Much has been written about Steve Jobs — the man and the driving force behind Apple’s meteoric success — in the days following his death.
Apple’s stock price reacted more negatively to its earnings miss than to the loss of Jobs, but it is not clear what the long-term impact will be on Apple’s ability to continue to develop cutting-edge products like the iPod, iPhone and iPad. The question for investors holding Apple shares is: Will Apple continue to innovate without the input of Steve Jobs?
Jobs, along with Steve Wozniak and Ron Wayne, founded Apple in 1976. Jobs was only 21 at the time. The company designed and sold one of the first commercially successful personal computers, and later introduced the Macintosh, the first computer with a mouse to be offered to the public.
Apple sold stock in its initial public offering (IPO) on Dec. 12, 1980, at $22 per share. There have been three stock splits, so the IPO price on a split-adjusted basis is $2.75 per share. (All stock prices in this article will be presented on a split-adjusted basis.) From the low of $1.44 in July 1982, Apple’s shares skyrocketed to a high of $7.67 by June 1983, rising by more than 430 percent in a single year.
By 1985, sales were slumping and Jobs got into a power struggle with John Sculley, Apple’s CEO (whom Jobs had brought to the company), and Jobs lost, resigning late in that same year. Apple’s share price had already suffered heavy losses from the peak in mid-1983, falling to a low of $1.84 (split-adjusted), or by 76 percent, by mid-1985, at the peak of the Jobs/Scully feud. By the time Jobs resigned from the company in late 1985, the stock price had actually rebounded significantly, to around $2.80 per share, or by about 52 percent.
In Jobs’ absence, Apple’s share price performed amazingly well (at first), driving to almost $18 per share by April 1991, or by almost 550 percent from the time of Jobs’ departure. However, due in large part to a lack of new product innovation, Apple’s share price suffered over the next several years, dropping all the way to a low of $3.42 just before Jobs resumed the helm in late 1997.
Apple introduced the PowerBook in 1991. The Macintosh portable was designed to be just as powerful as a desktop Macintosh, but weighed 17 pounds with a 12-hour battery life. The same year, Apple introduced System 7, a major upgrade to the operating system, which added color to the interface and introduced new networking capabilities.
The success of the PowerBook and other products brought increasing revenue. For some time, it appeared that Apple could do no wrong, introducing fresh new products and generating increasing profits in the process. But following the success of the Macintosh LC, Apple introduced the Centris line, a low-end Quadra offering, and the unsuccessful Performa line that was sold in several confusing configurations.
During this time Apple experimented with a number of other failed consumer targeted products, including digital cameras, portable CD audio players, speakers, video consoles and TV appliances. Enormous resources were also invested in the problem-plagued Newton division based on Sculley’s unrealistic market forecasts.
In 1996, Apple bought NeXT, a company Jobs owned, bringing him back to Apple. On July 9, 1997, then-CEO Gil Amelio was ousted by the board of directors after overseeing a three-year record-low stock price and crippling financial losses. Jobs became CEO in September of that year. The stock rebounded nicely just prior to his return as CEO, but then dropped again just after, hitting a low of $3.33 by the end of 1997.
At this point, the investing public was obviously not convinced that Jobs still had what it took to drive success for the company! Jobs, however, was about to take Apple to the next level, introducing a series of mind-blowing, innovative products that revolutionized the industry.
On Aug. 15, 1998, Apple introduced a new all-in-one computer — the iMac. The iMac design team was led by Jonathan Ive, who would later design the iPod and the iPhone under Jobs. The iMac featured modern technology and a unique design, and sold almost 800,000 units in its first five months.
Apple purchased several companies to create a portfolio of professional and consumer-oriented digital production software around this time. In 2002, Apple purchased Nothing Real for its advanced digital compositing application Shake, as well as Emagic for its music productivity application Logic, which led to the development of the consumer-level GarageBand application.
