Apple: Silence is Golden, Deception Inexcusable

By now I'm sure you've read 1000 places that Steve Jobs has taken a leave of absence from day-to-day operations at Apple:

Team,

I am sure all of you saw my letter last week sharing something very personal with the Apple community. Unfortunately, the curiosity over my personal health continues to be a distraction not only for me and my family, but everyone else at Apple as well. In addition, during the past week I have learned that my health-related issues are more complex than I originally thought.

In order to take myself out of the limelight and focus on my health, and to allow everyone at Apple to focus on delivering extraordinary products, I have decided to take a medical leave of absence until the end of June.

I have asked Tim Cook to be responsible for Apple’s day to day operations, and I know he and the rest of the executive management team will do a great job. As CEO, I plan to remain involved in major strategic decisions while I am out. Our board of directors fully supports this plan.

I look forward to seeing all of you this summer.

Steve

As I write this, Apple's stock is trading right around the 52-week low [$79.30] and speculation is rampant about what this means for one of the most beloved technology companies on the planet.

The Right to Privacy

A lot of people are incredulous at the thought that Jobs' illness has been kept quiet. I, on the other hand, STRONGLY believe that all things being equal, a person has an undeniable right to privacy when it comes to their health. Sure, Jobs has a fiduciary duty as CEO of Apple, but to that end he only really has a responsibility to assure the board of directors that any illness doesn't impair his ability to perform his duties. Beyond that, as long as the board is satisfied, it's NONE OF OUR BUSINESS.

I've heard all the arguments to the contrary...

• Jobs IS Apple
• Much of the company's valuation is tied to Jobs specifically
• Jobs made his medical history fair game when he came public 5 years ago about his first bout with pancreatic cancer
• Jobs' celebrity expands the boundaries of what should be "fair game"

The Duty to be Truthful

While I dismiss the arguments as to why he owed Apple shareholders, customers and employees an open book into his health, the right to privacy doesn't obfuscate the requirement for honesty. Over the last year, as Jobs' appeared to have lost weight; the market began postulating that Jobs' cancer may have returned. The sad truth is that pancreatic cancer is rarely survivable. From the Hirschberg Foundation for Pancreatic Cancer Research:

Survival Rates
According to the American Cancer Society, for all stages of pancreatic cancer combined, the one-year relative survival rate is 20%, and the five-year rate is 4%. These low survival rates are attributable to the fact that fewer than 10% of patients' tumors are confined to the pancreas at the time of diagnosis; in most cases, the malignancy has already progressed to the point where surgical removal is impossible.

In those cases where resection can be performed, the average survival rate is 18 to 20 months. The overall five-year survival rate is about 10%, although this can rise as high as 20% to 25% if the tumor is removed completely and when cancer has not spread to lymph nodes.

So while it's morbidly understandable that Apple onlookers would start fearing the worst, Jobs didn't owe us any explanation. So where's the problem? He went ahead and gave us an explanation...

After bowing out of his annual keynote at MacWorld, Jobs broke his silence:

Dear Apple Community,

For the first time in a decade, I’m getting to spend the holiday season with my family, rather than intensely preparing for a Macworld keynote.

Unfortunately, my decision to have Phil deliver the Macworld keynote set off another flurry of rumors about my health, with some even publishing stories of me on my deathbed.

I’ve decided to share something very personal with the Apple community so that we can all relax and enjoy the show tomorrow.

As many of you know, I have been losing weight throughout 2008. The reason has been a mystery to me and my doctors. A few weeks ago, I decided that getting to the root cause of this and reversing it needed to become my #1 priority.

Fortunately, after further testing, my doctors think they have found the cause—a hormone imbalance that has been “robbing” me of the proteins my body needs to be healthy. Sophisticated blood tests have confirmed this diagnosis.

The remedy for this nutritional problem is relatively simple and straightforward, and I’ve already begun treatment. But, just like I didn’t lose this much weight and body mass in a week or a month, my doctors expect it will take me until late this Spring to regain it. I will continue as Apple’s CEO during my recovery.

I have given more than my all to Apple for the past 11 years now. I will be the first one to step up and tell our Board of Directors if I can no longer continue to fulfill my duties as Apple’s CEO. I hope the Apple community will support me in my recovery and know that I will always put what is best for Apple first.

So now I’ve said more than I wanted to say, and all that I am going to say, about this.

Steve

And therein lies the problem. I have NO IDEA if Jobs is being truthful here, but a lot of people are asking questions. Once he gave an explanation for his weight loss in a public forum, and attributed it to hormonal imbalances, he's opened the door. And more importantly, some stakeholders will have construed his January 5th memo as an assurance that his health wasn't really a problem. Yet, just two weeks later, he's stepping away from day-to-day operations.

What does the future hold for Jobs? I don't know, but I sincerely hope he's back at the helm in July as promised. Not because I'm worried about what might happen to Apple in his absence, but because I want to see him triumph against a deadly disease that so few overcome. In the meantime, the world is going to finally come to terms with how much of Apple is really tied to one man, versus the other 31,999 employees on the payroll.

Disclaimer: At the time of writing, neither the author nor the firms affiliated with the author maintained a position, long or short, in the publicly traded companies mentioned or any related instruments. The author and the firm reserve the right to alter their investment positions at any time in the future. The content on this site is provided as general information only and should not be taken as investment advice. Content should not serve in any way as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of firms affiliated with the author. Any action taken as a result of information or analysis on this blog is ultimately your responsibility. Consult your investment adviser before making any investment decisions. 

Comments

[Alan]

" Not because I'm worried about what might happen to Apple in his absence, but because I want to see him triumph against a deadly disease that so few overcome."

Sounds like you believe he has AIDS? What's up?

[Jason]

Charlie, I get that conceptually, but again that gets back to the role of a CEO. Wanting to keep his health issues private, to me, doesn't mean he's likely to lie about something else, particularly as it relates to Apple's fundamentals. And let's not forget, again, the hundreds of other people inside and outside of Apple that help with corporate governance.

Let me ask you this, would you trust a company whose CEO commits adultery? Because the raw statistics on infidelity suggest that there's no discernible correlations between deception in one aspect of your life and that of another.

[Charlie Wood]

Jason-

Whether the man is sick or not, the bottom line is this: if you don't trust Steve Jobs you shouldn't be holding AAPL stock anyway.

-Charlie

[Jason Wood]

Thomas, could you flesh out your first contention -- i.e., that he has very little right to privacy under U.S. law? It's my understanding that he has a legal duty to disclose any illness that may impede his job performance to the Board, but that it's by no means a requirement to go public with it, do you interpret the law differently?

[Thomas Otter]

Under US law he has very little "legal right to privacy", but that is another discussion.

There are two things at play here, and they overlap.

On the one hand Jobs is a CEO, but he is also a celebrity. It is a faustian bargain. He is a public figure, even if he is often publicity shy. Jobs has a following in the same way as pop-stars and movie stars do. Call it the People Magazine syndrome. He rode that wave for all it was worth. It helped him sell more kit, and it helped establish him as one of the most significant figures in business history. Long after we have all left this mortal coil he will be thought of in the same way as Karl Benz, Cecil John Rhodes, Henry Ford or Andrew Carnegie, and yet because of the media driven society, today he is of interest to those who follow what Britney Spears' sister is
up to.

Secondly.
The market is amoral, it feeds on information and where it lacks certainty it seeks it out, or prices for the uncertainty. Annual reports often say people are our most important asset, but nowhere is it more starkly proven than here.

Apple needs to get on and show us
what they can do with the other employees.

I wish him a speedy recovery, and my thoughts are with him and his family.