Apple

Steve Jobs may be down, but he is by no means out, according to a report Saturday in The Wall Street Journal.

Apple's CEO has been on medical leave since January, but sources tell the Journal that Jobs is still running key parts of the company from his home.

Apple CEO Steve Jobs introduces new MacBooks in October, his last public appearance.

(Credit: James Martin/CNET)

He was, for example, specifically involved in the user interface for the latest version of the iPhone operating system, continues to review products, and is working on future projects, sources told the newspaper. He has made no public appearances this year.

Chief Operating Officer Tim Cook is running day-to-day operations until Jobs' planned return at the end of June.

Jobs went on medical leave around the same time that people started speculating about why the already-slim Jobs had noticeably lost more weight. Jobs was treated five years ago for pancreatic cancer. The reasons for his current leave are still a mystery.

At first, Jobs pinned his weight loss on a hormone imbalance. But soon after, he said that the condition was more complicated than he'd thought and that he would be taking a six-month leave of absence.

Apple won't comment on how Jobs' absence affects the company on a daily basis. "We're just trying to do what we do every day," Apple Senior Vice President of Marketing Phil Schiller told the Journal.

Jobs didn't respond to the Journal's requests for comment.

CUPERTINO, Calif.--Apple's first annual shareholder meeting in more than 10 years without founder and CEO Steve Jobs was largely uneventful, as COO Tim Cook and board members stepped in to handle questions regarding Apple's disclosure of Jobs' health.

Five shareholder proposals were considered, and only the one approving the re-election of Apple's eight existing board members was approved in preliminary voting. As in past years, the informal question-and-answer section was by far more interesting, although without Jobs' usual acerbic replies to institutional shareholders on soapboxes, a little duller.

For the record, Apple shareholders rejected proposals that the company adopt a so-called "say on pay" resolution, publicly commit to tough sustainability goals, adopt resolutions calling for health care reform, and publish a detailed list of its political contributions. The results are only preliminary, but are expected to stand following the tabulation of those votes submitted in person Wednesday.

Apple COO Tim Cook fielded several questions during Wednesday's annual shareholders meeting.

(Credit: Apple)

Some of the more interesting highlights from the meeting:

Jobs' health
The first question posed to Cook and the six Apple directors present (Jobs and Google CEO Eric Schmidt were the no-shows) concerned Jobs' health, and Apple's role in disclosing the status of his health in January. Apple first said in early January that Jobs was suffering from a hormonal imbalance but that recovery was considered relatively straightforward, only to turn around the following week and admit that Jobs' health problems had grown "more complex" and would require a six-month leave of absence from the company.

Brandon Rees, representing the AFL-CIO, asked that oft-repeated question "What did the company know and when did it know it?" regarding the state of Jobs' health, and also called on the board to disclose Apple's succession plan.

Art Levinson, co-lead director and chairman and CEO of Genentech, fielded the questions regarding Jobs' health. He said that the company believes it has satisfied all the legal requirements regarding the disclosure of material information, and that the board has discussed succession at Apple for years.

Levinson declined, however, to make any succession plan public, which some corporate governance experts have called on Apple to do in the wake of investor concern over the way the disclosures were handled.

Jobs "remains deeply involved" in major strategic decisions at Apple, and if that changes the board will inform shareholders, he said.

Happy birthday
The next person to approach the microphone was the last to address Jobs' health, and he did so just to wish Jobs "a full and speedy recovery," and lead the room in a chorus of "Happy Birthday." Jobs' 54th birthday was Tuesday.

Macworld
One original Apple shareholder dating back to the company's 1980 initial public offering used his turn at the microphone to ask Apple to considering returning to Macworld, which it plans to abandon next year. Cook answered that Apple "has very fond memories of Macworld" but repeated the company's belief that with its retail store network it believes it can reach far more people on a weekly basis in those stores.

In a new tack, Cook noted that Apple also has the rare ability in the tech industry to call a press conference and know that the entire tech media world will show up on its doorstep. That wasn't always the case when Apple was showing up at Macworld in the late 1990s and early 2000s, but these days "we have so many other ways to reach our customers."

Executive compensation
Scott Adams, who represented the AFSCME Employees Pension plan, asked the board if a Jobs-less Apple would be more willing to meet with shareholders, stating his belief that "Mr. Jobs has always been known as someone who hid directors from shareholders." Adams, who presented the shareholder proposal on executive compensation, noted that a similar non-binding proposal was approved last year by shareholders but Apple took no action on the matter.

