Apple

Securities and Exchange Commission investigators are reviewing the way Apple handled the disclosures surrounding the health of CEO Steve Jobs, according to a Bloomberg report citing a person familiar with the matter. Earlier this month, Jobs announced he would take a six-month medical leave.

Apple, whose CEO's health has been a concern to investors over the past six months following his gaunt appearance at the Worldwide Developers Conference in June, announced in mid-December that Jobs would not be speaking at the January Macworld and that Apple would not participate in the event going forward.

At the time, Apple said Jobs would be sitting out Macworld and that its marketing chief would fill in. Then, on the eve of Macworld, Jobs disclosed that he had a hormone imbalance that was "straightforward" in its treatment.

A week after Macworld, Jobs announced new information had come to light regarding his health and it was more complex than earlier thought and that he would be taking a six-month medical leave of absence.

According to the Bloomberg report on Wednesday, SEC investigators are looking into whether Apple's previous disclosures misled investors.

Apple has been enshrouded in controversy over its disclosures regarding Jobs' health, with a number of investors expressing frustration that such disclosures did not come sooner given Jobs' increasingly gaunt appearance.

Apple's share price has also suffered a bout of turbulence with each news report and company disclosure regarding Jobs' health; the iconic leader's vision is considered paramount by many investors in driving the company into new markets and products.

In 2004, Jobs underwent treatment for a rare form of pancreatic cancer, which he has said was successfully treated.

Last week, Bloomberg reported that according to people "monitoring his illness" Jobs is weighing his options regarding a possible liver transplant because of complications following his cancer treatment.

A spokesman for the SEC declined to comment on whether the agency was reviewing Apple's actions regarding Jobs health disclosures.

The SEC does not disclose its investigations unless an enforcement action is taken either through the courts or with an administrative law judge.

Apple was not immediately available for comment.

Apple shares took a sharp drop to start the day Thursday, as the markets opened after Wednesday's news that Steve Jobs would take a medical leave of absence.

(Credit: Yahoo Finance)

Update at 2:29 p.m. PST, with closing stock price.

Shares of Apple took a hit Thursday at the market open, falling 5.7 percent as investors demonstrated their anxiety about the company following the news that CEO Steve Jobs is taking a medical leave.

Apple opened at $80.50 a share in morning trading, down from its close of $85.33 a share Wednesday. But by the end of the regular trading session, Apple narrowed the gap, with its shares closing down 2.29 percent to $83.38 a share.

While a number of Wall Street analysts predicted Apple can stay on track with its deep executive bench, investors remain skeptical whether the company's vision and momentum can remain should Jobs' leave extend beyond the summer.

In his tenure, Jobs has provided a clear voice and direction regarding markets that Apple would enter and the types of products, such as the iPhone, for those markets. It remains to be seen whether his disdain for consensus-building and the homogenization of ideas will be discarded in his absence.

"Apple's command and control structure has worked well for the company," said Ashok Kumar, an analyst with Collins Stewart.

Kumar noted, however, that while no one executive can fill Jobs' shoes, the company can move forward with a "group genius" approach.

But one analyst wasn't so sure, downgrading Apple's shares to underperform, or "sell," noting concerns over Jobs' medical leave and the effects of the recession on Apple's products.

Analyst Michael Abramsky of RBC Capital Markets noted in his research report released Thursday:

CEO Jobs' unexpected leave of absence raises near-term uncertainty regarding leadership. Jobs is widely viewed as Apple's chief innovator, dealmaker, leader, deeply involved in minute decisions, inextricably tied to Apple's brand. Jobs' being sidelined for 6 months or more and unavailable day-to-day - with no clear successor - in our view raises risks to Apple's sustaining its stellar record of innovation going forward.

Abramsky also noted in his report that further deterioration is expected in consumer electronics and Apple-related spending over the next three months.

In an RBC IQ/Changewave survey for January, 28 percent of respondents said they planned to buy a Mac laptop in the next 90 days, versus 33 percent of survey respondents back in November.

Analyst Andy Hargreaves with Pacific Crest Securities, meanwhile, believes Apple's future innovation efforts would be better spent exploiting the popular iPhone as a technology platform.

"I think they created a paradigm shift with the iPhone," Hargreaves said.

Expanding the iPhone as a platform through additional services, software, and hardware would also require less high-brow vision.

As for Apple's stock price, which analysts such as Gene Munster of Piper Jaffray described as grossly undervalued and a buy opportunity, it already had concerns over Jobs' health baked into the price, noted Hargreaves.

"Given where the stock has been trading," Hargreaves said, "successful innovation has not been embedded in the price."

Apple's disclosures regarding Jobs' health have stirred concern over the timeliness of disclosures and the quality of Apple's corporate governance. All this also raises the question of whether Apple is setting itself up to be the target of shareholder lawsuits, noted a Reuters report.

Updated at 2:33 p.m. with updated after hours trading information.

Apple shares plunged 10.8 percent a share in after-hours trading Wednesday, after the company announced CEO Steve Jobs would take a medical leave until June.

Jobs said he would take a medical leave after learning his situation was more complex than initially believed.

Apple's shares fell as low as $76.11 a share in after-hours trading, down 10.8 percent from its close of $85.33 a share at the end of the regular trading session.

Wall Street analyst Gene Munster with Piper Jaffray said on CNBC that he still considers Apple a buying opportunity.

"No doubt that Apple is losing the greatest pitchman on earth, but people still want to buy Apple products," Munster said.

He added that the stock is grossly undervalued and presents a buying opportunity.

"Apple investors need to look at the big picture. They need to look at the new products, the balance sheet...this is a storm that will pass," said Munster, who noted Apple has a deep bench of talent.

The analyst pointed to Tim Cook, who will oversee Apple's daily operations during Jobs' absence.

"Tim Cook is a pretty unemotional person, but his ability to run a company is second to none," Munster said. "He is very capable of running the operations of the company."

Munster also noted that while investors may be "frustrated" with how Apple has handled the disclosures regarding Jobs' health, they should not be dissuaded from investing in the company.