Is Steve Jobs still relevant to AAPL valuation

  • Posted: 19 January 2011 02:24 PM

    My line of argument would be the following:

    Given Apple Inc. momentum, financial results for the next five years rely far more upon TIm Cook execution than on Steve Jobs vision.
    Steve vision in the next five years could impact Apple results in 7 to 10 years which is irrelevant to AAPL valuation.

    Steve Jobs relevance to AAPL valuation is only based on unsubstantiated beliefs carried and spread by the financial media.

    [ Edited: 19 January 2011 02:36 PM by Hamourabi ]      
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    Posted: 19 January 2011 02:43 PM #1

    Ham, your question made me think of a quote from my high school days:

    “Potential is interesting, but performance is what counts.”

    My high school valedictorian went to the U.S. Naval Academy, graduated high enough to go nuclear engineering (submarines), then married a Captain’s daughter, had a child and dropped off the radar. He’s probably in a think-tank now, who knows?  He had potential and used it. Jeff if you’re reading - hey! Look me up.

    The salutatorian want to Cornell, worked with the Sam Winston special effects shop for a while (with credits on several movies) and competed on the TV show Robot Wars. Got married, had three kids and dropped off the radar. He’s probably working with Jon Ive now. CC if you’re reading, Facebook me.

    Then there was the #3 guy who went to RPI, graduated with a 4.0 in his major, took too many tabs of LSD, ended up working third shift in a Garibaldi, Oregon bakery and living in a motel. He supposedly has a job in the produce section of some Stop & Shop in New England. Potential, yes. But performance just didn’t happen.

    Steve Jobs brought his potential to bear in the right industry at the right time, which opened doors. Then he did it again in a different industry, opening more doors. At some point he realized the best way to change the world was to unleash the potential of others in targeted performance doing the right thing right.  Selecting the right thing and then executing it the right way is a science. Yes there is some art involved but there is a formula, and it can be taught. But doing it consistently is HARD.

    Steve has made it easy to explain away Apple’s ability to execute (perform) on a consistent and exceptional basis: “the Steve effect”. A process is like virus - once you set it loose in a favorable environment it is very hard to kill it. Steve has set loose GOOD processes in a very favorable environment. The goodness at Apple will continue with or without him, and the virus has grown so big it’ll take true incompetence to kill it for quite some time.

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    Posted: 19 January 2011 03:13 PM #2

    rezonate - 19 January 2011 06:43 PM

    ... The goodness at Apple will continue with or without him, and the virus has grown so big it’ll take true incompetence to kill it for quite some time.

    You’re right but that don’t answer the valuation question.  Valuation would decline once the growth rate slow down.  Growth rate not absolute growth.  Apple business is likely to continue to grow for a while (no idea how long, may be even for more than a decade) when SJ is not around but growth rate would slow down much earlier (also no idea, may be a couple of years later, may be after a year).  So, it may not be wise to sell out immediately when SJ is not around but is prudent to begin to sell or accelerate the selling plan (talking from a buy n hold investor’s perspective).

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    Posted: 19 January 2011 03:44 PM #3

    Hamourabi - 19 January 2011 06:24 PM

    financial results for the next five years rely far more upon TIm Cook execution than on Steve Jobs vision.

    I only partially agree with this quote. I disagree with the rest.

    Financial results for the next five years rely on execution largely, but Steve’s vision plays a role during the execution period as well. “Vision” isn’t set in stone and decisions are being made almost until a product is in customer hands, and even after that with software updates. So you can’t divorce vision from valuation.

    As for the rest, I don’t believe that valuation is unaffected by anticipated results in 7 to 10 years, and I’m not sure that the mythical Steve Jobs isn’t real.

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  • Posted: 19 January 2011 08:08 PM #4

    So you can?t divorce vision from valuation.


    That’s the money quote. But after all Mr. Market has a learning disability. And he must be convinced.

         
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    Posted: 19 January 2011 08:12 PM #5

    There’s no question that a vision is key.  Knowing the abilities of your staff and pushing them to go further.  There’s a lot of visions at Apple and they take a beating to rise to the top.

         
  • Posted: 19 January 2011 08:48 PM #6

    I think a lot of folks (wall street included) look at this as a single sided question.  It’s only “what happens to Apple after Steve Jobs is gone?”  A more relevant question for investment purposes might be “what does the competitive environment look like without Steve?”  Will Microsoft suddenly be on equal footing?  Hewlett Packard?  Nokia?  Is there a company whose products will be more desirable than Apples offering moving forward?  Will Microsoft develop a secure operating system and exhibit a sense of style?  Hewlett Packard a retail chain?  Nokia a competent software division?  Was it Steve’s ability or their competitive vulnerabilities that has made Apple so successful?
    Yes Steve is valuable but his absence isn’t going to magically enable the competition’s ability to compete with the set of attributes that make Apple, Apple.

    Keep pounding the drum.  Sooner or later others will catch on.

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  • Posted: 20 January 2011 12:27 PM #7

    I believe Steve Jobs and Apple have learnt from previous experiences. A good example is Pixar. He led the company through 10+ hits and when he separated, Pixar is still dishing out hits.

    Dont believe me ? Go see Toy Story 3. Steve has a unique talent of adding emotion to inanimate objects viz, iPad, iPad, iPhone, or animated films.

    Market is still reacting to the shock news and is preparing for the worse that SJ may be lost to Apple forever. It may take a couple of weeks but post VZ-iPhone launch and iPad 2 it will be old news. And valuation would go back to at least 20 if not more.

