Time to Stand Up for Steve Jobs

Why would anyone own Apple (AAPL) shares knowing that Steve Jobs' health may be in jeopardy?  As Apple reaffirmed its official stance that the health of the company's CEO is a private matter, investors pushed Apple stock down into the $150s. As the potential health issue lingers, unanswered, will the stock continue to drop?

Here are two factors propelling long-term investors to not only hold through the short-term uneasiness, but to actually buy more shares on the dip:

1.  Occasionally, someone builds a platform that lives on. The Mac operating system, which was fortunate enough to survive the era of Microsoft dominance, provides the Mac computer and the iPhone with a barrier to entry 100 stories high.  Even if a new competitor came along and released a superior operating system, it would not be able to penetrate the market. Microsoft did such a good job of building a platform monopoly that it is a miracle the Apple OS even exists. Apple's cult-like following in the 80's and 90's kept software developers around during the lean years. Without software, an OS platform is irrelevant. This platform is why the Mac isn't just another computer and why the iPhone isn't just another gadget.

Mr. Jobs has built an economic moat around Apple that will flourish for years to come. Microsoft (MSFT) has owned the last 25 years, and Apple is poised to be the next Microsoft-only bigger. Not only does Apple produce the OS, it also produces the hardware for a generation built on technology. Twenty years ago, technology was a luxury, now it has evolved to become a worldwide necessity. Apple is ideally positioned to take advantage of the tech revolution. When analyzing Apple, the OS platform is the most important aspect of the company. It insulates them from short-term competition.

2. If there is anybody who deserves space, it is Steve Jobs - he's earned it. I've read every bit of Apple commentary over the last few days and it shocks me that nobody has stood up for the guy. Ignorant writers assume that his company is a one hit wonder that will wilt away once he is gone. I'm sorry but it's time to accurately report what this man has accomplished over the last ten years.

It's time to show some compassion in a world full of greed, greed, and more greed. I know that sounds naive, but every once in a while it wouldn't hurt to do the right thing. Let Mr. Jobs have some space. Investors have made too big a deal of his health and not a big enough deal about the one million iPhones that sold out in on opening weekend. This disconnect has created a classic buying opportunity.

These are the two reasons why I haven't sold any Apple shares over the last week, and why I've actually bought more on the dip. Ridiculously, his health scares investors like some kind of terrorist attack. This is an overreaction. Those still holding Apple shares understand the risk but also understand that any short-term drop due to Steve Jobs' health will quickly rebound because of the enduring strength of his company.

Disclosure: Long AAPL

Comments

[jkh307]

Well said, I agree 100 %.

2008 Jul 23 08:19 AM

[TraderZ]

New York Times reporting his helth is fine in any event. But I agree. Apple will live on without Steve due to the team he's built and the vision he has set.

2008 Jul 23 08:19 AM

[Anonymous Wizard]

Well said My Man and the absolute proper and correct perspective. I own a ton of AAPL and I'm not selling but buying. The manipulation isn't going to fly with me. AAPL is going sky high--just wait and see with no end in sight and alot of room to grow. The synergy of this Company is magnificent and seen by true technologists and marketeers. You know Steve Jobs loves this Company and has set the stage for Apple to flourish far into the future no matter what happens. Let's give this man the respect he deserves and wish him good health and respect his privacy. Apple will grow dramatically even if SJ stepped down right now.

2008 Jul 23 08:19 AM

[Looking for a job?]

If Steve does bite the dust... I'll take his place.

Only I refuse to work for $1 per year. I'll have to have at least $2.

2008 Jul 23 08:20 AM

[Vox Rationalis]

I guess these columns that bemoan the stock's price slide, stating that it moved into the 150s, were written early in the day yesterday, since it closed above 160 and is trading up pre-market today.

2008 Jul 23 08:22 AM

[Network Effect]

Amen brother. Spot on as it relates to all of your comments. The software is the revenue generator, even if they give it away. It's the rev shares that the software will allow via the ecosystem that is the big enchilada. This is the pie that everyone is going after - MSFT, GOOG, EBAY, YHOO, all social networks, etc. Be the hub of the network, and you will rule the world for the next 25 years as Microsoft has for the last 25-50 years. And Apple is going to win this game through the iPhone and all of their other hardware penetrating the worlds population. They've already reached the critical mass so the snowball rolling down the hill is getting bigger and bigger and bigger so that it is almost impossible to stop them - look at how hard it has been to beat Microsoft, eBay, PayPal, Skype, Ma Bell, NYSE, etc - all networks that are relatively impenetrable. And amen to your comment about Jobs Health - this is all just hedge fund manipulation / scare tactics so they could cover at a lower price. i hope a lot of them didn't cover, b/c this thing is going up like a rocket from here (obviously it may pull back in the short term, but if you are a day trader, you shouldn't focus on bit on fundamentals anyways, you should just try and figure out whatever the big money guys are going to do with a stock because that is what the stock will do no matter what the fundamentals are). But, one good piece of news, such as China Mobile (this may come sooner than people think - the Olympics start 8/8/08), a new product - MMIG video gaming makes a lot of sense, or his health being ok will send this thing up and it will never look back. And as far as the margin contraction goes, if anyone doesn't see that this is clearly a "give away the razor so you can sell the blade over and over and over again" strategy, they don't understand marketplace economics and the network effect.

