The tech world watched Apple stock anxiously today to see how shareholders would respond to yesterday's announcement (smartly released on a day that the U.S. markets were closed) that Steve Jobs would be taking his second medical leave in as many years. After a massive twenty-point plunge this morning, temporarily wiping $20 billion off Apple's market cap, the stock rallied, ending the day at a 2.16 percent drop with no meaningful sell-off. It was almost as though the news that the company's visionary CEO — the exacting architect that helped make Apple devices so ubiquitous — would be away from the helm indefinitely had never happened, leading some to call it the end of the "Jobs effect." Shaw Wu, an analyst at Kaufman Bros. told the Journal, "A few years ago, the stock would be down 20% to 25% easily. It's not as meaningful anymore." But Apple's fate without Jobs is still undetermined. Today's uptick from a dive to a dip was less a reflection that COO Tim Cook, who is taking over Jobs's day-to-day duties again, is poised to become Jobs 2.0 and more a reflection of the fact that Apple planned on announcing its latest earnings report after the bell closed (another case of smart timing) with predictions that it would be its biggest quarter ever.
And, woo boy, was it ever. In the first quarter, which reflects holiday sales, Apple beat estimates for revenue ($26.74 billion), number of iPhones sold (16.24 million — an all-time record), number of iPads shipped (7.33 million — more than 3 million from the previous quarter), and earnings-per-share ($6.43). Net quarterly profit was $6 billion — well above the record $4.3 billion Apple did last quarter. Before the earnings were even released, Goldman Sachs analyst Bill Shope recommended buying Apple since the long-term fundamentals remain intact, adding that "Apple's $51 billion in cash and investments could be partially distributed to shareholders to stabilize the shares."
The rub, of course, if there is a downside to raking in billions — and if there is, we would personally like to experience it someday — is that this earnings report would have been the same with or without the unexpected CEO's announcement, even though the timing and today's stock rally make it feel like a vote of confidence in Apple sans Jobs. When Jobs took his first medical leave for a liver transplant, in 2009, it took Apple stock (along with other companies during the downturn) awhile to recover. In this case, with a pipeline of products like the iPhone 5 and the iPad 2 already well under development, the impact might not be felt for years, especially with Cook already having proven himself a worthy stand-in and a bench full of talented leaders to takeover all of Jobs's roles.
But it's rare that a company is so synonymous with its CEO that it's hard to imagine anyone else coming up with the next big thing — as opposed to a better version of something that's already been invented. And with reports only just emerging today that Jobs, who previously suffered from pancreatic cancer, sought treatment for neuroendocrine cancer, an umbrella term for the same disease, in Switzerland in 2009 (unbeknownst to shareholders), Apple stock is still vulnerable to details about his health, something the company and its CEO keep tightly guarded. It's nice to imagine him seeing reactions to today's developments and popping his black turtleneck collar in celebration.
Steve Who? [Seeking Alpha]
After A $20 Billion Plunge To Start The Day, Apple Stock Powering Back As Earnings Near [TechCrunch]
Apple's Mild Stock Slide Shows Reduced 'Jobs Effect' [WSJ]
LIVE: Apple Crushes Earnings, Ships 7.3 Million iPads [BI]
Apple’s Insane Q1 2011: $26.7 Billion Revenue; 7 Million iPads, 16 Million iPhones Sold [TechCrunch]
Related: Steve Jobs Takes a Medical Leave of Absence From Apple