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What Apple Investors Should Really Worry About

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Cupertino's spirit is solemn but hopeful as Apple CEO Steve Jobs announced he will be taking another medical leave of absence. A survivor of pancreatic cancer and a liver transplant, Jobs defied grim expectations and subsequently led Apple to new heights with a new sense of confidence and managerial glee. However, private health concerns have reappeared and forced Jobs to make them his number one priority.

Still a master of brevity, Jobs addressed his staff as he began his leave:


At my request, the board of directors has granted me a medical leave of absence so I can focus on my health. I will continue as CEO and be involved in major strategic decisions for the company.

I have asked Tim Cook to be responsible for all of Apple's day to day operations. I have great confidence that Tim and the rest of the executive management team will do a terrific job executing the exciting plans we have in place for 2011.

I love Apple so much and hope to be back as soon as I can. In the meantime, my family and I would deeply appreciate respect for our privacy.


The announcement was made yesterday while domestic markets were closed to commemorate Martin Luther King, Jr. Overseas, however, Apple's stock took a big hit -- plummeting 8% in Frankfurt to €239.50 ($317.96). And once US markets opened this morning, shares fell 6.5% but then rebounded. As of this writing, they are down roughly 3.5%.

But overall, the company's momentum is staggering. As Minyanville's chief Todd Harrison pointed out today, "[Apple's] stock is up more than 80% since the beginning of 2009, 65% since the beginning of 2010, and almost 8% this year." What investors are worried about, however, is: Can Apple keep it up without its famous leading visionary in the office?

This is a time when Apple needs Jobs the most. Google's Android platform has eclipsed both Apple and Research in Motion in sales and is poised to surpass both in market share. In response, Apple branched out beyond its AT&T partnership and added Verizon to the iPhone fold. But an extra carrier can only do so much. In the end, hardware is what counts.

And new design and function is purportedly on deck for the new iPad model. Rumor has it the iPad 2 will sport a larger speaker, new gesture controls, and a camera or two. But Apple already owns the tablet computer industry lock, stock, and barrel. On the battlefield of tech, it's not even a war -- it's a slaughter. The success is well-received and extremely beneficial, but on the negative side of the coin, there's really no other place to go but down.

MacBooks and iMacs? They're making incremental gains through the years but are still hamstrung by that pesky "Apple Tax" and sole-proprietary support.

And as for the iPod line? Well, with the rise of capacity and popularity of smartphones as media players -- as well as total market saturation -- fewer customers are finding the need to lug around two devices in their pockets, leaving iPod sales to plateau.

Under Jobs' helm, Apple has certainly gained tremendous ground and clout. And while the Apple isn't a company not to have a few surprises up its sleeve, some claim the brand is peaking.

SmartMoney's James Stewart asked in a piece this weekend if the company's "best days" are over and if there are any worlds left for Apple to conquer. It's a bombastic article, for sure, but there is a kernel of logic behind it. Existing devices will always be upgraded and improved, but until Apple debuts, say, a high-end consumer camcorder or smart HDTV, innovation will be relatively constrained.

That isn't to say that, without Jobs on hand, executives like COO Tim Cook or Senior VP Jonathan Ive couldn't take the reins and deliver exciting new products. And considering Jobs will still remain behind the scenes for the time being, that wouldn't be so surprising. He steered the ship in the right direction, it's up to the company to keep it on course.

But as the face of Apple, Jobs commanded the public's attention and media coverage like no other. Publicity drove a significant share of Apple's momentum -- so much so that many consumers are convinced that no other smartphone or computer can do the things that Apple products can. Without Steve Jobs, the company wouldn't just be losing a CEO. They'd be losing its best hype man.

That is the area in which Apple investors should be worried. Not a unibody construction. Not touchscreens with four-fingered gestures. It's marketing and hype.

When he takes the stage, people listen. When he signs off on an ad, it hits home. Even when he argues with a user over email, headlines are made. Call him arrogant, call him smug, call him misguided -- I think I've used all three descriptors -- Steve Jobs drives attention.

And without him there to unveil the iPhone 5, somehow, it's just not that exciting.
POSITION:  No positions in stocks mentioned.