On May 19, 2001, Apple opened the first official Apple retail stores in California and Virginia. On Oct. 23 of the same year, Apple announced the iPod portable digital audio player and started selling it on Nov. 10. The product was phenomenally successful — more than 100 million units were sold within six years. In 2003, Apple’s iTunes Store was introduced, offering online music downloads for 99 cents a song and integration with the iPod. The service quickly became the market leader in online music services, with billions of downloads to date.
From the end of 1997 through March 2000, Apple’s stock made an incredible run, gaining 950 percent and peaking just under $35 per share. But the tech bubble burst, causing a significant overall stock market decline, with tech stocks across the board leading the markets lower. Apple, despite being one of the highest-quality companies, suffered along with every other tech company. By early 2006, when the stock market bottomed, Apple’s stock had fallen to a low of $6.68, or by 80 percent.
By October 2003, when Jobs was diagnosed with pancreatic cancer, the stock had rebounded to $11. He left for surgery in July 2004, with Tim Cook taking the reins of the company temporarily. Jobs returned shortly thereafter and the stock continued to climb.
In August 2006, Jobs delivered the keynote speech at Apple’s Worldwide Developers Conference. He looked thin and frail, and delegated parts of the speech to others, sparking widespread rumors concerning his health. The stock took a hit, dropping from a high above $86 early in 2006 to a low of just above $50 after the speech. Jobs and Apple assured the investor public that all was well and the stock rebounded sharply, breaking through $100 per share just after the release of the iPhone in 2007.
In 2008, again at the developers conference, Jobs delivered the keynote speech and again looked ill, causing another round of rumors about his health. On Aug. 28, 2008, Bloomberg mistakenly published a 2,500-word obituary of Jobs’ death, adding to shareholders’ concerns. During this time, Jobs and Apple repeatedly denied that his health was suffering, or that he had experienced a relapse of the cancer. The stock reacted negatively, dropping to about $90 from $187, or basically getting cut in half.
On Jan. 14, 2009, an internal Apple memo from Jobs announced that he would be taking a six-month leave of absence, until the end of June 2009, to allow him to better focus on his health. Despite his absence, the stock began to rebound in January, and rallied sharply again, rising back to about $140 per share by the time Jobs returned. The stock spiked even higher after his return, however, jumping to about $210 by the end of 2009. After years of speculation and multiple rumored “leaks,” Apple announced the iPad on Jan. 27, 2010. By the end of 2010, the stock had surpassed the $300 per share level, ending the year at $322.
On Jan. 17, 2011, a year and a half after Jobs returned from his liver transplant, Apple announced he had been granted a medical leave of absence. As during his 2009 medical leave, Apple said Cook would run day-to-day operations and that Jobs would continue to be involved in major strategic decisions at the company.
Throughout 2011, Apple’s shares have been choppy. Jobs announced his resignation as CEO on Aug. 24 and Cook was named his successor. Around 3 p.m. on Oct. 5, Jobs died at his Palo Alto home. The stock was $379 at the time. Since then, the stock has rallied to a high of $425 on Oct. 17, but has since faded a bit, to around $390.
There is no doubt that there has been a very strong, positive correlation between Steve Jobs and Apple’s positive stock performance. My feeling on the company is that Apple has enjoyed exceptional performance as a result of its ability — as a direct result of Jobs — to release revolutionary, game-changing products.
Without exceptional products, I do not believe Apple can continue to generate exceptional financial performance or stock price performance. The people are certainly still in place who worked with Jobs to create the iPad, iPhone and iPad. The talent is certainly there. But without Jobs driving the bus, I am not convinced that Apple will be able to arrive at the desired destination for investors: continued, sustained stellar stock price performance.
— Craig Allen, CFA, CFP, CIMA, is president of Montecito Private Asset Management LLC and founder of Dump Your Debt. He has been managing assets for foundations, corporations and high-net worth individuals for more than 20 years and is a Chartered Financial Analyst (CFA charter holder), a Certified Financial Planner (CFP) and holds the Certified Investment Management Analyst (CIMA) certification. He blogs at Finance With Craig Allen and can be contacted at craig@craigdallen.com or 805.898.1400. Click here for previous Craig Allen columns. Follow Craig on Twitter: @MPAMCraig.
