Is Steve Jobs really worth just $6 billion?
Apple Inc.'s revelation that its visionary CEO is taking his third medical leave of absence, this time for an indefinite period, sent shares in the world's most prominent tech company barely 2 percent south, or roughly the same amount higher or lower on any other day.
There may never be a better time for Jobs to take a bow.
The company is kicking off 2011 on a roll, a cash-generating machine with surging sales of its iPad and iPhone. Wall Street has prognosticated a rise of more than 50 percent in quarterly revenue to $24.4 billion after a bumper holiday season.
Analysts used to estimate the so-called "Jobs premium" in Apple's stock at roughly 10-15 percent of its value, but it seems that has shrunk in the past two years as Wall Street has grown increasingly confident in his lieutenants.
Wall Street analysts — not one of which has a "sell" rating on the creators of the Macintosh — reassured investors that all was well at Apple headquarters, on 1 Infinity Loop. The company has a deep-enough executive bench, a sterling line-up of gadgets to propel growth for years to come, and the shares had priced in Jobs' eventual departure to some extent.
Their reassurances drowned out warnings that Wall Street may not yet realize what they're losing was the idiosyncratic Jobs, called the closest thing to a magician Silicon Valley has seen.
"Investors are slowly coming to grips with the fact that he will not be with the company forever. There is no way to sugarcoat the news," said John Lutz, senior research analyst at Frost Investment Advisors LLC in San Antonio, Texas, which owned 164,968 Apple shares at the end of 2010.
"But we think he has surrounded himself with an extraordinarily talented group of executives, all of whom probably don't get enough credit for the success of the company over the past number of years."
Jobs, 55, is taking a medical leave of absence without specifying a return date or detailing his condition, Apple said on Monday, abruptly igniting a flurry of speculation and frenzied market activity.
In the maestro's absence, it will be up to Chief Operating Officer Tim Cook to decide how much to tell investors about the absent chief executive, and what Apple plans to do with a $50 billion-plus pile of cash and investments.
"I'm more concerned this time than the other two times he took a leave," said Joseph Eshoo, analyst for Sit Investment Associates Inc in Minneapolis, which owned 147,960 shares of Apple as of Sept. 30, 2010, according to its latest disclosures.
He mainly worried that Jobs did not cite a timeframe for his return.
LIFE WITHOUT JOBS
Jobs' leave came nearly two years after he took a six-month break to undergo a liver transplant. He also took time off after pancreatic surgery in 2004.
His role in turning around the once-struggling company into the electronics powerhouse of today is well-documented: the global spread of the iPhone, expected to sell more than 60 million units this year; the rise of the iPad that single-handedly created the tablet market; and continued strong growth from a resurgent Mac line of computers.
Yet it trades at a price of about 17 times next year's estimated earnings, a discount for a market leader and similar to Oracle Corp.'s and below Google Inc.'s.
"At some point there will obviously be a post-Jobs era. While it is clear that Jobs can't be replaced, we believe Apple's brand, strategy, and depth of talent is in place," said Well Fargo analyst Jason Maynard. "The current valuation already reflects some of the risk investors have associated with his health concerns.
The company has never dwelled on Jobs' health, despite investors consistently clamoring for greater insight into how serious his ailments are. Regulatory experts have criticized the company in the past for being murky and late to disclose, which might have prompted Monday's timely announcement.
Still, experts generally agree Apple has no obligation to detail Jobs' precise, confidential medical condition. The CEO himself asked for respect for his privacy in a memo to employees made public Monday.
Jeffrey Sonnenfeld, a senior associate dean at the Yale School of Management, faulted Apple's board for not disclosing to investors whether it has a clear plan for succession.
"We're entitled to know that there is one, and we don't," he said.
But perhaps the more pressing question on investors' minds now is how well Apple's management — including Cook, iPhone software head Scott Forstall, and design chief Jonathan Ives — can keep things going without their charismatic commander-in-chief.
"Tim Cook is not a slouch off the street. Neither is Schiller, or Forstall or Ives," argued Pacific Crest Securities analyst Andy Hargreaves. "While there is zero way to replace Steve Jobs, the company is in a better place to absorb that than it ever has been in the past."
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