Director Bill Campbell, chairman of Intuit and the head of Apple's compensation committee, told Adams that Apple's board considers executive compensation very carefully but prefers to make the decisions regarding the actual dollar amounts themselves, in order to "retain the flexibility to compensate our senior offices as we see fit," noting the role of those officers in generating the strong financial performance Apple has recorded over the past several years.

Al Gore, socialism, and TV ads
No shareholder meeting would be complete without a little comic relief, provided this year by a individual shareholder and a representative of the Parents' Television Council.

One shareholder used the comment period during the official presentation of shareholder proposals to urge a vote against the re-election of director Al Gore, citing Gore's ties to President Obama's choice for Commerce Secretary, Gary Locke, through John Huang, a player in a 1996 campaign scandal involving the then-Vice President, contributions obtained at a Buddhist temple, and the phrase "no controlling legal authority." No Apple representative responded to that comment.

Later, the same shareholder railed against shareholder proposals such as the health-care reform measure "that have nothing to do with Apple," deriding the institutional representatives as "socialists." That quickly turned into a running joke among Cook and shareholders posing questions following that outburst, assuring one another that they weren't socialists.

And finally, a representative from the Parents Television Council complained that Apple chooses to advertise during television shows it feels contain inappropriate comments, singling out an episode of CBS's "Two and a Half Men" that contained a stripper and quoting one of the main characters uttering the immortal phrase, "Ooh, ooh, yeah, yeah, yeah," or something like that. (CBS also publishes CNET News, as most of you know.)

Cook claimed not to have seen the show in question, saying "if it's not on ESPN, I probably didn't see it." But he promised to look into the matter and used the opportunity to talk up Apple's work on parental-control technology in the Mac.

Apple CEO Steve Jobs is sitting out Wednesday's annual shareholder meeting.

(Credit: James Martin/CNET Networks)

Apple has confirmed that CEO Steve Jobs will miss Wednesday's annual shareholder meeting for the first time since he returned in 1997 to the company he co-founded, Bloomberg has reported.

Jobs is currently on a medical leave of absence until the end of June to deal with unspecified health issues that have caused him to lose a significant amount of weight over the last year, so his absence is not a total surprise.

Chief Operating Officer Tim Cook is running the show in Jobs' absence and will likely serve as master of ceremonies for the meeting Wednesday morning at Apple's headquarters in Cupertino, Calif. In the past, a large part of the meeting--once the official business is done--has centered on Jobs fielding questions from shareholders on any number of topics, flanked by Cook and Phil Schiller, senior vice president of worldwide marketing. Cook will likely handle those inquiries this year.

It will be interesting to see if shareholders pose questions about Jobs' absence and the way Apple has handled the disclosures related to his health. Apple has addressed succession planning in oblique terms at shareholder meetings in the past, but in the wake of Jobs' medical leave, corporate governance experts have called for Apple to make its plan for a post-Jobs Apple known to the public.

No significant shareholder measures are on the ballot this year, and all eight directors are up for re-election, as usual. Apple does not provide a feed of the meeting, but reporters are allowed to watch on closed-circuit television in an overflow room, and we'll be there.

Apple may have wanted to protect Steve Jobs' privacy with the way it chose to address his health. But the end result is a credibility problem that will not go away easily.

After initially reassuring the public that Jobs' health issues were real, but not all that serious, Apple's statement Wednesday that his problems had grown "more complex" outraged many investors and corporate governance experts. Jobs will remain Apple's CEO, but he is turning the responsibility for day-to-day operations over to COO Tim Cook until the end of June to focus on his recovery.

Now that Jobs' health issues seem far more serious than Apple initially indicated on January 5, investors are not satisfied with the cryptic "more complex" explanation provided by Apple, and are publicly wondering if the company has been deceiving them all along.

Questions about Steve Jobs' health intensified following his appearance at Apple's Worldwide Developers Conference in June. He appeared to have lost a significant amount of weight.

(Credit: James Martin/CNET News.com)

"The most indispensable chief executive in the United States, beloved by customers and investors for his magnificent turnaround of the company he founded -- and for the amazing gadgets his company produces -- can no longer be trusted on the subject of whether he is healthy enough to continue running the company," wrote Joe Nocera, columnist for The New York Times and one of the few people in the financial media who has spoken directly with Jobs concerning his health.

The main question? After months of insisting that Jobs' health was a private matter, why did Apple release two vaguely worded statements within days of each other, one saying he was fine, and the other saying he was going to have to take some time off?

