The Mysterious Steve Jobs

Forget about Apple's (AAPL) P-E ratio. If you want to know whether to buy or sell Apple shares, just gauge whether CEO Steve Jobs looks gaunt or well-fed.

It's worth asking if there has ever been another major publicly traded company whose stock rose or fell based on the CEO's waistline. Wal-Mart (WMT) did just fine when founder Sam Walton retired as CEO in 1988, and died of cancer in 1992. Exxon (XOM) mints money regardless of who its CEO is. There hasn't been a Johnson at the helm of Johnson & Johnson (JNJ) since the 1960s, yet J&J is an exemplary Wall Street performer. Even Berkshire Hathaway (BRK.A), which is basically Warren Buffett's investing club, seems better insulated from the health of its CEO than Apple is. And Buffett is 78.

Jobs's health, of course, moves markets more than that of any other American. When Jobs issued a public "letter" recently saying that his observable weight loss - and decision not to attend the annual Macworld trade show - was due to a treatable hormone imbalance, investors bought more Apple stock. Shares rose more than 4 percent - on a down day for the markets.

Jobs, 53, purports to be embarrassed by the attention. "I’ve said more than I wanted to say, and all that I am going to say, about this," he concluded in his letter to the "Apple community." And he promised that he's concerned about the company, above all. "I will be the first one to step up and tell our Board of Directors if I can no longer continue to fulfill my duties as Apple’s CEO," he pledged.

So let's say you were running Apple, and you weren't motivated at all by ego or self-interest. You cared only about the company. Your stock was in the habit of rising and falling based on your own well-being - and even rumors about your well-being. You personally represented a single point of failure from which your company might not recover. At least that's what the markets thought.

You would:

A) Diversify the portfolio, so to speak, by making changes that assure the fate of the company doesn't rest completely on you.

B) Secretly hire a cast of lookalikes to impersonate you, in case something happens.

C) Adopt the Osama bin Laden telecommunications strategy and pre-record a bunch of vague, undated videos that can be aired at random points in the future, whether you're alive or not.

D) Continue the cult of personality on which the company depends, regardless of your health.

Obviously the responsible choice is A. Jobs's answer seems to be D, plus bits and pieces of the others.

He's addressed the succession question before, telling Fortune, for instance, that "my job is to make the whole executive team good enough to be successors." So Jobs has groomed a bunch of understudies to fight for his job once he's gone. Interesting start. He could go further, by relinquishing the CEO job to one of his qualified executives, while retaining multiple titles as Chairman and Chief Genius and Mr. Apple and The Guy on Stage in the Black Turtleneck.

But he hasn't. And Apple aficionados don't seem to mind. That's because Jobs's personal imprint on Apple products is what makes the company unique. But if Jobs is Apple, and vice versa, then why own the stock if the man is so fragile? And why believe Jobs when he says he'll function impartially as CEO on matters that affect his own future?

Oh, right - because Apple is different. And because Steve Jobs might just turn out to be immortal, his most brilliant innovation of all.

Comments

[costello:]

not so clever and not so funny

Jan 06 04:00 AM

[pk de cville:]

Why buy the stock?

Maybe it has something to do with a really large organization of talented individuals working and contributing as if their shared future depended on each and every one of them making her/his best contribution possible.

Maybe it has something to do with Apple accomplishing in a year what other enterprises accomplish in three.

Maybe it has something to do with a large enterprise delivering levels of excellence, power, intelligence, innovation, and profit unmatched by any other today.

Might be worth a couple bucks...

Jan 06 04:34 AM

[pk de cville:]

Why buy the stock?

Maybe it has something to do with a really large organization of talented individuals working and contributing as if their shared future depended on each and every one of them making her/his best contribution possible.

Maybe it has something to do with Apple accomplishing in a year what other enterprises accomplish in three.

Maybe it has something to do with a large enterprise delivering levels of excellence, power, intelligence, innovation, and profit unmatched by any other today.

Might be worth a couple bucks...

Jan 06 04:35 AM

[User 227576:]

The health of a successful CEO is indeed of concern to investors. However, in Apple's case that is far from the whole story.

Those of us with memories that go back longer than last year know that SJ's health is just the latest excuse for manipulation of the Apple stock price. Before that there was the long-running "iPod sales will peak some day" story. Then there was the "The latest results are too good and the guidance shows a slowdown in sales and profit growth" story. Then, there was the.... You get the idea.

