What is a CEO worth to a company’s shareholders? The question was raised again for Apple’s shareholder when rumors or facts, one of the other, came out early today that Jobs had hired an attorney and that Apple option grants may have been falsified. Apple’s shares went down 5%, and then analysts came out of the walls saying that the big hardware company was unlikely to be hurt by it all. According to MarketWatch: "Gene Munster, analyst at Piper Jaffray, pegged the odds that Jobs was involved in any shenanigans at less than 5%." Get him a suite at the MGM Grand in Las Vegas.
The question of what the CEO is worth can’t be answered. 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 St. can speculate what it meant when important founders or CEOs meant to the share price at other companies like Home Depot, Intel, Dell, Qualcomm, and Sun Microsystems.
Job’s vision for the iPod has certainly been critical to bringing the stock from below $10 in 2003 to above $80 now. The hint that Jobs might have a problem dropped the stock from a close of $81.55 yesterday to $76.77 early today. Concerns about iPod sales and back dated options earlier this year took the stock down to $50. Jobs was at the helm.
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 or 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. But, the institutional investors who own most of the shares in Apple probably will not be swayed by that. Their concern is whether someone inventive is at the wheel to make sure that there is another "iPod" if one can be conjured up.
Maybe Mr. Munster at Piper 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 is 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 can be reached at [email protected]. He does not own securities in companies that he writes about.
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