Apple Inc. (AAPL-Q340.65-7.83-2.25%) has once again posted the best quarterly earnings in its history – at least partially deflecting attention from CEO Steve Jobs’ announcement that he will be leaving the company indefinitely for medical reasons.
Apple posted company records in revenue, profit and earnings per share for the quarter ending Dec. 25, 2010. The iPhone-maker said revenue jumped 71 per cent to $26.7-billion (U.S.). Analysts had expected $24.4-billion, according to Thomson Reuters. Net profit for the quarter was $6-billion, or $6.43 per diluted share.
The company shipped 16.24 million iPhones in the quarter – which covers the busy holiday shopping period – an 86-per-cent increase over the same period a year ago. An inventory backlog kept those numbers from being even higher, said Tim Cook, Apple’s chief operating officer and the man many believe will eventually become the permanent replacement for Mr. Jobs as CEO.
Mr. Cook chaired an analyst conference call Tuesday after Apple posted its results (Mr. Jobs did not sit in on the call). During the hour-long session, not a single analyst asked questions about the CEO’s health.
Instead, Mr. Cook covered some of the same ground the normally feisty Mr. Jobs does, but in a far tamer fashion. For example, Mr. Cook described some of the tablets powered by Google’s Android operating system as “a scaled-up smart phone, which is a bizarre product in our view.” As for newer tablets that are expected to hit the market soon, Mr. Cook said they “generally lack performance specs, lack prices, lack timing, so today they’re vapour,” a reference to “vapourware,” a tech industry term for products that sound appealing but don’t actually exist.
Mr. Jobs had made similar comments during the company’s previous quarterly earnings call. His name rarely came up during Tuesday’s call. In previous years, during Mr. Jobs’ other health-related absences, Apple has refused to comment, calling his medical issues a private matter.
One of the reasons Apple may feel comfortable about not disclosing more information on Mr. Jobs’ health is precedent. It appears U.S. regulators have never punished a public company for telling investors too little about a senior executive’s medical issues. Indeed, media reports indicate Apple looked into the legal implications of such disclosure when Mr. Jobs’ medical issues first surfaced more than six years ago, and decided at the time not to immediately inform the public.
Still, even as the company posts yet another record-breaking quarter, questions about Mr. Jobs’ health and future with the company are not likely to go away.
“You have to start with belief that a public company should be advising shareholders on a timely basis of any material changes in its affairs, and for many companies, the health of the CEO is relevant to the extent that the health issue makes it impossible for the CEO to function as expected by the marketplace,” said Stephen Griggs, executive director of the Canadian Coalition for Good Governance.
“I find it hard to understand how a board whose CEO is clearly very important to the company’s success would not disclose the very serious health concerns of that CEO.”
U.S. markets were closed Monday – the day Mr. Jobs made his announcement – for Martin Luther King, Jr. Day. However Apple shares dropped sharply on European stock exchanges as a result of the news. U.S. investors followed that lead Tuesday morning, and Apple shares dropped more than 4 per cent in Tuesday morning trading, before bouncing back to eliminate about half that loss. The drop came despite overwhelming expectation that Apple would post perhaps its best quarter ever after markets closed – Apple products usually fly off the shelves during the holiday shopping season.
Apple shares jumped slightly during after-hours trading Tuesday, but not enough to offset earlier losses.
While few analysts see Mr. Jobs’ medical leave as anything but a negative for the company, the downside for Apple is somewhat limited by the fact that much of the company’s 2011 road map – which includes the anticipated release of a new-generation iPad and possibly another iPhone refresh – has already been determined. As BGC Partners analyst Colin Gillis put it, Mr. Jobs’ absence isn’t a good thing for Apple, “but the company isn’t going to fall apart.
“We do mention that if the company had executed a succession plan that had Steve Jobs take a president title, with full control over strategic direction, the negative impact of this news may have been more muted,” he added.
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