Something is ailing Apple (NASDAQ:AAPL) co-founder Steve Jobs. What it is anyone’s guess.
Jobs abruptly resigned as Apple CEO on Wednesday night, saying he could “no longer meet my duties and expectations” of the job he held for 14 years. Chief Operating Officer Tim Cook, who has run the Cupertino, Calif., company since Jobs went on his latest medical leave in January, will replace him. The secretive company did not provide further details.
If Jobs, who reportedly survived pancreatic cancer and underwent a liver transplant, is too ill to be CEO, how long will he be able to provide Apple guidance as chairman? Apple owes its shareholders an explanation.
The soap opera about Jobs’ health has gone on long enough. Jobs first learned he had cancer in 2003, according to media reports. He tried to treat his condition with a special diet to avoid surgery. Unfortunately, Apple decided not to inform investors about Jobs’ illness until a year later when the company said Jobs had undergone successful surgery to remove his tumor. He returned to work that September.
In 2005, he told graduates of Stanford University that doctors told him he wouldn’t live longer than six months. Of course, Jobs proved them wrong. But doubts about his health lingered. Whenever Jobs would appear in public looking gaunt, Apple would assure people that its visionary CEO was fine. People believed Apple — until he went on his third medical leave.
Jobs is an extraordinarily lucky man. According to the Hirshberg Foundation for Pancreatic Cancer Research, the one-year relative survival rate for the disease is 20%, and the five-year rate is 4%. Jobs, for his part, said he had a rare variant that was curable by surgery. I certainly am not qualified to diagnose him, but his health clearly is not good. Beating cancer and liver issues is tough for anybody.
The pundits on CNBC are urging investors not to panic. They point out that Apple is chock full of smart people and that Jobs will continue to be involved in Apple as his health permits. The shares, as many have pointed out, are relatively cheap, trading at a price-to-earnings multiple of 14.71 — versus 21.23 for Google (NASDAQ:GOOG) and Amazon‘s (NASDAQ:AMZN) 85.46.
Apple needs to inform investors exactly what Jobs will do as chairman. Walt Mossberg, the well-connected tech columnist for The Wall Street Journal, reported that Jobs “intends to remain involved in developing major future products and strategy and intends to be an active chairman of the board.”
That sounds great, but Apple needs to provide more specific detail. For instance, how many hours will he work a week? Will he continue to have the final say on all products? What happens if Jobs becomes incapacitated? Is he going to become Apple’s answer to Colonel Sanders — a brand ambassador trotted out at public relations events?
Not surprisingly, shares of Apple fell in after-hours trading after news about Jobs broke. They continued to fall Thursday, but did rebound to go slightly up near the end of the day. To many investors, Jobs and Apple are synonymous. Indeed, the shares would have cratered if Jobs had cut ties with Apple entirely. Apple shares have risen 10,000% since Jobs returned as CEO in 1997. The company briefly eclipsed ExxonMobil (NYSE:XOM) to become the world’s biggest company by market capitalization.
Jobs’ role at Apple cannot be reduced to numbers entered on a spreadsheet. He is the heart and soul of the company. Maybe he didn’t invent the iPod, iPhone and iPad, but he surely inspired them and probably helped make them better. There is no way to assign a multiple to the Jobs magic.
To be clear, Apple will remain a great company with Tim Cook as CEO, but it will be different. Nonetheless, it remains a stock worth owning.
Jonathan Berr owns no shares of the companies listed. Follow him on Twitter at @jdberr.
