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Jobs' medical leave creates uncertainty for Apple, investors

For the second time in two years, Steve Jobs is going on medical leave. Only this time, he's not saying when he'll be back.

In January 2009, after furious speculation and opaque statements about the state of Jobs' health, the Apple CEO, who also had surgery for pancreatic cancer in 2004, issued a letter to employees saying he would take a leave of absence until the end of June 2009. Chief Operating Officer Tim Cook, widely acknowledged to be an operations whiz, stepped in to run the show on an interim basis. Though the market did not take well to the initial news, the company obviously recovered, and went on to soar to new heights.

To find out how U.S. investors will react this time around, however, we'll have to wait until Tuesday. Apple released the news on a holiday, when the U.S. market is closed, possibly to allow shareholders time to absorb the news. In Frankfurt, the Wall Street Journal reported, Apple shares were off 7.4 percent at one point in afternoon trading. The company announces fiscal first quarter earnings late tomorrow afternoon.

One can only hope that more information will be forthcoming during that earnings call. Jobs makes a plea for privacy in his letter, saying, "I love Apple so much and hope to be back as soon as I can. In the meantime, my family and I would deeply appreciate respect for our privacy." But he does not share any details about the extent or severity of his health issues, nor does he give any kind of time line for when he'll be back.

Investors, of course, abhor uncertainty, and are likely to punish the company for revealing so little unless more comes out tomorrow. To be fair, this time around Jobs is not relinquishing the reins, saying he will remain CEO and "be involved in major strategic decisions for the company." Still, if he's not running things on a day-to-day basis, his leave is likely to be met with some concern. Without more information about his health situation or when he'll be back to running the company full time, investors are sure to fret over the state of his health, the length of his leave and the possibility that someone so tied to the fortunes of the company could be gravely ill.

The last time this happened, Jobs and Apple directors were criticized for not sharing more. Debates raged over whether Jobs, as an individual, had medical privacy rights that superseded his and the board's responsibility to disclose more information to shareholders. As it turned out, Jobs had a liver transplant during his leave, a serious medical procedure.

Also worth considering: Apple investors may be more skeptical this time around. Just days before the company's January 14, 2009 announcement, in which Jobs said his health issues were "more complex than I initially thought," he sent a letter to the Apple community, saying he had a "hormone imbalance" confirmed by "sophisticated blood tests" and that "the remedy for this nutritional problem is relatively simple and straightforward." Investors may again be wondering this time if another shoe is yet to drop.

Of course, I wish Jobs a speedy recovery, and do believe in a certain amount of respect for privacy as a family goes through an illness. But I also believe leaders have a responsibility to share as much information as possible, even if that means giving up some of their own privacy. That's especially true at a company where one person is so central--whether in reality or in perception--to the company's future.

By Jena McGregor

 |  January 17, 2011; 10:11 AM ET |  Category:  CEO watch , Corporate leadership , Technology Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: Finally, merit pay for auto workers? | Next: Revealing Apple's succession plan?

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Investors need to remember that it is the products that make Apple such a success. Tune into Apple's results on Tuesday and you will get another indication of how strong Apple really is.

Products for 2011 are probably finished, or at the final design stage. New iPhones and new iPads. New notebooks and iMacs with new processors from Intel.

A subscription newspaper is due very soon, followed by magazines. That appears to be in the hands of the programmers right now.

Overall Apple is well set for 2011 and I am comfortable with their prospects for a very profitable year.

And Jobs has ensured that there is a very strong cash position, even in a recession.

I wish Steve Jobs all the best, but feel he has done a very good job of protecting Apple for times like this.

Posted by: KHMJr | January 17, 2011 6:15 PM

We've been Mac users since 1985 so we support Apple products. The health concerns about Steve Jobs has been well known for quite a while. Everyone knows (like us) he will die sometime. The Apple Board either has or needs to decide what to do when that happens. No question he is the driving force behind Apple's marketing and product development. So like the prior commentator, either accept the risk or sell your stock.

Posted by: rskillman | January 17, 2011 3:42 PM

People seem to have trouble accepting the reality that Steve Jobs' health is what it is. He clearly has a history of very serious health problems. If his current health problems are really serious enough to require an indefinite leave of absence from his job, there is a large uncertainty in Apple's prospects. It may turn out that the image of an indefinite leave overstates his current problem. It is possible that Apple and Jobs have decided on a strategy for dealing with his health issues that just admits to the uncertainty of his health and avoids revealing any specific information about his prospects even in the case where relatively good information is available. If he is back at work full time in a few weeks, there may be some grounds for complaining that this announcement was less than candid. Otherwise, investors don't have much reason to complain. Investments involve taking risk. One big risk in owning Apple is Steve Jobs' health. If you don't want to accept that risk, don't buy Apple.

Posted by: dnjake | January 17, 2011 3:34 PM

I have cashed in my remaining Apple stocks at a very decent profit. It seems like a somewhat churlish thing to do in the light of Steve Job's continuing health woes, but I will always be an Apple customer and Job's admirer. Some think that he will never return and I myself think this is probable. Nevertheless, Jobs is definitely doing the right thing; making his own health a priority, not profits or Wall Street standing.

All the best Steve.

Posted by: heuristic77 | January 17, 2011 2:18 PM

We need Apple to keep innovating so other companies can develop devices that "are better than the iPod, iPhone, iPad, iMac"

Posted by: Michael2255 | January 17, 2011 12:29 PM

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