Who Cares if Steve Jobs Cares About Us?

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A few weeks back, Motley Fool analyst Rich Greifner wondered aloud why any investor would trust Apple (Nasdaq: AAPL  ) and its leader, CEO Steve Jobs, to look out for shareholders when they've shown they don't care about them.

Upon reading Rich's article and his rationale, my engineering common-sense kicked me and said that's not right.

Rich repeated several tired blemishes -- options backdating, returning cash, Jobs' health disclosure -- while intoning that you must set aside past results … even when the results are excellent.

Sorry, Rich. I'm not buying it. Here are four reasons why.

1. With the bad comes the good
It doesn't make sense to argue that you have to ignore past results and look only at past actions. Actions have consequences. If they don't have consequences, they are immaterial. If they have consequences other than what you think they should, that does not make them wrong. This includes management's actions and the operating results.

In my opinion, the truest measure of the treatment of outside shareholders is the return on investment, and in that sense, Apple's results have dominated the competition. They have been so dominating that Jobs was named CEO of the decade by Fortune magazine.

The Fool has previously put together lists of the most "shareholder-friendly companies," singling out companies such as Costco (Nasdaq: COST  ) , IBM (NYSE: IBM  ) , Berkshire Hathaway, and Sears Holdings.

However, Apple destroys them all on the basis of one-, five-, and 10-year returns: 

















Berkshire Hathaway




Sears Holding




Source: Google Finance.
*Jobs rejoined Apple as "interim" CEO in the fall of 1997.

2. Options and urban legends
Rich mentioned several areas where he believes Apple's management has been less than stellar. Fortunately, the Fool has covered those issues in the past. The first of those was the options backdating scandal.

Yes, Apple had an options scandal (as did Broadcom (Nasdaq: BRCM  ) , among other companies). However, it wasn't anywhere near the scale of Enron. Former Apple CFO Fred Anderson was charged and settled out of court with the SEC for $3.5 million.

The SEC indicated that no charges would be filed against Apple or Jobs. Yet somehow the myth lives on that Jobs was at fault. If he was at fault, does anyone really believe that the federal government would not have gone after him with everything it has? There simply isn't evidence to support the claim. To suggest otherwise is simply to make this an urban legend.

3. A pile of cash is a good thing
On the cash issue, this is an opinion about which I disagree with Rich and other Fools. Apple has a pile of cash and securities, about $34 billion including its long-term investments, according to the latest quarterly results.

Having that cash allows Apple to do some important things. It has the flexibility to ramp up R&D to protect its cutting-edge technology and procure companies that it feels will provide a significant benefit to its products. For example, the PA Semi acquisition is thought to have been made with an eye toward designing a processor for the iPhone.   

4. The real question of health
The topic of Jobs' health is hotly debated. But I find no fault in Apple's handling of the situation.

As a public company, Apple is bound by laws that prohibit the discussion of an employee's health without his or her permission. Regardless of statements in the 10-K, individuals are still entitled to privacy in their health records.

The SEC has no set rules governing such a disclosure, so Jobs couldn't have violated any rules. According to an article from Corporate Counsel, "the agency has no clear rule about whether an executive's health problems are material."

Jobs is a visionary and important leader. And experts have argued both sides of whether his health is "material" to Apple shareholders. But let's not get ahead of ourselves -- while Steve Jobs is the figurehead, he is not Apple.

Yes, he did lead it back from the brink of collapse. But to argue that the Apple of today is the same as the Apple of 1997 -- near failure without his leadership -- is preposterous. And this wasn't the first time Jobs has taken time off. He battled pancreatic cancer back in 2004, and Apple kept making money just fine without Jobs running the show.

In fact, the real health to look at is the health of Apple. How many other companies have continued to grow even in this recession?  Has Microsoft (Nasdaq: MSFT  ) , Dell (Nasdaq: DELL  ) , or Hewlett-Packard (NYSE: HPQ  ) ? Apple has, and it has done so with generous margins that are the envy of competitors.

