How Apple's CEO Change Alters Its Prospects

Aug. 25, 2011 10:17 AM ETApple Inc. (AAPL)2 Comments
John Tobey, CFA profile picture
John Tobey, CFA

Buy or sell pictureHearing that Steve Jobs will no longer be Apple’s (NASDAQ:AAPL) CEO can generate sadness on a personal level. The response is understandable and appropriate. The challenge is to shift to objective (i.e., emotionless) investment analysis. But that is what we need to do.

Our goal as investors …

... is to own securities that offer the opportunity of good returns without inordinate risk. Therefore, we need to separate our feelings about Apple-Jobs, the “person,” from AAPL, the stock.

A good place to start is recognizing what hasn’t changed. Apple, the organization, has the products, people and pricing that have provided the company’s high profits and growth. The organization is structured as a research and development firm, capable of converting that work to desirable products. It possesses many leading patents and has the ability to earn profits from them without selling the rights to others (see Holman Jenkins' WSJ column, “Obama and the Smart phone Wars”).

Moreover, Apple has a Jobs-designed roadmap that takes it well into the future. This future planning is a key characteristic of leading technology companies – both driving future research and development as well as designing ways to apply it. We have strong hints at what Apple already has in the pipeline beyond, say, the iPhone 5 coming out around October. Examples are Apple’s massive, North Carolina data center under construction; the Lion operating system, moving iPhone/iPad technology into computers; and reducing the laptop versions from three to two.

But what about the long-term without Jobs?

I believe that whenever a strong, savvy leader exits, there are actually opportunities that open up. Leaders such as Jobs create highly capable firms, designed to continue the good works. However, even top executives have points of view that drive them. Replace the person with another capable leader and a new perspective can actually add a growth

This article was written by

John Tobey, CFA profile picture
I am the founder and editor of Investment Directions. My career has been managing and consulting to multi-billion dollar funds. Using the widely accepted “multi-manager” approach, I have worked with top investment managers throughout the country, gaining a high level of expertise. My career has spanned many market environments, and I have hands-on experience searching out opportunities and avoiding risks in all of them. I now devote my time to Investment Directions, with the goal of helping investors further their understanding and improve their investing skills. I am currently serving on: The AAUW Investment Advisers Committee and The City of Vista Investment Advisory Committee.

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