         
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    Posted: 20 January 2011 01:50 PM #8

    Every time apple has developed a new product, it has impacted the company exponentially, for reasons that we now understand. They are now at a point where what they currently have to offer, alone, will likely amplify their value another ten fold over the next 2-3 yrs. Its amazing that the majority can not see, understand or believe this; the ‘law of big numbers’ and all. Apple has, is and will continue to make history with its ongoing story. It now has so many industries under control that no company competing in one or two of these areas can compete, even if they did have the same imagination and clout. And we know that big things are still coming, and that with their new power and abilities will come new unforeseen possibilities that nobody else could pull off. This story is just starting folks. Steve perfected the formula, but this is now a self propagating machine. I hope he gets to see how far it goes, although he probably already has a pretty good idea. There are lots of folks whipping the “Apple without Steve is a rudderless ship” story, for their various reasons, but I think most of us here understand why this is not the case.

         
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    Posted: 20 January 2011 02:13 PM #9

    macProf - 20 January 2011 05:50 PM

    Every time apple has developed a new product, it has impacted the company exponentially, for reasons that we now understand. They are now at a point where what they currently have to offer, alone, will likely amplify their value another ten fold over the next 2-3 yrs. Its amazing that the majority can not see, understand or believe this; the ‘law of big numbers’ and all. Apple has, is and will continue to make history with its ongoing story. It now has so many industries under control that no company competing in one or two of these areas can compete, even if they did have the same imagination and clout. And we know that big things are still coming, and that with their new power and abilities will come new unforeseen possibilities that nobody else could pull off. This story is just starting folks. Steve perfected the formula, but this is now a self propagating machine. I hope he gets to see how far it goes, although he probably already has a pretty good idea. There are lots of folks whipping the “Apple without Steve is a rudderless ship” story, for their various reasons, but I think most of us here understand why this is not the case.

    Excellent view.

    It is worth pointing out that our world is made up of thousands of products that we use everyday.  Apple has managed to improve the mp3 player, the cell phone, and the tablet.  The possibilities are endless and history should teach us that Apple can make those into reality and big bucks.

         
  • Posted: 21 January 2011 05:47 AM #10

    Why Steve Jobs won’t return to Apple

    http://www.slate.com/id/2281453/

         
  • Posted: 21 January 2011 12:01 PM #11

    I’m posting this here in this thread, although I originally had it in another. It’s till relevant, if not more relevant to this discussion of SJ.


    A small minority group of people complain about Apple?s ?control freak? nature with which they manufacture, market, sell, and service the products they make. Somebody will always complain about something.

    But if performance is to be the measure of success, taking a company that was being given last rites to the number two corporation in the United States in just a matter of a few years through your control freakish nature can be considered nothing other than an invaluable success.

    So, to Apple I say, go get your freak on. Let the whiners whine, let the naysayers nay.

    /I just wish I still owned stock.
    //have no vested interest in Apple, or any company for that matter.

         
  • Posted: 21 January 2011 12:21 PM #12

    Tiger - 21 January 2011 04:01 PM

    So, to Apple I say, go get your freak on. Let the whiners whine, let the naysayers nay.

    Right, I read somewhere that Apple became successful despite ignoring popular business theory of the last 20 years. They act like an early 20th century company in some ways. Perhaps then current popular business theory is flawed?

    Steve and Apple seem to think long term unlike many companies nowadays (see GE just selling their soul to China recently for a quick buck). I have a feeling Steve and the other big brains at Apple have been having serious talks about the Apple road map 5, 10, even 20 years down the road, especially after his initial cancer diagnosis. They’ll have plans but need to stay flexible to accommodate shifts in technology that no one can predict.

    I’m not too worried but I don’t own enough stock to make a difference (I still wish I had more dough in 2001 when I bought in at $15). :)

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    Posted: 21 January 2011 12:34 PM #13

    I think the fear on the street is based in peoples memory of days when Apple was without Jobs, when there was Sculley, Spindler, and then Amelio. Sculley was hand picked by Jobs and all of these chiefs failed to understand Apple and how to run it profitably as a result took Apple through its darkest days.
    I am sure everyone wants Apple to continue to wow investors with quarter after quarter of stellar results, but up until this point no one has seen the tremendous success of Apple from anyone other than Jobs in command.

         
  • Posted: 21 January 2011 12:37 PM #14

    I have been designing and building machines and computers for a long, long time, including manufacturing my own for a while. I observed that: Companies that last can do it for boring reasons such as good financing and structure. Those that lead, however, have the ability to focus so as to do an encore, beyond their original product. In the case of Apple and Jobs, they did many encores, not just one.

    The problem is that leading companies depend on their leader. Once the founder and his/her vision is gone, the drive and coherence is gone also. It’s not just Apple. Look at MS without Gates. Look at HP without Hewlett and Packard.

    In my boat racing days, also long ago, we had a saying: “You have to do two things to win: 1 - get out in front and 2 - stay there.” Many people can get out in front occasionally with boatspeed but only a few can stay there, anticipating the wind while covering the competition - traits of a good skipper. Like the rest of us,  Jobs cannot last forever no matter how many good wishes we send him. Without Jobs, Apple can continue but will it lose its vision and focus?

    Sic transit gloria mundi.

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  • Posted: 21 January 2011 12:39 PM #15

    Hamourabi - 21 January 2011 09:47 AM

    Why Steve Jobs won’t return to Apple

    http://www.slate.com/id/2281453/

    How in the HELL does he know this to be true?

    Why Steve Jobs Won’t Return to Apple
    The legendary CEO has accomplished everything he ever wanted to accomplish.

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