Apple's responsibility to disclose the true state of its CEO's health has been discussed numerous times in the past several years. While there are no strict guidelines regarding disclosures as they relate to executive health, any health issue that affects a CEO's ability to run the company can be considered "material," and therefore needs to be disclosed to the board of directors and the public.

There are many potential scenarios for how this saga came to pass. It's quite possible that the true source of Jobs' pronounced weight loss was uncovered in the days between its first disclosure on January 5 and Wednesday's announcement. Anyone who has dealt with serious health issues knows that initial test results aren't always accurate, and that doctors can disagree on diagnoses.

But it seems more likely that Apple has had to beg Jobs to be more forthright about his health, and Jobs, a famously hard-headed man, resisted. CNBC reported Wednesday that two prominent tech industry executives considered close friends of Jobs believed him to be very ill and in "serious denial" regarding his health and its effect on his ability to run Apple.

When Jobs was first diagnosed with a rare form of pancreatic cancer in October 2003, he kept the diagnosis secret for nine months while pursuing alternative medical treatments that troubled some of his confidants, according to a March 2008 Fortune story. That strategy ended once his tumor began to grow, and Apple announced that he had undergone successful surgery to remove the tumor after the operation.

In the years that followed, Apple occasionally had to deal with rumors regarding Jobs' health, but nothing like what followed his appearance at Apple's Worldwide Developers Conference in June--he appeared to have lost a significant amount of weight. At that time, Apple insisted Jobs' health was a private matter.

It might have taken the intervention of Apple COO Tim Cook to force Steve Jobs to talk about his health, and the issue will not go away for Cook as he runs Apple during Jobs' medical leave.

(Credit: Apple)

When Apple announced that Jobs would be skipping Macworld, it stuck with that communications strategy, deflecting all questions about his health even though the decision appeared to happen very quickly and took IDG completely by surprise.

A few weeks later, a Gizmodo report that his health was "declining rapidly" finally appeared to spur Apple into commenting directly on Jobs' health just before Macworld started. But the information they released on January 5 does not square with the information released Wednesday, and regardless of the company's intent, that is troubling to outsiders.

Jobs is widely believed to personally approve every piece of official communication that emerges from Apple. It seems clear that he detested having to make the initial statement, writing "so now I've said more than I wanted to say, and all that I am going to say, about this."

But as much as Jobs may have liked that to be the case, it was never going to be so. That's because once Apple opened the door to the idea that Jobs' health was public information, there was no going back. And if it wasn't completely forthright about the state of Jobs' health on January 5, it has also opened the door to legal action.

Did Jobs deceive Apple and shareholders regarding his health? No one has uncovered hard evidence that he did. But it sure looks bad, and securities lawyers are sure to exploit the situation given the drop in Apple's stock in after-hours trading Wednesday and a further drop Thursday.

Apple is a notoriously secretive company. That strategy has allowed better than perhaps any company in America, but it could have backfired in a big way Wednesday. So how can Apple respond?

Lay bare the succession plan, said Patrick McGurn, special counsel at RiskMetrics Group's ISS Governance Services. Tim Cook will run Apple while Jobs is recuperating, but the board of directors needs to reassure investors that it has a long-term plan for providing Apple with leadership, whether that's Cook or anyone else on the management team.

"That's where the uncertainty is. No one can predict the health issues, (but investors are) looking for some level of assurance that the board does have a plan in place" for a post-Steve Jobs Apple, McGurn said.

Apple has hinted at such a plan in the past, but hints won't cut it anymore. And that's going to be a very difficult thing for a company raised in a culture of secrecy to do, especially while Jobs is still its CEO.

Apple will be fine without Steve Jobs for six months, but better have a plan concerning the longer-term issues.

(Credit: James Martin/CNET News)

How will Apple fare without CEO Steve Jobs at the helm for six months? History provides some indication.

Clearly, Apple will miss its legendary CEO while he takes a leave of absence to recuperate from health problems that are apparently much more serious than previously thought. But Apple is in far better shape in January 2009 than it was in August 2004, when Jobs announced he had undergone surgery for pancreatic cancer and would have to take a few months off.

These days the company has three strong product lines, a worldwide network of retail stores and, with $24 billion in the bank, the financial resources to outlast a deep recession. Flash back to the summer of 2004, when Apple was a very different place.

At the time, Apple was just getting onto solid financial ground, growing revenue by 30 percent compared with the previous year while posting net income of $61 million. By contrast, Apple recorded a net profit of $1.14 billion during the fourth fiscal quarter of 2008.

