Apple: America's Most Fragile Company
Forget about Apple's P-E ratio. If you want to know whether to buy or sell Apple shares, just gauge whether CEO Steve Jobs look 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 did just fine when founder Sam Walton retired as CEO in 1988, and died of cancer in 1992. Exxon mints money regardless of who its CEO is. There hasn't been a Johnson at the helm of Johnson & Johnson since the 1960s, yet J&J is an exemplary Wall Street performer. Even Berkshire Hathaway, 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.
Tags: Apple Inc. | Steve Jobs
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Reader Comments
MY DREAM
My dream was to have an iPhone with a camera of 5 megapixels with flash and zoom through that led
serious video in HD, with OLED screen, with camera front, with a processor
1 GHz with 512 RAM, with bluetooth compatible with all mobile phones with
AVRCP, which pass the phone to the car radios, to replace a
external hard drive without installing anything on it or the computer, with 60 GB of
memory. I do not think we get to see it as Apple does things
little by little and am already old.
I have a Nokia e66 (see its technology) and a 3G 16GB, I am satisfied
partly with the new software, I just wanted AVRCP and passing to
phone book for the car radio to the effect using e66.
Do your research
It seems to me that Mr. Newman has not done his research. If he did he would realize that Steve Jobs in not one of your typical CEOs. Steve Jobs is the muse at Apple which has some of the brightest minds in the industry. What he and the team at Apple have done since the start of the industry has set the course of where technology is today. Apple and it's leader Steve Jobs have lead the industry unlike the Redmond affect. Mr. Newman step away from your PC and write your next article on a Mac while listening to music on what I can only guess be is an iPod.
Steve, we wish you well and are in our prayers. We support you and everyone at APPLE.
S
good article
As a Mac user since the early 90's (though I have now moved on, at least partially), I think this has a lot of relevance. A lot of people don't remember how aimless Apple was without Steve Jobs. It stumbled on just about everything it did and was only saved because Microsoft threw them a life line.
I really do hope the best for Steve Jobs. His vision has lead the computer industry for decades now, and even with the iPhone, he has shown that not only is he a master showman, but a visionary creator as well.
BUT, with all that said. We've experience Apple without him before, and the picture is not pretty. Using the comparrison to Warren Buffett, he has built an empire using regular brick and mortar businesses that need very little of his oversight to run. Most are fully autonomous, merely sending their excess cash back to Berskhire to reinvest elsewhere. So, should he pass, Berkshire will remain one of the top rated insurers, with plenty of cash and marektable securities. One would doubt that it will continue to outperform the S&P as it has while he's been at the helm, but once the P/E ration adjusts for his absence, it will still be a profitable company. They may not employ the same strategy once his time is up, but if they can continue to earn market like returns on their investments, they'll still be a force with huge earnings for a long time.
THEN take Apple. They've experienced life without Steve before and nearly lost it all. And with reports saying that even the most minor of details needing to meet his approval, a future without him is downright scary. Not only for the company and its shareholders, but for the rest of the computer industry that follows his lead. ANd with product life cycles the way they are, it would only be a year or two tops before Apple was out of his ideas.As an occassional Mac user, but every day iPhone user and iPod listener, I don't look forward to that day.
And well wishing aside. The money i'm putting away now is for my future, and I just can't see Apple being a safe bet anymore. Maybe this whole scare is just a passing thing (and I hope it is), but regardless, Apple may as well be Steve Jobs, Inc and I just can't fathom what the company would do without him.
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