Reacting to Steve Jobs Departure: An Amazing Ride
The world is reacting to the news that Steve Jobs, visionary leader of Apple Computer, has resigned his position as CEO of the most valuable technology company. After a series of groundbreaking inventions, Jobs stepped down last night, penning a letter to the company’s board that said he could no longer meet his duties. Such news sent shudders around the world as public feared that his health had deteriorated further.
Analysts and media pundits are speculating on whether Apple will continue to be successful under its new leader Tim Cook who has taken the reigns from Jobs. Cook has been running the company administratively, since he took over for Jobs during two previous medical leaves, so Wall Street watchers were not surprised and had expected Jobs to step down at some point. But emotionally, judging from the comments on Twitter, people were stunned and saddened by the news because they were personally touched by Jobs, who ironically is an enigma – a college dropout who founded the company in a garage with Stephen Wozniak in 1976.
Not only is Jobs the genius behind the Macintosh – which some consider the first PC, but he's had an amazing run. He was even forced out of the company in 1985 in a power struggle with John Scully; he then founded NeXt Computer, bought Pixar studios, only to return in 1997 to rescue Apple. In the past 10 years alone, Jobs has also revolutionized the music business with the iPod, the cell phone business with the iPhone, and the tablet market with the iPad, but he has also built a cult following among consumers that are attracted to the elegant, sleek designs and intuitive interfaces of his products.
But Apple’s latest devices charmed business users as well. Wall Street firms like Morgan Stanley have adopted the iPad for distribution of research reports and wealth management firms find that financial advisers use the tablet to read documents and review portfolios with their clients.
Appearing on CNBC this morning, Will Power, senior analyst at R.W. Baird & Co., said that Apple has a deep bench in terms of talent, and as well as a strong product portfolio, but he also indicated the answer will lie in the future.
Look, obviously you can't replace Steve Jobs and the strategic vision and personal touch he's brought to the company for many years. That said, as you indicated he has institutionalized a lot of practices he put in place. They have a deep set of very talented people. Tim cook has been involved as CEO for some time and well thought of by the street. I think will do as good a job as anybody can do.
Investor fears of Apple’s future without Jobs pushed the stock down 5 percent on Wednesday evening. On Thursday morning, Apple shares were down $9.03, or 2.4 percent, at $367.15 in pre-market trading. By 11:00 am, Apple shares were up to $370.03, perhaps signaling that investors were optimistic about the company’s future.
At these levels, the stock is trading at 11 times earnings, noted the Baird analyst this morning. The company has a cash horde of $70 billion, and so there’s been speculation that Apple might make more acquisitions. Apple generates close to $10 billion in cash each quarter. Without factoring in the cash, Apple trades at 9 X earnings, said Power, adding that the stock valuations don’t get credit for hording cash.
“I would be surprised by a big acquisition. I would urge the company to pay a dividend,” said Power, who said yield would be more meaningful for investors (given the current state of the stock market), which he didn’t say.
“In two years,” Baird’s analyst told CNBC, “the stock will be trading well north of $400 share,” contending that the company will have enough innovation and portfolio gains to grow.”
Apple is expected to release a new version of the iPhone that will have a faster processor and be lighter, according to media reports. Baird’s analyst predicts the company will be expanding upon the Apple TV they have, which jobs called his hobby.
But let’s not forget that the iPhone is facing intense competition from Google Android, which just bought Motorola Mobility’s patent portfolio and plans to make cell phones, next. And don’t forget about plans by Amazon and others to bring out less expensive tablets. So far, Apple has benefited from its cult following among consumers who will line up for hours at it stores to be the first to buy a new product.
Consumers interviewed by CNBC this morning called Job's departure a setback. One compared it to “Kobe Bryant leaving the Los Angeles Lakers.” In this case, Jobs is still in the wings. Though no longer calling all the shots, his track record and influence lives on.
Click here for CNBC Video, “Will Apple Succeed?”.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio