Now investors can focus on just how good Apple is

August 25, 2011

By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Few companies are as indelibly linked to an individual as Apple is to Steve Jobs. Not only one of the founders, he led the company from near bankruptcy to become one of the most valuable companies in the world. News on Wednesday of his retirement from running day-to-day operations is a blow — even if it was both inevitable and expected. But investors haven’t yet wrapped their minds around the powerhouse Jobs built.

For the time being, Apple will still be able to call on Jobs’ uncanny sense of consumer tastes and shrewd marketing skills. He was elected chairman of the board and will presumably guide and advise the company as long as he is physically able. It’s nevertheless reasonable to surmise his illnesses, first disclosed seven years ago, are taking a harder toll. Meanwhile, his replacement, Tim Cook, is not just capable but has had several stints in the CEO’s seat, during which there were no noticeable hiccups.

Cook may not have Jobs’ ability to marry design with technology or to inspire engineers to extraordinary heights. Nobody does. But the fact Jobs anointed him successor should add a bit of luster to his persona. More importantly, Cook has proven he can manage astonishing growth. Despite that Apple now sells more per quarter than it did per annum just a few years ago, it is still increasing revenue at an annual rate of more than 80 percent.

This growth, in a way, shows how hard it has been for investors to separate Jobs from Apple. Despite its extraordinary expansion in sales and profitability, the company is valued at about the same earnings multiple as the S&P 500. That makes little sense, unless it reflects worries about Jobs’ health or, worse, a repeat of the troubles Apple experienced after Jobs left back in 1985. What’s more, following the news that Jobs resigned as CEO, in after-hours trading Apple shed some $20 billion of market value.

Once the initial shock wears off, however, investors should be able to focus on just how good Apple is. Each of its stable of iPads, iPhones and Macs feeds the growth of the others. Apple’s customer base is growing and loyal. The smartphone and tablet markets have yet to hit their full stride. New ground in TV is bound to be broken.

Having Jobs around to lead the $350 billion company through this next phase would be preferable. But soon enough, it ought to become apparent that Cook and Jobs’ legacy will be a pretty potent combination.

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