2008 Jul 23 08:27 AM

[michiganjake]

You are right on my friend! The games people in power to make the market play to make money is sickening! You can rely on the mutual and hedge fund players to do this kind of thing again and again. And those of us that are small investors, must hang in or play with them. We too can make short term gains on the wide swings or sit tight for the long hall and pay a whole lot less to Uncle Sam!

2008 Jul 23 08:31 AM

[2snazzy]

Totally Agree! There are a list of companies a mile long that would kill to be able to report the numbers that Apple just turned in (numbers that don't reflect the 3G iPhone launch mind you). What has happened to sound business practices to ensure growth rather than making forecasts that can't be achieved just to impress analysts? Like it or not, Jobs has built his career(s) on delivering the finest products possible regardless of analysts opinions. His reward? To have the street pummel the stock because the philosophy at Apple is to undercommit and overdeliver. Certainly I believe the current forecast for the coming quarter is light. However, as a stock holder, I want and NEED to know that the management team running this company understands market and economic conditions. The last thing I want is a forecast designed to impress the street that can't be achieved only to have the stock crash as a result. I learned to quit betting against Jobs a long time ago. People said that when he was thrown out of Apple in the 90's and built NEXT that NEXT was a failure. Turns out that the programming efforts done at NEXT was the foundation for the current Mac OS. Also, NEXT made Jobs a TON of $$ when he sold it to Apple. Pixar was a homerun that not only made a TON of $$, but also provided Disney with an additional business unit that cements their hold in film animation. Certainly I'm concerned about Jobs health and wish that more information had been released to clear up confusion and rumors. However, bottom line, Apple has built and continues to build a multi-product company with a focus on excellence, consumer appeal, and INNOVATION. Jobs is truly a rare breed in terms of CEOs, but people lose sight of the fact that behind him there is a team of people who have helped remake Apple into the company that it is today. Not only are consumers lined up to purchase Apple's products. Potential employees are also lined up to be able to work for this company. COO Tim Cook is rock solid and had a strong history at Compaq before coming to Apple. Ron Johnson at Apple has built a retail franchise in the Apple stores that is producing five times the revenue per square foot of it's nearest competitor (Best Buy) and shows no evidence of letting up. There are absolutely no "me-too" products at Apple and no "me-too" retail experiences at Apple stores. Can the company screw up? Absolutely. But Jobs has built a culture that has evolved over several years and is not going to go away overnight if something happens to him. $19B in the bank and absolutely NO DEBT. Products that people line up for in an economy that is weak at best. And now we're seeing global demand for these products. Record results in EACH product category every quarter. And the result? The stock tanks on earnings. Like all humans Jobs has his flaws, but running Apple isn't one of them.

2008 Jul 23 08:35 AM

[Toni +]

Nice article. I agree. It would be nice.

2008 Jul 23 09:02 AM

[iJah420]

FINALLY! Kudos to you Jason. You speak the truth and that will serve you well in the future. No AAPL is NOT PERFECT. However unlike any other tech Co. APPLE has EARNED their place in the tech world.

Many more fantastic innovations will come from the masterminds behind the doors @ AAPL. Apple is a tech LEADER not a follower or copier and that mindset has FINALLY paid off and paid off BIG TIME!

To be honest, even though MobileMe was EH HEM anything but a smooth launch it should serve Apple well into the future to learn and grow from the experience and make them a tad more humble. THEY WILL IRON OUT THE KINKS>They will make it happen.

So in closing Jason Thank You. Thank You VERY MUCH for having the gajungas to speak your mind and for ONCE telling the TRUTH.... A very rare occurrence in this day and age of the dimwitted half baked less than true analysis spin on APPL.

iJah420 smiles today because of Jason Schwarz.. Cheers!

2008 Jul 23 09:15 AM

[Lex Luz]

Having a celebrity CEO is a blessing and a curse for a company. It's unlikely that Apple has been effective in planning succession for Jobs, more likely because of Jobs' own ego than much else. Not a problem as long as he's fit, healthy, and in the game, and at least for now, he probably is. Irrespective of the fundamentals underlying the stock price, if Steve Jobs got hit by a bus tomorrow (God forbid, by the way), the stock would be pummeled. Yes, he's a genius, yes, the company is grand and wonderful and innovative. Jobs' fatal flaw - and someday, this flaw will manifest in the stock price - is his apparently comprehensive inability to groom a successor and share the spotlight with that person sufficiently to ensure an orderly transition. The risks here are difficult to measure in any tangible way, but rest assured they are real and when a disorderly transition comes about, the risk will be realized first and most obviously in the form of billions of dollars sucked away from Apple's market cap.

