Apple's Balancing Act: 3G iPhone vs. Jobs' Health - Barron's 22 comments
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What a week it was for the world's foremost CE gadgets maker. Apple's (AAPL) guru, CEO Steve Jobs, unveiled its second generation iPhone at the company's annual Worldwide Developers Conference in San Francisco and it pretty much met or surpassed all expectations. Consumers can forget about all those complaints about the slowness of i-surfing the web via the 2.5G EDGE network when a faster WiFi network wasn't available; iPhone 2.0 comes locked and loaded for much faster 3G network access.
Another thing that has the Apple faithful riled up this time around is the 2.0's price -- or lack thereof. Despite the fact Apple's latest iPhone has features a-plenty that the pre-3G version lacks, such as built in GPS, a new and aggressive pricing strategy will run consumers just $199 for 8 gigs of storage -- half the price of the model it replaces. Instead of retailing the phone at full price and taking a monthly cut from exclusive carrier AT&T (T), Apple will forgo its cut and AT&T will subsidize the phone's price in exchange for a two-year service contract. The reduced pricing means barring unforeseen disaster, Apple should blow past the 10 million phone sales estimate it set for itself in FY2008.
Despite the bounce in share price the 3G's coming out party should have in all likelihood created, Apple shares spent the week selling off (-7.5%). The reason, according to Barron's' Eric Savitz, is simple: Steve Jobs-related health concerns. Following last week's 'Jobs-note', both the blog-o-sphere and mainstream media were filled with reports of a gaunt-looking Jobs, setting off a round of rumors that Apple's number one executive had experienced a relapse of the rare form of pancreatic cancer he suffered from four years back.
Apple's press team responded to the rumors by saying Jobs merely had a "common bug" but to Savitz, the stock's sharp reaction to what amounted to nothing more than hearsay and speculation (at least for the time being) alluded to a greater truth - Apple investors have serious concerns about the company's future prospects in a post-Jobs universe. According to Savitz, "More than any other company, Apple is viewed as a creation of its CEO; it's a cult of personality." Without Jobs in the Chairman's seat, Apple's share price could suffer a serious setback - 3G iPhone or not.
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TechCrunch's Michael Arrington ponders what will happen to the iPhone's rivals.
Author Eric Savitz discusses Apple's refusal to seriously engage in Jobs-related health speculation.
FP Trading Desk notes analysts are thoroughly impressed with the surprise change in Apple's carrier revenue sharing agreement, which should drive an additional $2 billion in free cash flow to the company in 2009.
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This article has 22 comments:
Rest assured no one at Seeking Alpha is short any of the companies we write about and if we were, we would fully and openly disclose such an important fact. We summarize Barron's stories not because we agree or disagree with them but because they move the market. So don't see this piece as agreeing with Barron's (or disagreeing with it) - that is not its purpose.
One (small) defense of the Jobs rumor mill (and your critique is certainly justified) - last time Steve was sick Apple waited until after the fact to inform investors of his condition. As such, there are those who feel it is too late to wait until Apple releases an official statement to sell their shares.
Here's wishing Mr. Jobs many years of good health.
Best,
Jonathan Liss
Along with the digestive problems, patients often lose 5% to 10% of their body weight after the procedure. Weight stabilizes within the first year or two for the vast majority of patients, says Dr. Dilip Parekh, chief of tumor and endocrine surgery at the University of Southern California, who has performed more than 100 Whipple procedures.
don't you think that if steve jobs has cancer AND a "bug" that apple would say so? obviously when asked about jobs' health apple knew that the media wanted to know about the cancer. do i wish that apple was clearer for the feeble-minded among us? yes. but the question was asked and answered.
APPLE AND ITS BOARD AND OFFICERS NEED THE LOYALTY OF THE SHAREHOLDERS. PLEASE REMEMBER THIS, MR. LISS.
The implication of Barrons (and your article in repeating it without questioning it) is that Apple is lying in its response. Reporter asked specifically about cancer, Apple answered that it's a bug. Continuing to question the answer shows that Barrons doesn't believe it.
As for you weak reply to another commment that you guys don't short stock, ahhh ha ha ha please, you must really think the readers and shareholders of Apple are stupid.
Seriously, Apple and Jobs (and perhaps the shareholders) should look into a libel lawsuit over the Barron's article.
One of the traits Mr. Jobs should be given credit for is his eye for talent, and while there may not appear to be an obvious successor to him, I suspect this is more a question of his deputies preference to defer to Steve, rather than the incapability of taking his place.
It is quite possible the stock would take a short term hit if he were to step down for any reason, but we have seen the stock take greater hits for other manufactured reasons, such as the drop earlier this year from $200 to $120. So, as always, the performance of the stock will return to reflect the performance and strength of the company.
I have met Steve Jobs and "The Woz" many times over the years. Those early shareholder's meetings were definitely "family affairs" and talking to both founders was commonplace. We've all grown up and grown middled aged together. The goal of any business founder is to build something that is bigger than the sum of it's parts. Apple clearly meets that test. Mr. Jobs has built something that will continue on well after he is no longer on this veil of tears. The Visions that he has had to date have been invaluable. The ones that may come in the future and become "Apple" branded products may well come from other people now at Apple and who are now being heard for the first time. Steve has built a cohesiveness and uniformity into Apple products that cannot be denied. From the packaging, to the set-up, to the way the buttons connect on my new Aluminum Keyboard. It's Apple all the way. In his youth Steve Jobs had the visions that became Apple. Now his chief strength is hiring (stealing when necessary) the best talent and bringing them into the Apple family and then keeping them their with professional challenges and wealth beyond their wildest dreams. Do you know how many millionaires are made by Apple Employee Stock Purchase Plan every year? They don't release the exact numbers but I've heard it said that the number is in the thousands per year. That isn't going to go away if and when SJ leaves Apple for any reason. The talent he's found, nurtured, taught "the Apple Way" to and then locked in with Platinum handcuffs - they're not leaving. The cage is far too well stocked. Apple is not a company you want to have on your Resume' as a stop over. Apple is the destination. The one place you want to remain for the rest of your career if humanly possible. How many companies inspire that kind of loyalty from their employees and their stock holders? How many inspire any loyalty at all from the public? Apple is unique. Apple Forever!
So it's not surprising that the same tired old garbage is being trotted out now, in advance of a major product launch....it's nothing more than money-grubbers trying to create a buying opportunity. Apple is a volatile stock; notice these cretins never peddle their lies when the stock is in a trough. They get trotted out four weeks before the launch of the 3G iphone.
It's a sad commentary on our overweight culture that someone in shape and fit is ridiculed as "skinny", and becomes vulnerable to rumors of frail health. About two weeks before Tim Russert's tragic passing, I commented to a friend that Russert was looking way too heavy, which is worrisome in a high-pressure position like his. I was not surprised when he was stricken last Friday.
Personal anecdotes may be of limited use, but I recently purchased a high-end pair of New Balance running shoes. In speaking with a rep at the company, he mentioned that this particular pair was Steve Jobs' favorite......in spite of the superb quality, he told me that Jobs still burned through two pairs in a year! No wonder he's so slender. The guy is fit, driven, a total stud, and will be with us for a long time, I suspect. This all makes you realize how ludicrous the rumors are. Apple is right to not to engage these stories beyond what they said last week; otherwise, it's like feeding the beast. ANY responses will get nitpicked and analyzed six ways to Sunday. And before long, all these shorts will be psychoanalyzing Jobs' bathroom habits....