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This isn't the first time Apple Inc. (Nasdaq: AAPL) Chief Executive Steve Jobs has given investors a scare.
And each time before, Apple has navigated the crisis – and soared to even greater heights.
Will that pattern repeat itself again? Or has Apple's fortunes soured this time around?
Jobs on Jan. 17 e-mailed Apple employees to say that he was taking time off for undisclosed medical issues.
"I love Apple so much and hope to be back as soon as I can," Jobs wrote. "In the meantime, my family and I would deeply appreciate respect for our privacy."
Apple Chief Operating Officer Timothy Cook will oversee day-to-day operations in Jobs' absence.
All eyes turned to Apple stock in the days following as fearful investors worried shares would drop like the last time Jobs required a health-related leave. Apple followers worry that Jobs' absence might disrupt the company's profit-churning momentum.
"A lot of people will hit the ejection handle," Brian Marshall, an analyst at Gleacher & Co., told MarketWatch. "The stock will come under a lot of pressure."
U.S. markets were closed Jan. 17 to observe Martin Luther King Jr. Day. But Apple shares fell 8% on German exchanges after the news broke. On Jan. 18, the company's shares fell as much as 6.5% in U.S. trading, eradicating about $20 billion in market value, before corrected to close 2.25% lower than Friday's closing price.
Apple stock has fallen about 2.3% since Jobs announced his leave.
The news was similar to the CEO's 2009 announcement that he was leaving for six months to undergo a liver transplant. On Jan. 14 of that year, Jobs admitted his health issues were "more complex than I originally thought," and Apple shares hit a low of $78.20 on Jan. 20. Then the stock rallied with the overall market, reaching $144.67 on June 5, 2009 and climbing to a record high $348.48 last Friday.
Jobs also left in 2004, after he was diagnosed with pancreatic cancer.
Many investors say that Job's vision and hands-on stewardship of the company is directly responsible for Apple having been able to eclipse Microsoft Corp. (Nasdaq: MSFT) in market value. Those same investors believe that Jobs' presence is vital for Apple's success, and worry that without him, the company's ability to innovate will wither.
Apple's tight-lipped policy on who else is behind the booming success of such products as the iPhone and iPad has also frustrated investors. Highlighting the company's lesser-known supporting cast – including industrial designer Jonathan Ive, marketing guru Philip Schiller and iPhone software specialist Scott Forstall – might bolster investor confidence in Apple and its future.
"If you can show us the process behind the vision, and show that it's not all Steve Jobs, then I think the valuation will persevere," Kim Caughey Forrest, an analyst for the Fort Pitt Capital fund, told MarketWatch.
But many experts think Apple's product pipeline boasts enough technological advancement and creative energy to prevent a decline in value.
Apple followers are expecting a new version of the iPad in the spring, and the iPhone 5 in the summer. The company is also bringing the iPhone to Verizon Communications Inc.'s (NYSE: VZ) 93 million subscribers in February.
This prompted last week's Money Morning "Question of the Week": Do you think Apple can continue to thrive without CEO Steve Jobs? Why or why not? Are you bullish or bearish on Apple shares? Should the company be more open about its future, including a plan for Jobs' successor?
The following reader responses show a divided view of Apple's future without Jobs.
Glory Days Are Over
No question. If Steve's health status is getting worse this stock will drop like a rocket!
– Anonymous
I don't think Apple can keep going much higher, especially without its dedicated leader. I wish I had gotten in on it last time [Jobs was sick] and taken some of those 400% gains, but I missed it.
I think it might go on for a bit, the stock price, but competition is eventually catching up to the iPhone and iPad, and without its CEO things won't be the same.
I hope it surprises us and remains strong, but I think it'll slip from the top soon.
– Helen B.
Nah, I hate to say it but I don't see Apple being as great without Steve Jobs. Every company has struggles and it's been on a good run for a while…time for a break.
–Gene F.
Apple: Onward and Upward
Yes, they can. Apple can handle a little rockin' the boat…at least, I'm keeping my shares. They have knocked it out of the park this year with their goods and they aren't going anywhere but up.
– Brian E.
Yes, no man is irreplaceable.
– Randy H.
Apple is a machine.
