Of Jobs, Wireless Exclusivity and the Competition
Jun 24, 2009 4:00 AM PT
Are concerns about Steve Jobs are impacting Apple's share prices?
Apple's share prices have been slipping since it was learned over the weekend that the company's CEO may have had a liver transplant.
Trading in Apple shares was volatile on Tuesday, with prices changing by the minute.
For example, at 2:12 p.m. ET, Apple's share price hit US$134.77, down $2.60 from the previous day's closing price of $137.37. Three minutes later, at 2:15 p.m. ET, it climbed back up 8 cents to hit $134.85, down $2.52 from Monday's closing price.
There's debate about whether Jobs should be more open about his health -- and whether Apple's management team is strong enough to keep the company going without him at the helm.
Two other issues could impact Apple's share prices. One is wireless exclusivity -- the arrangement that currently allows AT&T to be the exclusive carrier of the iPhone. Last week, this was the topic of a Senate hearing, and the FCC has promised an investigation.
The other issue is competition -- if there is any. Consumers bought 1 million iPhone 3G S devices over the first weekend following its launch.
The Share Price Shimmy
On June 19, the day the iPhone 3G S went on sale, Apple's share prices closed at $139.48. That was $2.51 up from the previous Friday's closing price of $136.97.
Apple's stocks then slipped on Monday to $137.37, a loss of $2.11.
Still, that wasn't much of a fall in the grand scheme of things. Monday's closing share price of $137.37 was up $46.62, or more than 51 percent, from the January 2 figure of $90.75.
If you had plunked down $10,000 for Apple shares on the first day the market opened this year, those stocks would have been worth about $15,000 on Monday.
The State of Steve's Liver
Both Apple and Steve Jobs have always been reticent about the state of his health, stating that it's a private issue. Jobs underwent surgery for pancreatic cancer in 2004 and looked rail-thin when he introduced the iPhone 3G in June of last year, but he shrugged that off as being due to a bug.
Recently, according to a report in The Wall Street Journal, he had a liver transplant.
It's believed the information about Jobs' latest surgery was leaked to the paper by a board member. If true, this signals deep divisions within the board, whose members will be on the hook if Jobs' health fails, leading to shareholder losses. Not only would Apple be hit by lawsuits, but the SEC or other relevant government authorities would want to know why the board did not take any action.
A company divided is heading for trouble, no matter how good its products, so let's hope Steve and the boys come to terms.
Is a Job-less Future Bad?
It's not yet clear whether Jobs can return to work, although he has apparently been seen on the Apple campus in Cupertino -- or, at least, someone dressed in his trademark black turtleneck and jeans was.
But even if he is kicked upstairs and made consultant or Grand Poohbah, so what?
The mark of a great leader is not only that he inspires his staff by his presence, but also that he puts together a team that can carry out his vision even in his absence. By all accounts, that's what Jobs has done.
How do you think the iPhone 3G S, which was developed while he was ill, came about?
"The fact that the iPhone 3G S came out when he was otherwise occupied shows there's a good team at Apple," Martin Reynolds, a Gartner distinguished analyst, told MacNewsWorld. "No one person could achieve this kind of result; there has to be a strong management team in place."
So, is the state of Jobs' health important? Only inasmuch as a sudden downturn may kick off federal investigations and shareholder lawsuits.
Apple did not respond to requests for comment by press time.
Last week, the U.S. Senate Committee on Commerce, Science and Transportation, chaired by Sen. John D. Rockefeller IV, held a hearing on the consumer wireless experience to look into why customers are bound to contracts with their carriers.
Wireless exclusivity gives a carrier exclusive rights to offer a particular vendor's phone -- like the iPhone deal between AT&T and Apple, for example.
This latest hearing was sparked by a letter from four senators, including Sen. John Kerry, to FCC Acting Chairman Michael J. Copps, urging him to investigate the issue of wireless exclusivity.
Nothing new here, move along ... . Back in October of 2007, the CEO of Central Texas Telephone Cooperative, Michael Higgins Jr., testified before the very same Senate committee on various topics, including that of wireless exclusivity.
If Exclusivity's Denied
This time, the FCC has pretty much pledged to investigate the question of wireless exclusivity.
If it rules against exclusivity, carriers like AT&T, which is desperate to extend its exclusive deal with Apple over the iPhone, could be hit hard. Sales of the iPhone have contributed mightily to AT&T's bottom line.
Exclusive agreements provide wireless carriers a competitive edge, AT&T spokesperson Mark Siegel told MacNewsWorld. However, they are not a sure bet.
"There's no guarantee of success with an exclusive agreement," Siegel said.
Apple might benefit from ending it, though -- it would be free to pursue agreements with other wireless carriers, notably Verizon, which has a far larger network than AT&T. There has been a resounding clamor for Apple to make the iPhone available through Verizon.
Here's the thing, though: A survey by the Government Accountability Office showed that 84 percent of wireless customers are very satisfied, or somewhat satisfied, with their wireless phone service.
Verizon did not respond to requests for comment by press time.
Competition? What Competition?
The market will be hit by a slew of Android phones later this year -- T-Mobile has already announced its second Android entry from HTC, and handsets built by Motorola are expected before the end of the year.
Meanwhile, Sprint Chief Financial Officer Bob Brust said during an investor conference webcast on Tuesday that the company expects shortages of the Palm Pre smartphone, for which it's the exclusive carrier, for some time.
Sprint is not seeing any impact from iPhone 3G S sales on sales of the Pre, he said.
Well, perhaps -- but 1 million customers bought the iPhone 3G S over the weekend, and on Friday, the day the device went on sale, some AT&T stores ran out of 3G S stocks.
The demand came as no surprise to Julien Blin, principal analyst and CEO of JBB Research. "People don't count their money when it comes to the iPhone," he told MacNewsWorld.
Perhaps the most telling statistic comes from Crowd Science, a company formed by online market research and audience measurement experts. A survey of 606 respondents who visited a network of sites monitored by Crowd Science found that 40 percent of users of BlackBerry handsets and other smartphones would switch to the iPhone for their next purchase, while 82 percent of iPhone users would buy another iPhone.