Markos N. Kaminis
Apple (Nasdaq: AAPL) smartly tried to control the impact of the announcement that its idea-man and CEO Steve Jobs would need to take a medical leave of absence. The pre-release of this unfortunate information, ahead of the blowout earnings numbers, were meant to allow a free flow of funds to occur on the good news. If both pieces of data were released at the same time, the effect would very likely have been neutral to negative for AAPL shares.
While it’s clear what Apple’s PR people were up to a week ago, they may not be able to stave off investor realization of the risk of the long-term loss of Jobs to Apple and its shares. Though the company is doing its best to make this seem bearable, we suggest investors will increasingly question whether it is or not.
Apple shares were up $4.25 or 1.25% after hours after it reported EPS, but only after falling $7.83 (2.25%) through that same day, the first day of trading since the best-timed release of Jobs’ unfortunate news. By the end of the following day, AAPL shares had moved back into negative territory.
It took this long for good reason, as the company posted blowout earnings, exceeding analysts’ expectations by nearly 19%. The EPS gain was an astounding 78% greater than the year ago quarter. The company’s quarterly net income, for one quarter and after expenses, was six billion dollars. Granted, this was the most important quarter for the consumer oriented firm, but still, those are blowout numbers, period.
Thus, Apple’s PR people had quite a situation before them with regard to how to manage the news that their iconic CEO would need to leave day-to-day operations to take care of himself. Given his importance to Apple, and the perception of his importance to Apple, this became more than just a problem of how to author a public release to best serve the man. Rather, it needed to manage how investors, both current and prospective might react to this clearly unplanned division of the company and its brilliant CEO.
You’ll note that in the short release, a letter Jobs’ authored to employees, he states that he will remain CEO and that the 2011 operating strategy had already been laid out. In other words, he’ll still be actively involved, but off-site for the most part, while he takes care of his health problem. Secondly, there’s reassurance in the fact that all the important product planning has occurred already for this year, so whatever magic might be lost, perhaps another amazing year lay in store for Camelot in 2011 at least.
While AAPL shares are drifting now, be careful not to underestimate the company’s marketing savvy, nor its PR prescience. Another release or important news item might lay in store for just that scenario. That said, I would expect the company to let the news of Jobs’ temporary leave sink in and digest completely before any such release were made. Thus, I would be taking short-term profits in AAPL, outside of valuation and on just an artistic point of view (versus scientific). Over the medium term, beware the risk of already prepared corporate plans and a still savvy PR team at Apple. The next great catalyst for Apple and stopper of a stock slide could be just a press release away. Thus, it may be wise to check back in on AAPL shares over the medium term. Catch a longer version of this article at our blog.