While the Mac was starting to make a comeback, that resurgence wouldn't really start in earnest until 2006 when Apple switched its processor supplier to Intel. Behind the scenes, Jobs and Co. were hard at work on that transition. The project involved a massive overhaul of Apple's code even though for years, the company had maintained a laboratory version of Mac OS X that was compatible with Intel's chips.

The iPhone was barely a concept, about to make the leap from vision to hardware, according to a Wired article detailing the behind-the-scenes development of the product that has become one of Apple's most important cash cows. It would be years--and many redesigns--later before the iPhone came to resemble the product we now know.

And the iPod was about to make a huge leap, with game-changing products such as the iPod Nano and iPod Video in development before their eventual release in 2005.

The point? These were all crucial projects that were under way when Jobs took his first medical leave of absence, from August 2004 to October, when he returned to full-time duties. And Apple managed them well enough.

This is the likely scenario for the next five months or so, while Jobs recuperates and Apple COO Tim Cook runs the company. We don't know exactly what kinds of projects Apple is working on behind closed doors, but Apple has shown in the past it can continue to develop crucial projects while its leader is sidelined, something they'll have to prove again in 2009.

Piper Jaffray's Gene Munster might have said it best late Wednesday: "While the iconic leadership of Steve Jobs cannot be fully replaced, we believe his core attributes as a CEO, operationally and with products, can be replicated."

But therein lies the question: what will Apple do in the long term?

CNBC reported Wednesday that two prominent tech industry executives have recently expressed "dire concerns" over Jobs' health. While unpleasant, Apple has no choice but to consider the possibility that Jobs' absence could be longer than anticipated.

That potential challenge, more than anything else Apple will do this year, is what Cook and Apple's board of directors must tackle in the coming months. The products? They'll be fine.

Tim Cook

Steve Jobs' medical leave puts the spotlight back on the other members of Apple's executive ranks, in particular Chief Operating Officer Tim Cook, financial chief Peter Oppenheimer, and marketing chief Phil Schiller.

Tim Cook
A one-time Compaq executive, Cook has run much of Apple's operations for some time. He also was the man tapped by the board when Jobs previously went on leave for cancer treatment.

Much of Cook's career has been spent handling manufacturing and procurement duties, although he took over responsibility for sales at Apple, before adding the COO title in 2005. In addition to his work at Compaq, Cook also spent 12 years at IBM, where he ran manufacturing and operations for a large chunk of Big Blue's PC business.

Peter Oppenheimer
A longtime Apple finance guy, Oppenheimer started with Apple in 1996 serving as controller for the Americas and, eventually, as the company's overall controller, before taking over as chief financial officer upon the retirement of Fred Anderson.

Peter Oppenheimer

Prior to Apple, Oppenheimer was a divisional CFO at Automatic Data Processing (ADP).

Phil Schiller
Schiller has long served as Jobs' right-hand man when it comes to pitching Apple products to the public. A frequent guest in Jobs' keynote speeches, Schiller has also given some solo talks, most recently at this year's Macworld.

An avid sports fan, he coached an Apple hockey team that took on a team from Sun Microsystems, among other rivals. In addition to his work at Apple, Schiller served as a VP of product marketing for Macromedia.

While these three will be most visible during Jobs absence, others also play key roles. Design guru Jonathan Ive is known as Apple's strongest creative voice outside of Jobs, while former Target executive Ron Johnson is responsible for Apple's booming network of retail stores.

On the software front, chief software architect, Avie Tevanian, is no longer there, but several other software execs remain, including software engineering head Bertrand Serlet and applications chief, Sina Tamaddon.

Phil Schiller delivered the keynote address at Macworld 2009.

(Credit: James Martin/CNET News)

Apple COO Tim Cook was among the executives that received $100,000 raises to start Apple's 2009 fiscal year.

(Credit: Apple)

Apple awarded three key members of its executive team with $100,000 raises to kick off its 2009 fiscal year.

Chief operating officer Tim Cook, chief financial officer Peter Oppenheimer, and senior vice president of Mac hardware engineering Bob Mansfield will have a little more cash in their pockets this year courtesy of Apple's board of directors, the company revealed in a proxy filing Wednesday. Cook now makes $800,000 a year, while Oppenheimer makes $700,000, and Mansfield makes $600,000.

This was the first raise for Cook and Oppenheimer since October 2005. Mansfield received a raise just prior to his promotion to his current role, and is now the third most-highest paid executive at Apple. Mansfield displaced retail chief Ron Johnson among the group of Apple's highest earners that must report their compensation to the SEC.

