Apple, Business, Companies

The Steve Jobs Effect: Investors Hit the Ejection Handle, AAPL Nosedives Overseas


The timing of today’s release is certainly interesting, to say the least. Today is Martin Luther King Day in the US so stock markets are closed. Tomorrow, Apple will release its fiscal 2011 first quarter earnings covering the holiday 2010 calendar quarter when Apple sold a lot of products.

Strong quarterly figures will lessen the negative impact of Jobs’ sick leave and investors have the whole Monday to digest Apple’s announcement. Meanwhile, the stock is already loosing some of its steam in Frankfurt trading where AAPL fell 6.2 percent to ?244.05 (about $326.41) immediately following Apple’s media advisory. Previously, multiplied effects of both strong gadget sales across the board and Verizon iPhone rumors helped catapult Apple’s market cap north of $300 billion.

The initial stock market reaction won’t be positive as investors ponder whether to hit the ejection handle. It’s mid- and long-term effects on the company’s valuation on Wall Street that are troubling. Both Apple and Jobs have a history of keeping a tight lid on his health status. Jobs himself said on several occasions that his health is his private matter, the notion most analysts certainly do not share.

APPL’s rise was stopped Monday morning due to Martin Luther King Day. In after hours trading, though, the stock has already begun to see a drop.

The big question is what if Jobs never returns to Apple. And the issue troubling investors even more is what would Apple be like without its charismatic CEO and co-founder. Piper Jaffray’s resident Apple analyst Gene Munster once estimated that the stock would loose at least  one quarter of its value should Steve Jobs, a Silicon Valley and luminary, be forced to leave the company he co-founded for any reason.

If Munster’s projections are true, than about $80 billion of Apple’s current market cap will evaporate should Steve Jobs step down. But don’t sell those AAPL shares yet – Munster says Apple’s annual revenue could surpass $200 billion in a five years time, catapulting AAPL above the thousand dollar a share mark. There’s also an uneasy but legitimate concern about the vision and direction in the post-Jobs era.

Apple noted in today’s statement that Timothy Cook, who will be covering for Jobs during his leave of absence, will execute "exciting plans" the company has in place for 2011. There’s no doubt Apple can live off Jobs’ inventions, but that’s a risky strategy that inevitably ends when you run out of Jobs’ ideas a few years down the road.

While other tech companies publicly disclose their succession plans, Apple – the largest technology company in the world – refuses to talk about the next Steve Jobs. In addition, the company’s board routinely rejects calls for disclosure coming from hedge funds and institutional investors with interest in the company.

Some media outlets, like Fortune, call Apple’s operations chief Timothy Cook, 50, a former Compaq executive, as the most likely candidate for the CEO post. Other people, this author included, think Apple would be better served if Jonathan Ive, pictured on the right, takes the CEO job.

Ive’s lack of leadership experience is a disadvantage and could prove problematic. However, if he can deliver a compelling vision that can prove a strong enough a pull to keep the fans interested in the company and its products – and providing Apple’s current executive team backs him up by taking care of execution – Apple under Ive’s leadership could weather the storm ahead smoothly.

Jobs called Ive during the iPhone 4 presentation "one of my best friends in the whole world" and the two men are deemed instrumental to Apple’s fortune and a string of smash hits. While Ive possesses a different kind of stage personality, he doesn’t come short in the charisma department like Cook and seems to share fanatical Jobs-esque dedication to making sexy gadgets people lust after, which is what the company is all about.

Steve Jobs makes the first public FaceTime call to Jonathan Ive, Apple’s design guru, during the iPhone 4 unveiling last summer.