Steve Jobs’ medical leave rattles Apple, Silicon Valley
The latest health scare for Apple Inc. Chief Executive Steve Jobs is raising sobering concerns for a company basking in a string of hit products that have helped make it the world’s most valuable technology enterprise.
FOR THE RECORD:
Steve Jobs: In the Jan. 18 Section A, a graphic with an article about the latest health scare for Apple Inc. Chief Executive Steve Jobs said he missed his customary speech at Macworld in December 2008. Macworld was held in January 2009. —
Apple rattled Silicon Valley and its own employees by disclosing Monday that Jobs is taking his second medical leave in two years to attend to unspecified health problems. He underwent surgery for pancreatic cancer six years ago and had a liver transplant two years ago.
Jobs, 55, has become one of the most recognizable chief executives in American corporate history, experts said, and is so enmeshed with the company he co-founded in 1976 that it’s sometimes difficult to tell the two apart.
“If you asked the average person who walks into Wal-Mart who founded the company, they probably couldn’t tell you,” said Dan Alpert, managing director at Westwood Capital, a New York investment bank. “Steve Jobs, on the other hand, is his own brand. He’s almost as big a brand as Apple.”
That may pose problems for investors who worry about Apple’s long-term prospects without its driving force at the helm.
The news pushed Apple’s share price down 7.9% in overseas stock trading. U.S. financial markets were closed for the Martin Luther King Jr. holiday, but analysts expected a similar drop when they reopen Tuesday. Apple plans to release fiscal first-quarter earnings after the trading day ends; its shares were at $348.48 at Friday’s close.
Speculation about his health had intensified recently as Jobs had appeared gaunt. His condition delayed the launch of the iPad 2, the much-anticipated update of the popular tablet, a person familiar with the situation said. The iPad has been one of Apple’s most successful new products.
Jobs’ medical leave could have been prompted by a variety of issues, including an infection, a rejection episode related to his liver transplant or a recurrence of his pancreatic cancer, experts said.
But all cautioned that these are just educated guesses because so few details about his medical condition have been made public.
Jobs said in a brief note to employees Monday that he would remain chief executive and take part in major strategic decisions, but is ceding day-to-day management duties to Chief Operating Officer Tim Cook.
“At my request, the board of directors has granted me a medical leave of absence so I can focus on my health,” Jobs wrote, adding, “I love Apple so much and hope to be back as soon as I can.”
In Apple’s typically opaque fashion, the message left many details unknown, including the severity of Jobs’ illness, the prognosis for his recovery and the length of his leave. Apple has been criticized in the past for cryptic announcements that have underplayed Jobs’ health issues.
“Apple is more closed than North Korea when it comes to Steve’s health,” said longtime Silicon Valley observer Paul Saffo, managing director at investment advisory firm Discern in San Francisco.
Nevertheless, the latest revelation unsettled Apple investors, employees and the tightknit Silicon Valley tech community. With information on his health scarce even on Apple’s Cupertino campus, Jobs’ decision to step away worried employees who peg the success of their company to their boss.
“Everyone feels a personal connection to him,” Saffo said.
Jobs’ decision comes at a time when Apple has been riding a crest of technological achievement and consumer appeal.
Apple has legions of fans, many first attracted by the first generation of Macintosh computers introduced in 1984. But Apple’s fortunes jumped dramatically after the release of its iPod portable music player in 2001, followed in 2007 by the iPhone, a smart phone now in its fourth generation. The iPad tablet debuted to overwhelming interest in April.
Measured by its $321-billion stock market value, Apple is the world’s most valuable technology company and trails only Exxon Mobil Corp. ($392 billion) among all companies. Some analysts have speculated that within a few years Apple could be the first company to hit $1 trillion.
Analysts said investors were not concerned with the length of Jobs’ leave or whether he is part of the day-to-day operations. They mostly want him to remain involved in the company’s strategic decisions.
Still, an extended absence by Jobs would come at a crucial time for Apple, which is grappling with a surge of competition from determined rivals.
Google Inc.’s Android platform is now more popular than Apple’s iPhone, according to research companies ComScore and Nielsen. Samsung’s Galaxy Tab already is battling the iPad on the market, and more than 80 new touch-screen computers were unveiled at the recent Consumer Electronics Show in Las Vegas.
That the announcement of his condition came on a holiday could open the company to fresh criticism if it’s shown that Apple had been aware of Jobs’ deteriorating health but waited to disclose it until a day when the U.S. market was closed, said Lex Perryman, an assistant professor of management at Texas Christian University’s Neeley School of Business.
Two years ago, Apple told investors that Jobs was stepping away from the company to receive hormone treatments. After his return, it disclosed that his condition actually had been far more acute and that he had undergone a liver transplant.
Shortly after the revelation, the Securities and Exchange Commission started an inquiry into whether Apple appropriately disclosed the nature of his illness. The SEC has declined to comment on the investigation.
Apple has been less open about the health of its chief executive than other companies have, said Perryman, who has studied the issue.
This will be the third such stint for Cook, 50, who has been with the company since 1998.
A veteran of computer maker Compaq, Cook also took the helm briefly in 2004 when Jobs was recovering from pancreatic surgery. He became Apple’s chief operating officer in 2005, a position in which he runs sales and operations as well as Apple’s vast supply chain.
Many believe that Cook will succeed Jobs, though the company has never disclosed a succession plan. Analysts said Cook plays a key role on the management team.
“He has had two very intense tests over the last seven years and he aced both of them,” said Gene Munster, an analyst at Piper Jaffray.
Still, individual investors such as Fred Hazboun, a system administrator at IBM, are worried.
The 35-year-old Riverside resident put in a sell order to unload all his Apple shares — worth about $1,500 — if the stock drops more than $5 when the market opens Tuesday.
“It’s going to be a bad time right now without Steve,” Hazboun said. “He’s the visionary. Without him, the company’s not going to do as well. But I’m not giving up on the company. I’ll reinvest in a few weeks if he comes back.”
Hazboun believes that the uncertainty surrounding Jobs’ condition is unfair to investors.
“People need to know what’s going on,” he said. “He’s been trying to hide it, and that’s why everybody’s been so confused.”
Hamilton reported from Los Angeles and Guynn from San Francisco. Times staff writers Tiffany Hsu, Tom Petruno and Thomas H. Maugh II contributed to this report.