Basically, Apple is a hot stock, because the company is doing the right things. It has a vision, a strategy, and a tremendous store of technological and human assets. The balance sheet is in excellent shape, and top and bottom line growth are outstanding. The value of the company was under-appreciated by the market for several years, chiefly because of the two tribes (Mac & Windows) problem.

The stock is popular with small investors, most of whom understand Apple's considerable strengths. It is also popular with stock price manipulators, many of whom missed out on the early growth because they did not understand, or just do not like the company.

The techniques used to profit from manipulation of the price are several, but generally involve shorting and derivatives. When a position is taken, the panic du jour is trotted out, via telephone or e-mail whisper, or using a blog co-conspirator, or patsy. Individuals (and funds!) are panicked, and the price controller takes a very nice turn. These stories sometimes turn out to have a grain of truth, such as Jobs' lack of body fat. The irrelevant truism (Sales of some product will decline in future, SJ will die some day) is a favorite. But sometimes these stories are pure fiction, which is why those investors who understand the company get burned so badly by the price manipulations.

Apple really is a case for an SEC investigation, or would be if Brownie, sorry, Cox weren't in charge. Let's hope his successor gets round to earning his paycheck.

So please be careful when peddling the latest Apple panic story. It may make for big hits from concerned small investors, but there is a danger that even an innocent blog might unwittingly help set up the market for another bout of manipulation.

Jan 06 04:44 AM

[Tom B:]

You weren't supposed to know about the Osama Bin laden communication strategy! Expect a call from the CIA, which does better funding-wise in lunatic-rich environments.

But seriously: Tech is different from pumping oil (Exxon) or Union-busting (WMT). Tech is hard to get "right"; and "right" is in a constant state of change.

And Apple is at a crossroads. When the Stores opened and Apple started selling iPods, the pundits all said "Oooh, Apple wants to be a CE company". But, in fact, all their successes have lead to a boost in Mac usage. Apple has HUGELY increased the usability, performance, security and stability gaps between Mac and Windows (which were at their lowest points around 1996, just before Jobs returned). OSX runs on great machines and has dev tools Redmond can only fantasize about.

And yet, market share sits around 10%, in large part because Enterprise is slow-moving; way more willing to spend 100's of thousands on IT support than $50 more on a CPU; and has, very, very simple needs-- E-mail, Powerpoint, some database. That is changing, but slowly.

My feeling is that, at some point, OSX will pick up monentum and really start to hammer Windows on market share. 10.6 will help. Maybe Win 7 will help, if it is anything like Vista (and it looks like it will be very much like Vista!). After that point Apple's CEO will matter less. My hope is that Jobs will stay at least a few more years and finish what he started.

I remember the Apple-is-doomed 90's, and it wasn't that they didn't have the best computers or the best programmers-- they did. The problem was they got WAY behind transitioning to a UNIX-like OS, needed in the modern age where everybody is always running many apps at once.

MSFT has STILL not made the transition to UNIX, and I'd say its a bit too late to start now, particularly with weak, ineffectual management at the top: Ballmer (Yahoo deal, Vista, Zune, Xbox).

Jan 06 10:19 AM

[mollytjm:]

Apples announcement that they won't dance to the Macworld tune anymore is a good start to let others in the company share the stage and on their own timetable.

The talent at Apple is amazing, but just as Disney succeeded the end of Walt, Apple succeed after Jobs...because he made it such a good, financially sound company and put the money where it needed to be, in R & D and very smart people. he wants Apple to outlast him...and it will. Apple remains a true value investment and there's no better time than now, when the stock is so undervalued.

businesses are starting to go Mac. It's easy to understand. Macs need so much less tech support which, on site, is expensive. i agree with the comment that Mac will start to make big inroads in business. Microsoft made a big mistake in Vista and in continuing to develop bug and virus prone products. the shut down of every Zune on the planet when the time chip failed to recognize the new year (didn't we learn about that in 2000?!) didn't help.

Jan 06 11:46 AM

[2bitRick:]

excuse me for repeating myself but:

"What usually passes for analyst's research and comment on this site is pure crap except for one or two notable exceptions."

And guess what Rick?

I am afraid you are not notable.

As always most of the comments from my fellow readers make much more sense than the initial article.

Jan 06 12:11 PM