Friday, 26 August 2011
Wednesday evening, I was going over my trades, getting prepared for the days ahead. I use one of the best news services out there. It gives me headlines the second they are released around the world…
Up on the screen popped one of the few headlines that disturb me:
17:28 AAPL Trading Halted: News pending (376.18, +2.58, 0.69%)
When trading is halted, something big is happening. Most of the time, it’s not good. My first thought was something terrible happened to Steve Jobs.
Six minutes later this headline was released by Apple:
17:34 AAPL *STEVE JOBS RESIGNS AS CEO, NAMED CHAIRMAN; TIM COOK NAMED NEW CEO
In the back of my mind I was relieved that Mr. Jobs was alive, but I knew this day was coming. Steve Jobs has been skirting his health issues and trying to remain strong. Much of the market knew he would step down eventually, but didn’t think it would be right now.
After Apple started trading again 15 minutes later at $356, I immediately thought that apple stock was a buy at that level, at least for now. With the stock back up at $374, the real question is whether you should still be buying Apple here or if this is the beginning of the end for the tech giant.
Steve Jobs Versus Tim Cook
Apple is Steve’s baby; no one will run Apple as he has. This is a man who started Apple out of his garage in 1976 along with Steve Wozniak and Ronald Wayne. It is impossible to replicate that passion.
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| The Apple Lisa cir. 1983 |
Believe it or not, in the early days Steve was known an aggressive taskmaster who was extremely difficult to deal with. Even so, his forceful, erratic and wild demeanor helped transform the way humans interacted with computers in a big way. He popularized the Graphic User Interface (GUI), the mouse and the desktop set of icons that are still popular today.
More importantly, Jobs remade Apple into the largest company in the world by market capitalization.
Here’s why Steve Jobs is so important…
In 1985 he was forced out of Apple, ironically by the same guy he hired to run the company. Jobs immediately founded NeXT (apparently he likes to play with capitalization), where he honed and tested his ideas.
In ’86 Steve Jobs purchased Pixar from George Lucas and turned it into the most successful animated movie production house of all time. He sold Pixar to Disney for $7.4 billion and sits on the Disney board.
By 1996, Apple was faltering, and Jobs made his comeback. His presence was immediately felt.
He has a gift… His personality has showed up in the products Apple produced, and in the culture of the company itself. Indeed, many folks say Apple’s culture is like a cult.
He is the face and soul of Apple in many minds, including mine. Like many, I attribute much of Apple’s success to Jobs.
Tim Cook is cut from a different cloth. Before joining Apple in 1998, the engineer worked for Compaq and IBM. In both capacities he was more of a logistics and operations guy. In other words, he is not known for his creativity.
But he is a logistics genius. He got Apple out of the manufacturing business and outsourced all its production. This allowed Apple to control inventory and change its supply chain dramatically, thus increasing margins.
Cook has been around long enough to know how Apple works and to keep it running smoothly. He has been the company’s chief operating officer and oversaw sales and operations.
As far as being a visionary and showman like Jobs, I can’t say. Neither his commencement speech at Auburn nor his appearance at a Mac media event impressed me. But you can tell that Jobs has had a big influence on him.
Having a man like Cook at the helm is not a bad thing for Apple for now. But with every cult, there must be a leader, someone who continues to mystify its followers. Apple actually has “magical” products. From what I have seen of Cook, I don’t know if he has the “magic” or passion that Jobs
has.
Don’t expect any major changes, though. Cook has been basically running the company since January of this year, when Jobs started his leave of absence.
Jobs will remain on the board and I am sure will be a confidant and advisor to Cook. From the looks of it, Jobs may have deteriorating health issues again and if God forbid he were to pass, it would be a devastating blow to the company, the culture and the apple stock.
How to Play It
Much of the market is expecting business as usual for the next year. As an investor, you can still hold and buy Apple up to about $400 or so. From that point I would look to cash in a good portion of your holdings in Apple and move to companies like Google (GOOG:NASDAQ) and Skyworks Solutions (SKYW:NASDAQ).
The majority of the next two years of products are most likely already being created. Beyond that we have to wonder if a logistics guy can keep Apple golden in this rapidly changing and hostile environment.
As long as Steve continues to serve on the board, his influence will be present. When that ends, I believe that Apple will lose part of its soul.
That said, it will most likely take another two years after that event for the effects to be realized. Competition will also look for any weakness or missteps by Apple. Don’t panic here; Apple is still a good company to own, but I see changes coming.
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Other Related Topics: Apple , Jared Levy , Option Strategies Weekly , Steve Jobs , Stock Market , Technology Industry
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