Buy them and IBM at the same time, that's what I say.
– B.H.
Be sure to answer next week's question: How would you rate U.S. President Barack Obama's 2011 State of the Union address? Did he adequately address economic issues? What parts of his speech did you agree or disagree with? Did he change the way you feel about the year to come? Are you more hopeful – or less hopeful – about the country's economic future?
Send your answers to mailbag@moneymappress.com.!
Is there a topic you want to see covered as a "Question of the Week" feature? Then let us know by e-mailing Money Morning at mailbag@moneymappress.com. Make sure to reference "question of the week suggestion" in the subject line. We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
- Money Morning:
Hot Stocks: Steve Jobs Health Concerns No Reason to Bail on Apple Inc. (Nasdaq: AAPL) - MarketWatch:
Jobs absence seen pressuring Apple on succession - The Wall Street Journal:
Are Apple's Best Years Over? - Money Morning News Archive:
Question of the Week Feature
I will sell AAPL now … Predicting that this stock will drop like a lift without STeve. Why wanna take the risk of holding this stock while cannot predict his health… Right?
This AAPL stock can go up very fast but it can also drop like a rocket. I will stay away from it and invest on GOOG and RIM.
I find the general public related to apple somewhat amuzing at times. I have held this stock since it was $17 a share and I just keep buying more. Sure, the stock has gone through volatility and it will when investors keep pulling their profits on days the market jumps. Otherwise, the stock would keep moving up. There is a reason the stock has valuations in the $400 a share range. The profits are there. Every quarter, they beat the estimates. Stock price value is based on future profit valuations guys. So, if analysts are saying the stock is worth over $400, than why worry? I don't know how many reports I see that say apple is a strong buy and the future is bright with or without Steve Jobs, but the general public fights logic of the people in the financial world. Why? I guess because there are two sides to everything and someone will always disagree and have a difference of opinion.
Every kid on the street wants a Mac, an Ipod, and Ipad. Do you think that will really go away if Steve Jobs is gone? Tell your kid at X-Mas or his birthday that Steve Jobs is sick, so he really doesn't want an ipad. Something tells me you can't reason with a middle school or high school kid. I see it on college campus as well. Everyone wants Apple products. Do you really think Steve Jobs was smart enough to bring Apple to where it is and build the company around him? Where is Steve's money? In the stock. He paid himself $1 every year. He doesn't want the stock price to fall either! Heck, when he is sick and the stock falls, the amount of money he loses could send his kids, kids, kids, kids, kids, kids to college. I am sure he is smarter than that and plans to keep his own family set for years as well as the Jobs generations to come.
Until then, you guys can keep being negative and I will keep being positive.
By the way, thanks for selling the stock last week guys driving the price down. I got in again last week when it fell and the gains in the last 2 days just paid for a new motorcycle. :)
Dangerous stock to own. It may have rewards, but I can't believe how fast investors dump the stock whenever Steve Jobs coughs. All there needs to be is a RUMOR that Steve Jobs went to the doctor for a physical and it turns into Steve Jobs is given last rights. Unbelievable. What sort of idiots dump huge amounts of stock for a rumor? A medical leave is a medical leave. Steve never said he was on his deathbed. He never said he couldn't make any decisions while he was away. Just news of the medical leave took the stock down $20 and it hasn't yet recovered despite a blowout quarter and three healthy target price upgrades.
Apple stock is truly screwed up. Or maybe the investors that own Apple stock are screwed up. Either way, no matter how many iPhones are iPads are sold, the only thing that seems to have any visible impact on the stock is Steve Jobs health. You just can't run a business on such a flaky criteria. If Google was doing as well as Apple, they'd already be at $1000 a share by now because its CEO doesn't get sick. They swapped CEOs and nobody even blinked. The stock just went along as usual. That's the way a company should be.
The company is doomed without Steve. Sell your stocks people…sell while its still high enough. $348 is Apple's highest point. And coincidentally enough it is the price at which Steve's departure was announced. Steve accelerated The Apple Machine to its top speed of 348, shifted the gears to Neutral and just left the scene. If it was Steve driving the company (and the stock) up all this time, now its fate that will determine which way the price will swing.