Apple Is Worth More than Steve Jobs

Jul.22.08 | About: Apple Inc. (AAPL)

I wish Steve Jobs a long and happy life. I thank him for all of the good that he has done. Sadly, others do not seem to feel this way. The New York Post yesterday joined the chorus of negative voices speculating that Steve Jobs is in ill health. This is pure speculation. But, the implication is that Mr. Jobs's demise would tank Apple's (NASDAQ:AAPL) stock price.

I have lived through this before. I owned Apple in early August of 2004 when the company announced that Steve Jobs was taking a leave of absence. I still own it today. On July 31, 2004, Apple's stock price closed at a split-adjusted price of $16.17. When Apple announced that Steve Jobs was well in January of 2005, Apple's stock price finished the month at a split adjusted price of $38.45. During the six month "cancer scare," Apple's stock price rose 137.79%.

This is the monthly ownership experience of this Apple shareholder for the six "cancer-scare" months ending: August of 2004 +6.68%; September of 2004 +12.35%; October of 2004 +35.19%; November of 2004 +27.98%; December of 2004 -3.97%; January of 2005 +19.41%. This is good. This says to the world that there is a bigger issue than Steve Jobs's health that we need to focus on, if we truly want to understand the behavior of Apple's stock price.

Apple Inc.'s stock price is driven by its earnings growth and public expectations. There were three relevant earnings announcements during the Jobs "cancer scare": 7/14/04; 10/13/04; and 1/12/05. On July 14, 2004, Apple announced year-over-year earnings growth of 220%. On October 13, 2004, Apple announced year-over-year earnings growth of 117%. On January 12, 2005, Apple announced year-over-year earnings growth of 312%. With earnings results this outstanding, investors bought the stock for the right reason: the iPod had rejuvenated the company. And, the investors expected the iPod to keep on delivering. They were right. iPod continued to be the growth drive for all of the years 2005 and 2006.

Yesterday, on July 21, 2008, the iPhone and the MacTel computers are the earnings drivers. The iPod is relevant today because the earnings from the iPod product alone are sufficient to cover the overhead cost of the Apple retail stores. This fact makes any additional contribution to retail sales from the iPhone or the MacTel computers pure gravy. I am talking about a lot of gravy!

Going forward, the earnings picture at Apple for the next three years is rock solid as the iPhone seeks to achieve global market share of 10% and the MacTel computers seek to achieve the same. These products are in the pipeline right now. The iPhone currently has global market share of less than 1%. The MacTel computers have global market share of 3%. Both products are selling like hotcakes. Whether Steve Jobs is with Apple or not, there is simply nothing to worry about for at least three years. I expect the earnings growth to be too robust to resist. I expect the world to keep buying AAPL.