All three executives also received large restricted-stock grants during the past year: 200,000, 150,000, and 120,000 for Cook, Oppenheimer, and Mansfield, respectively.

CEO Steve Jobs, of course, still makes just $1 a year. But he holds 5.5 million shares of Apple stock, by far and away the largest amount held by any members of the Apple executive team.

The proxy filing was primarily distributed to set the date for Apple's annual meeting in Cupertino, which will take place on February 25. Four shareholder proposals will be considered regarding whether Apple should report its political contributions, adopt health-care reform principles, publish a sustainability report regarding its environmental policies, and a non-binding resolution allowing shareholders to ratify executive compensation awards.

Deep one-day discounts on products such as the new MacBook could be coming this Black Friday.

(Credit: CNET)

Here's a rundown of some of the Apple news making the rounds this Wednesday:

Apple may launch most aggressive Black Friday pricing yet--AppleInsider: On a day when the stock market tanked once again on news of shifting priorities in the government's bailout plan, coupled with pessimistic forecasts from huge retailers like Best Buy, this notion doesn't seem all that far-fetched. Last year, Apple offered $101 discounts on MacBooks and other discounts on iPods on Black Friday, and Ben Reitzes of UBS thinks similar discounts could be applied more broadly across Apple's product line on that particular day.

Apple's iPhone faces off with the game champs--The Wall Street Journal: Is the "funnest iPod ever" something that should have Nintendo and Sony worried? Steve Jobs certainly thinks so, pointing out in this story (paid registration required) that a quarter of all the applications downloaded from the App Store have been games. The iPhone and iPod Touch may not yet be the choice of serious portable gamers, but Sega shared an interesting tidbit on how it views the iPhone: the 500,000 copies of Super Monkey Ball sold through the App Store would be considered a hit if it had sold that many copies of a game for the Nintendo DS or Sony PSP.

Apple focusing on MobileMe improvements in latest 10.5.6 builds--MacRumors: Everyone's favorite whipping-boy in the Apple universe--MobileMe--has received a great deal of work in the next update for Mac OS X Leopard, according to MacRumors. The update will supposedly have improvements to how MobileMe syncs data between MacBooks and the online service, which lets you access contacts, calendars, and other data from any computer.

The genius behind Steve--Fortune: This actually came out earlier in the week, but Adam Lashinsky's profile of Apple COO Tim Cook is worth a read if you haven't checked it out already. There's not a lot of new ground broken--Cook is the obvious short-term solution if Steve Jobs had to step down as Apple's leader, since he's a clear No. 2 and has already run the company once before--but the insights into Cook's personality and working style make it worth your time if you were ever curious about Apple's second-in-command.

In the wake of yesterday's iPhone software development news, a few positive tidbits related to Apple's iPhone surfaced here and there regarding 3G support, carrier exclusivity, and shipment expectations.

First off, UBS analyst Nicolas Gaudois posted a research note--spotted by AppleInsider among others--declaring that Apple has a 3G iPhone slated for the middle of this year using a modem chip from Infineon. The 3G model has long been expected to arrive at some point this year, and could help boost its standing with European customers and business types.

Apple COO Tim Cook, believe it or not, still likes the iPhone.

(Credit: Apple)

Secondly, Apple COO Tim Cook took the stage at the Goldman Sachs Investment Symposium in Las Vegas to reiterate Apple's goal of selling 10 million iPhones in 2008. Over the last several weeks, several analysts had gone on record predicting Apple would fall short of that goal, dragged down in part by a souring economy, but that was before news broke yesterday of the pending enterprise applications scheduled to be unveiled next week.

Cook also noted that Apple wasn't "married" to the exclusive carrier rollout strategy it has used so far in the U.S., U.K., Germany, and France. That could imply that Apple is thinking about adding other carriers in those places, although I still think it's unlikely that Apple will release a CDMA-based iPhone that would work on Verizon and Sprint's networks anytime soon. It could also imply that Cook is angling for a better revenue-sharing deal with the carriers already in Apple's fold.

The combination of all of these developments--the prospect of a more business-friendly 3G iPhone that could be available through multiple carriers--seems to have revived interest in Apple's prospects. After getting killed over the last few weeks, Apple's stock is up over 5 percent today, swimming against the tide of a broader downturn on higher unemployment numbers.

Following this company is sometimes like watching a tennis match. Or maybe it's closer to hockey, where everybody scurries around on one end of the ice before flying around on the other end.