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Thoughts on Apple

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January 14, 2009 – Comments (1) | RELATED TICKERS: AAPL

The NY Times reports that Steve Jobs is taking a leave of absence, as his health issues are "more complex" than originally thought.

Apple is down about 7% in aftermarket trading, Tomorrow, the stock is probably going to trade as if Steve Jobs is dead. There, I said it.

 Of course, not only is Steve Jobs not actually dead yet, but even if he does die, there are still reasons to buy Apple. First, the company has strong momentum in a number of product lines. The company also has its own base of strong management talent. The question will be whether or not they can sustain the vision that has guided them to considerable profits. I think they can, but there's certainly the risk that they can't. Additionally, Apple gets a D grade for disclosure on its succession plan. We don't even know if they have one.

The bottom line is, I think Apple is a hold. In valuation terms it's a definite buy. I believe more in long term analysis than short term, but in Apple's case, investors shouldn't overlook the succession risk with Steve Jobs. Apple will certainly be able to attract a skilled CEO if he dies. However, Steve is undeniably a visionary CEO with a superb vision. If Apple's vision and innovation stall, the stock will suffer. A lot.

1 Comments – Post Your Own

#1) On January 15, 2009 at 1:23 AM, uclayoda87 (29.14) wrote:

I agree that Apple is a long term buy, but I wouldn't buy tomorrow.  The market as a whole will likely drift down further over the next few months.  This should create some good buying opportunities.  I still remember Apple before Steve Jobs returned.  That is what investors fear, a great company with no vision.  Steve is probably aware of this and he is likely looking for a group of disciples to carry on after he leaves Apple.  I also suspect that he will begin introducing this group, probably at MacWorld, just as he has done for new products.  They will probably look like the TV show "Friends" to try to maintain the Apple image.

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