Apple chief Steve Jobs has again been forced on medical leave. But assessing the true importance to Apple of its talismanic leader is far from simple, says Seb Janacek.

The news that Apple CEO Steve Jobs has again taken medical leave led to intense concern among investors and Apple fans. It is his third period of medical leave in the past five years. Jobs was described by one analyst this week as the company’s greatest asset and its greatest risk.

In the past, the share price took a battering as panic spread over the absence of the iconic tech leader. This time, Apple managed it in such a way as to mitigate the effect of the news on US trading by choosing to make the announcement on a public holiday. It also released the bombshell a day before it released its latest quarterly results – the best in Apple’s long history.

The company’s share price still fell almost 10 per cent on the German stock exchange on Monday before recovering on Tuesday. By the time the US markets opened on Tuesday, analysts and investors had 24 hours to digest the news and the fall was less dramatic and quickly began to recover. News that quarterly revenues topped $26bn and profits of $6bn for the three months helped steady the ship.

Market backing for Apple
That investors have such paroxysms of panic each time Jobs goes on medical leave or looks a little thinner than last time he appeared on stage is due to the particular perception of the role he held – a perception that has perhaps changed in recent times.

The common view is that Jobs is responsible for the conception, creation and release of every product that rolls off the Cupertino conveyor belt. Jobs clearly plays a massive role at Apple, yet the executive team around him has demonstrated itself highly capable, most notably when the CEO has had to step away from the helm.

Steve Jobs on stage

Investors put a high price on the value of Steve Jobs to Apple but some analysts are more sanguine
(Image credit: James Martin/CNET)

Analyst Shaw Wu of investment firm Kaufman Bros said on Tuesday: “For a company of Apple’s tremendous size, where consensus is looking for $90.4bn in revenue in fiscal year 2011, we believe its nearly 50,000 strong employees don’t receive enough credit for the company’s great success.”

Analysts were largely unconcerned with Jobs’ latest medical leave, advising investors to stay with the company, increasing price targets for shares to $415 and even $450 – the price a few hours before the earnings call was $340 – with others advising clients to purchase Apple stock aggressively if it fell below $300.

Credit for the Apple management team
It’s not surprising that the Apple management team doesn’t get the credit it deserves given the halo that surrounds Jobs.

Needham & Company analyst Charlie Wolf noted that Apple has “one of the deepest managerial benches in this country”. He added that: “Jobs’ absence should have no material impact on Apple’s financial performance over the next several years.”

Yet doubt, uncertainty and anxiety over the future of the CEO persist. Only last week, Apple advised shareholders against voting for…

… a motion to reveal its succession policy at the annual meeting at the end of February. It might struggle now.

Much of the information is already available naturally. It’s absurd to suggest that a company of Apple’s size does not have succession plans in place. Indeed, the question is less about succession and more about how Apple will operate without Steve Jobs. We’ve already seen how, twice. The company managed just fine with Tim Cook at the helm.

The Bill Gates succession model
As for the succession plan? Arch-rival Microsoft may provide a possible model. When the equally iconic Bill Gates announced his own departure he shifted away from the company but remained in an advisory capacity as chairman.

The anxiety is more about how do you replace Steve Jobs? The answer is quite simple – you can’t. Jobs is a unique presence: founder, visionary and showman. His character is linked to the company, both its success and its mythology.

Yet the prospect of Apple without Jobs is not what it was five years ago.

When he last went on medical leave in 2009, I wrote that the Apple management team would have “six months to prove to the world that the company does not stand and fall by one man. To do that it needs to turn out a couple of strong quarters, and it is in a good position to do so”.

Apple has a strong executive team, almost $60bn in the bank, revenues and profits on an upwards trajectory, a premier brand and a highly established retail network. It also has strong product lines, two of which – the iPhone and the iPad – fall into nascent but rapidly growing markets that will sustain Apple for many, many years to come.

Respected internally and externally
It also has a fine deputy CEO in COO Tim Cook. He may not have the gravitas of Jobs but he is well respected internally and externally and has demonstrated he can run the company in the temporary absence of its iconic leader. He is undoubtedly in pole position to take over the CEO reins on a permanent basis.

The 2011 Apple is in a stunning position compared with where it was 10 years ago. In 2001, it wasn’t even reporting quarterly revenues of $2bn, let alone quarterly profits of $6bn. In the short to medium term, the company is in very safe hands.

The nagging concern for Apple investors will be how to replace Jobs’ ability to know where the puck will be in a few years’ time, and managing the long-term vision when he finally decides to step aside for good.

Wu of Kaufman Bros said his organisation considered Jobs to be in the company of Thomas Edison, Benjamin Franklin and Walt Disney. There are few people of that calibre and they can’t be replaced.

Apple hasn’t put a timeframe on Jobs’ medical leave but hopefully he’ll be back soon and in better health.