No word on when Jobs will return, shares may tumble as earnings report looms
The announcement that Apple CEO Steve Jobs will be taking a medical leave of absence has spurred concern over the prospects for the world’s second-largest company.
The news may spur a decline for Apple and computer makers after the stock rallied 319 percent since March 2009, said Michael Yoshikami, who owns the shares and oversees $1bn at YCMNet Advisors in Walnut Creek, California. Asian suppliers to the company fell on the news. Jobs’ departure for health reasons puts Apple in chief operating officer Tim Cook’s hands for the third time in seven years.
“It’s a corporate setback and a negative for the stock,” said Yoshikami. “Investors may be less negative this time because we’ve been down the road before when Tim Cook did a great job navigating the company in Steve Jobs’s absence, and Apple probably has its product replacement cycle set for the next two years. Still, the stock could sell off 10 to 15 percent and bring technology stocks down on sentiment.”
Jobs took leave as his health deteriorates from battling a rare form of cancer and the liver transplant he had almost two years ago, according to a person with knowledge of the situation. Jobs has been unable to keep on weight as he undergoes treatment for his conditions, said the person, who requested anonymity because the matter is private.
Apple, along with Citigroup, Google and Goldman Sachs Group, are among companies scheduled to release earnings this week. Analysts estimate that S&P 500 profits grew 22 percent in the final three months of 2010 and will increase 14 percent in 2011, according to data compiled by Bloomberg News.
Apple earnings are forecast to have grown 47 percent to $5.39 a share in the fourth quarter, according to a survey of analysts.
Foxconn Technology, the contract manufacturing company that assembles iPhones, fell 1.7 percent in Taipei. Wintek, which provides touch-panel displays to Apple, lost 2.1 percent to NT$50.80. TPK Holding, also a touch-panel display supplier, dropped 1.7 percent to NT$696.
“It may influence investors’ minds, but health and succession issues are not new and are widely acknowledged as potential risks for Apple,” said Hideyuki Ookoshi, general manager in Tokyo at Chibagin Securities Co. “It is too early to worry that it will lower Apple’s competitiveness.”
Jobs’s last medical leave was disclosed after markets closed in New York on January 14, 2009. Apple shares fell at least 9.9 percent in after-hours trading that day and then declined 2.3 percent on Jan. 15 in the first full trading session.
The shares recovered and rose 70 percent through June 29, 2009, the day Apple announced his return to work.
“Apple shares will obviously be getting hit,” said Dave Lutz, head of ETF trading and strategy at Stifel Nicolaus & Co. in Baltimore. “Any selloff will be used as a buying opportunity, as Steve Jobs has high confidence in Tim Cook, and the two have worked closely defining Apple’s strategy and vision. Last time Jobs had to take time, that proved a huge buying opportunity.”
Trading in futures signalled that when exchanges reopen the Nasdaq-100 may retreat from its highest level since February 2001 and the S&P 500 will decline after closing last week at the highest since August 2008. The S&P 500 capped a seventh straight weekly gain on Jan. 14, the longest rally since May 2007.
Floor trading of US stock futures on the Chicago Mercantile Exchange was closed yesterday for the holiday.
Apple shares closed last week at $348.48, a record high. With 921 million shares outstanding as of December 27, Apple has a market value of $321bn, behind only Exxon Mobil Corp., which is worth $392.5bn, among the world’s largest stocks. Two years ago, Apple’s market value was $73.2bn.
The maker of iPhones, Macintosh computers and the iPad tablet has led the US stock market’s rebound from a 12-year low in March 2009, the trough of the bear market triggered by the collapse of the US subprime mortgage market.
“Since Apple is a big part of the S&P, if there’s a negative reaction, that’ll pull down the market, but I don’t know if it will affect the psychology of investors,” said Walter “Bucky” Hellwig, who helps oversee $17bn at BB&T Wealth Management in Birmingham, Alabama. “It’s a company- specific event that won’t affect the market in the long run.”
Jobs co-founded Apple in 1976. The company’s board ousted him as chairman in 1985. Since Jobs returned as interim CEO in 1997, the company’s shares have surged the equivalent of 37 percent a year, according to Bloomberg data.
“As much as any company has been associated with one person, it’s Apple,” said Greg Taylor, who helps oversee C$5bn ($5.07bn) as a money manager at Aurion Capital Management in Toronto. “He has portrayed himself as the guiding light behind the company and one of its key innovators,” he said. “The fact that Steve Jobs is taking some time off could be enough of a concern that people want to take some money off the table ahead of this quarter.”
Get well soon Steve. We want to see more revolution from you. At times comes a man where you can never replace them. Like Maradona in football, Gandhiji, Tendulkar in Cricket, Russell Peters in stand up comedy...
Likewise, Steve Jobs is one of a kind, at least for many years to come.