What is a CEO worth to a company's shareholders? The question was raised again for Apple Computer Inc.'s (NASDAQ:AAPL) shareholders when rumors or facts, one or the other, came out yesterday that Jobs had hired an attorney and that Apple's option grants may have been falsified. Apple's shares went down 5% before rebounding later in the day.
Then analysts came out of the walls saying that the big hardware company was unlikely to be hurt by it all. "Gene Munster, analyst at Piper Jaffray, pegged the odds that Jobs was involved in any shenanigans at less than 5%." Get Munster a suite at the MGM Grand in Las Vegas. Yet, today, The Financial Times reported that Jobs received options in 2001 that were not approved by the board.
The question of what the CEO is worth can't be answered. General Electrcic Co. (NYSE:GE) traded above $50 before Jack Welch left. It has never made it back there. Even with a recent run, it trades below $38. Wall Street can speculate what important founders or CEOs mean to the share price at other companies like Home Depot Inc. (NYSE:HD), Intel Corp. (NASDAQ:INTC), Dell Inc. (NASDAQ:DELL), Qualcomm Inc. (NASDAQ:QCOM), and Sun Microsystems Inc. (NASDAQ:SUNW).
Jobs' vision for the iPod has certainly been critical to bringing the stock from below $10 in 2003 to above $80 now.
Virtually all of the product plans and structure for the next year or so has to be in place at Apple. It takes that long to get a consumer electronics device out. The next versions of the Mac and iPod are already well past the drawing table. The iPhone, if there is one, has to be far along.
Jobs is a great front man. A cult hero. In that sense, he cannot be replaced. The institutional investors who own most of the shares in Apple probably will not be swayed by that. Their concern is whether someone as inventive is at the wheel to make sure that there is another "iPod" if one can be conjured up.
Maybe Mr. Munster at Piper Jaffray is right. Maybe there is only a 5% chance that Jobs was involved in anything unseemly. But there is a 100% chance that the stock could be down $30 within 90 days if Jobs does leave.
Send me to Las Vegas. I will take the room next to Munster's.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
12-28-2006 @ 9:36AM
online auctions said...
it would be a big shock, as you say, Jobs is a hero and somebody coming after him would have a tough task to perform "as well" !
12-28-2006 @ 10:42AM
KARIN GENOVA said...
STEVE JOBS SHOULD BE PROSECUTED AS SO MANY OTHER CEO'S
THEY SHOULD HAVE TO GIVE UP THEIR GAINS DUE TO PURE GREEDINESS !!!
12-28-2006 @ 11:21AM
Jim Manderscheid said...
Apple's October investigations report that Jobs's involvement, "was aware that favorable grant dates had been selected, but he did not receive or otherwise benefit from these grants and was unaware of the accounting implications." A later release states that he did not exercise the questionable options and returned them. He then properly recieved restricted stock instead. Sounds to me that he saw a "wrong" and made it "right", without turning to the "dark side".
Two former company officers seem to be possibly implicated as part of the option grant backdating, Former general counsel, Nancy Heinen, and former chief financial officer, Fred Anderson.
So as to the comment prior to mine, "Why the narrow minded witch hunt". Blind comments and lemming attitudes can hurt stocks and the common man's retirement fund for no reason. Get the facts. Make no judgement 'til you have the facts. Be informed and decide fairly.
12-28-2006 @ 12:26PM
Mr. noitall said...
I would guess that there is a 95% chance that Jobs knew about and participated in the shenanigans. Based on what I've read it sounds more like Jobs saw I potential lost and made it a gain when he decided to drop his options and accept the stock. I don't believe he was trying to "right" any "wrongs". Again, let's be realistic, million dollar bonuses were being paid out due to the backdating trick. It isn't possible to keep something like that quiet. I don't think Jobs will be forced out. More likely deals will be cut. Fines & settlements will be paid in exchange for not disclosing the facts and no admission of guilt.
12-28-2006 @ 4:26PM
rose lloyd said...
buy apple, this is a bunch of crap
12-29-2006 @ 11:35AM
Charlie Vazquez said...
Yes, and if the Queen had King, she'd be bald. Your constant attempt to get appl stock down is now predictable and boring.