And then there is the potential for growth. Apple still has less than 6% of the global market for computers. It has less than 4% of the market for phones. The potential for growth in those markets is significant, and will significantly impact the bottom line.

My bottom line is this: Results matter. Ignoring past results to focus on perceived past shortcomings is like rewriting a history book. Apple under Steve Jobs has continued to reward shareholders with market-crushing returns by focusing on the long term, not what Wall Street wants next quarter.

And Apple still has room to run. As a shareholder, that's the best reward any chief executive can give you.

Apple, Berkshire Hathaway, and Costco Wholesale are Motley Fool Stock Advisor picks. The Fool owns shares of Costco Wholesale and Berkshire Hathaway. Motley Fool Options has recommended a diagonal call on Microsoft. Microsoft and Berkshire Hathaway are Motley Fool Inside Value selections. Try any of our Foolish newsletters today, free for 30 days

Jeff Milton, aka JJMSpartan on the Fool discussion boards, owns shares of Apple, Berkshire Hathaway, and Costco. Jeff is proof that sometimes even a blind squirrel can find a nut, - as it would seem when an amateur investor/professional engineer pens a rebuttal to an article by a Fool analyst and writer. Jeff, a happy long-term Apple shareholder, also owns Macs, iPods, and iPhones.  The Fool's disclosure policy is outlined here.

Read/Post Comments (8) | Recommend This Article (63)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 03, 2009, at 4:41 PM, MaBellIsDead wrote:

    Excellent article. Aapl has done very well for me. When I heard Jobs was returning to Apple, I bought back into aapl and have enjoyed the anticipated growth over the many years. If Apple would declare dividends I would still own all my shares, but let's face it; aapl share price will be up and down like a roller-coaster, because its only value is to sell it when it reaches a satisfying height.

    On the down side, although I have held it like a good investor, I don't feel like a good investor, because Apple has no need for more money for growth. The old models are garbage and the new models are scary.

  • Report this Comment On December 03, 2009, at 6:03 PM, rufianno wrote:


  • Report this Comment On December 04, 2009, at 3:06 PM, Philipo wrote:


    Seem more like an extension of Ballmer in performance than of Gates.

    Lets get real indeed - these associations of a large cap to being tied more than not to the performance and heartbeat of one single person are largely exaggerated.

    Great rebuttal Jeff.

  • Report this Comment On December 04, 2009, at 4:34 PM, streetstupid wrote:

    Excellent Jeff. Your logic is impecable.

  • Report this Comment On December 04, 2009, at 5:50 PM, SNHamilton wrote:

    A solid article, though admittedly, the article you are rebuffing was so asinine that a monkey with a typewriter would have a 50/50 chance to refute it.

  • Report this Comment On December 04, 2009, at 9:51 PM, HMALETTER wrote:

    Great write-up Jeff. Apple has befuddled the Fool as a whole for years. After each attack, be it on the iPhone, the Mac, or the iPhone, we all ran the numbers. Some rand the numbers to a degree that shamed professional analysts.

    In the end, run the numbers, have no bias. If people had done the same with Microsoft years ago, perhaps they wouldn't have sat on dead money for a decade. In fact, the original article would have been spot-on if it had been written about Microsoft. Just run the numbers and follow the options and stock grant practices, then explain who's thinking about shareholders.

  • Report this Comment On December 04, 2009, at 11:23 PM, Maraith wrote:

    The original article was shallow and clearly reflected an irrational bias on the part of the author. This article is quite the opposite...deep and letting the facts speak for themselves.

    Nice job.

    (Disclaimer: my investment in Apple has tripled in value over the past five years, so I have a bias myself.)

  • Report this Comment On December 07, 2009, at 10:34 AM, bjpinto wrote:

    Excellent rebuttal!

    I'm relieved to see that at least someone took the time, facts and statistics to prove that Apple is a good investment, and has proven that the article from Rich was not one would expect from an analyst.

    I expect more of such insight and clear facts as detailed out by Jeff to come from TMF analysts, my expectations more so being a subscriber to TMF services.

    Thank you Jeff!

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