2008 Jul 23 09:21 AM

[probert]

Anybody remember what happened the first time Jobs left Apple? 1986 or so, Sculley forced him out...Jobs returned 10 years later in an acquisition. Did the stock drop or go up?

I dont think I can name a company who is so clearly identified with its CEO. That is not the responsibility of Wall Street. This is a guy who is treated with bona fide celebrity. Apple has done very well on the strength of Steve Jobs personality...but there is a downside.

2008 Jul 23 09:23 AM

[Rob L]

I'd say I have to agree with you on most items although I am thinking of selling my long positions pre November. I don't think I can risk an Obama White House increasing the Capital Gain.

2008 Jul 23 09:24 AM

[thebinmaster]

well said. For all the wealth Mr Jobs has created for me (as a long time shareholder and as a delighted and converted consumer of Apple products), he has earned more than enough respect from me to not get all worked up about media and analyst opinions.

As for purchasing more Apple stock- I'm in the enviable position that any additional purchases at this point would nearly exponentially increase my average cost of shares. Wow, even my "problems" are a testament to the wealth and value Mr Jobs has created for me.

2008 Jul 23 09:26 AM

[cabrach]

Rarely mentioned, but a major factor in the success of Apple, is Steve Jobs appreciation of design and the industrial design quality of all the product emanating from Apple. They always seem to consistently come up with designs which are right at the top - and all this, as far as I am aware, by in house personnel.

2008 Jul 23 09:28 AM

[taojones]

first of all a little credit goes to Xerox and the PARC team and the "Woz" who took Xerox's idea of the graphic user interface and the mouse and went with it (had it not been for them you would be looking at orange text with a blinking bar beneath one of the letters)Steve Jobs was the visionary that knew where these devices could go but it was the unsung apple engineers that smoothed out the nits and cricks and eventually made the beauty of OSX a reality .Microsoft's problem has always been they have no idea what we are likely to want to actually do with our computers. Like a pack of gum you don't need an instruction past "pull tab" to figure how it should work you pull the tab the cap pops off the gum is wrapped the paper falls away the powdered slice of gum is there you chew. Millions of people go through the same dance to get the peppermint reward with out instruction or manual that is the apple design esthetic in a green wrapper they care about what you want to do and set it up to do what you most likely want to do. steve guides that process by sending his people back again and again to refine the interface and constantly reevaluates what they have done not dump more features a'la Vista. if Steve were to leave tomorrow unless apple put a total dummy in there the design guidelines(go look at them in the tech library developer.apple.com/do...) already in place would continue to bring apple forward into the next great opportunity

2008 Jul 23 09:40 AM

[Airplaneguy]

Well Said. With Or Without Steve.
To be honest - a lot of market manipulation going on. Whisper campaigns. I am long on apple - and will continue to be so. Look at it this way - Apple stock is on sale !!! Now is the time to jump in.

2008 Jul 23 10:20 AM

[fatleopard]

Totally agreed! Even if he has health problem, I will continue to hold this stock. And will buy more shares if there is a drop because of such news.

2008 Jul 23 10:30 AM

[Dizzle]

amen! I am a nobody, but I have stood up for the guy. This vulturizing makes me want to vomit. I wish I had money to pay apple stock - and I say to those who are panty-waists about this whole thing - get the h-ll out!

2008 Jul 23 10:30 AM

[uh-huh]

You're wrong.

Job's health is not a private matter.

He is the CEO of a public company, and reportedly has not reported major health issues to his board in the past during a previous health scare. If true, that's dubious ethics right there. As is the whole reported options backdating issue. If the market is skittery on his behavior, it's no wonder. There's been a deliberate lack of transparency into many aspects of Apple's business operations.

Add to that an apparent lack of succession planning (tell me who you think could step in and replace Jobs from the current management? I'm not seeing anyone. Ive has never run an org larger than a handful of artists, Mansfield lacks vision, Cook is great at execution but could not be described as a businessman, Serlet has execution problems, Schiller is a marketer without the tech savvy, perhaps the only possibility is Fadell). A group of SVP's mainly promoted beyond their abilities. A lack of execution.

For example iPhone 3G was a year after iPhone, one real tangible new feature (3G on a battery hogging infineon chipset), a $50 price bump $450 vs $400 with the $10 AT&T digital plan price hike. Have you upgraded an iPhone to the new software? That's been fraught with problems, and nothing in the press. Imagine if M$ or intel released such shoddy work.

Macbooks are appalling in terms of quality. The one I'm typing this on does not sleep approx 20% of the time. Close the lid, go home, battery dead. Fans stuck on. Screen does not come back. Quality issues?

Apple without Jobs takes a 50% stock price hit. Sorting succession will be a key issue. Execution ability will become a key issue (it's ignored currently).

Therefore Job's health is no longer a private matter. He cultivated the cult of personality. He made this all about him. Them be the consequences.

2008 Jul 23 10:35 AM