May of 1985. He goes off and starts other ventures, and Apple falls on serious hard times with respect to profitability. The company actually comes close to filing bankruptcy, so it brings him back in 1996, and the rest is history with regards to profitability.
The point is, he’s not only a great innovator, he’s got uncanny business acumen as well. By the way, one of his side ventures during his exile from Apple turned out to be Pixar, the group behind the Toy Story movies, The Incredibles, Finding Nemo, and a host of other money-making, critically applauded features. When Disney purchased Pixar in January of 2006, Jobs ended up with 7% of Disney stock, making him that company’s largest single shareholder. Again, he knows how to get deals done.
Is it time to panic and dump the stock?
Jobs is a genius. Jobs will be in history books. And the resilience of the company he built will solidify his legend. When he stepped away for seven months in 2009, the company did very well under the auspices of COO Tim Cook. Cook, a 10-year veteran with Apple, will take over this time as well, and there are other talented and experienced officers with the company. And even if Jobs’ health is worse than expected, Apple’s cupboard is stocked with some pretty unique products in development.
Apple had a phenomenal fourth quarter in 2010, as iPhones, iPads and iTouches piled up under Christmas trees around the nation. The 30-day period ending January 19th actually saw Apple stock rise 5.7%, so the market hasn’t been as spooked about Jobs’ health as you would think. It closed at $338.84 on the 19th, and some analysts are predicting it could go to $550 in the next 12 months.
So while we hate to see a talent like Jobs be put on Injured Reserve due to this health issue, the company should be able to compete ably without him.