Steve Jobs did a terrific job of pulling the company he
started two decades ago up by its bootstraps when he rejoined in 1997. But
investors in Apple Computer are still not giving him the benefit of the doubt.
Witness the spectacular $8 billion plus wipeout of market value following the
surprise warning about fourth‐quarter and 2001 earnings.
Apple certainly deserved a spanking for ambushing the
market. Yet the extent of the punishment shows investors are not taking it on
faith that the earnings shortfall is a simple “speedbump,” as Jobs called it.
They may be right. Apple said sales to students, a big market for its products
in September, were well below expectations. Since students tend to be more
fashion conscious consumers, that may signal waning interest in the funky iMac
and Cube models that have been the company’s recent salvation.
In a sense, Apple finds itself a victim of its own
fashionable success and must now work furiously to keep its products looking
cutting edge. If it fails, it could lose a hard core of customers, namely
students, who the company is relying on as its next generation of users. Should
the trendy computer geeks abandon Apple, the company's share certificates risk
becoming collector’s items alongside its first Macintosh.
Published Sept. 29, 2000
MISSED OPPORTUNITY
By Rob Cox
Steve Jobs may be a visionary when it comes to technology,
but his financial foresight may not be so keen. Sure, his stake in Pixar
Animation Studios, which Walt Disney is reportedly interested in acquiring, is
currently worth around $3.6 billion. This is not a bad return on the roughly
$60 million Jobs pumped into the business. And he is set to receive a windfall
of nearly $800 million when his 10 million shares in Apple Computer vest in
March. Yet had Jobs not exchanged a much bigger chunk of underwater stock
options for these shares a few years back, he would now be sitting on an Apple
fortune worth nearly as much as his Pixar pile.
In July 1997, Jobs returned to the floundering computer
business he had co‐founded two decades earlier. A few months later, rival
computer mogul Michael Dell sneeringly suggested that Apple be closed down and
its cash returned to shareholders. Last week, when Apple's market
capitalisation for a brief moment surpassed Dell's, Jobs gloated that his rival
hadn't been "perfect at predicting the future." Yet Jobs himself
wasn't much better at anticipating iPod mania and the extraordinary revival of
Apple's fortunes.
In early 2000, as the tech bubble was reaching its peak, the
Apple boss received a controversial stock options package worth around $548
million, according to company accounts. This 40 million split‐adjusted
options package had an exercise price of around $22. In 2002, Mr. Jobs received
another package, with 15 million stock options sporting an exercise price of
around $9. After these grants, the Apple share price declined
precipitously.
That's when Jobs lost his nerve. In March 2003, as the stock
hit a near 5‐year low of around $7.50, Jobs traded in his 55 million
underwater options for a less risky but smaller package of restricted stock,
then worth $75 million.
In retrospect, Jobs, who declined to comment, couldn't have
chosen a worse time to exchange his options. Apple's shares are currently
trading at around $80. True, the restricted stock is valued at more than 10
times its original value. But the options which Jobs divested would be now in
the money to the tune of more than $3.3 billion. So he effectively kissed
goodbye to $2.5 billion.
Still, Jobs has his $3.6 billion Pixar stake for consolation.
The only real loser is that other Californian visionary, George Lucas, who sold
him the company that became Pixar for $10 million in the first place.
Published Jan. 20, 2006
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