Investors undaunted as Apple's Jobs steps aside

By Poornima Gupta and Edwin Chan

SAN FRANCISCO/LOS ANGELES | Thu Aug 25, 2011 11:19am EDT

SAN FRANCISCO/LOS ANGELES (Reuters) - Apple Inc began a new era on Thursday without Steve Jobs as chief executive, a momentous shift that surprised investors, but barely dented confidence in the near-term outlook for the stock.

In announcing that he could no longer fulfill his duties, Jobs stepped away from his CEO duties and cleared the way for Tim Cook to take over leadership of one of the world's best known and valuable companies.

Cook, 50, must now convince investors that Jobs' vision and spirit have been institutionalized within Apple, a company that revolutionized entertainment and communication with its iPod, iPad and iPhone devices. Jobs, who has been on medical leave since January, will stay on as chairman.

"Investors are coming to the realization that this is a natural transition. It may have already been built into Apple's valuation," said Hendi Susanto, a Gabelli & Co analyst.

Apple's shares were down less than 2 percent in early trading on Thursday, showing more resilience than when the departure was initially announced late Wednesday.

"Over the course of last year, investors have become more comfortable with the idea of life after Jobs," said Bill Kreher, an analyst with Edward Jones. "I think it is encouraging that he will remain with the company as chairman but the real story is that Tim Cook has emerged as a capable successor."

Jobs, who has fought a rare form of pancreatic cancer, is deemed the heart and soul of a company that became the most valuable in the world for a brief period this year.

"I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple's CEO, I would be the first to let you know. Unfortunately, that day has come," Jobs wrote in a brief letter announcing his resignation.

While it is unlikely that his departure as CEO will derail Apple's ambitious product-launch roadmap in the near term, there are concerns about whether the company will be as creative without its founder and visionary at the helm.

Jobs' battle with pancreatic cancer, which has stretched over several years, has been of deep concern to Apple fans, investors and the company's board.

Over the past two years, even board members have confided to friends their concern that Jobs, in his quest for privacy, was not being forthcoming with directors about the true condition of his health.

Wall Street also wanted a clearer picture of plans at Apple.

"I think a lack of clarity of its succession plan in the past has been a distraction so we appreciate that this plan represents a smooth and orderly transition," Kreher said.

Jobs, 56, has been on medical leave since January 17, with his duties being filled by Cook, who was chief operating officer.

Jobs had briefly emerged from his medical leave in March to unveil the latest version of the iPad and later to attend a dinner hosted by President Barack Obama for technology leaders in Silicon Valley.

But his often-gaunt appearance had sparked questions about how bad his illness was, and his ability to continue at Apple.

Cook, a former Compaq executive and an acknowledged master of supply-chain management, has taken over the helm in each of Jobs' three health-related absences.

One Silicon Valley CEO, who declined to be identified because of the sensitive issues involved, said the tone of Jobs' statement indicated his health may be worse than feared.

The Apple chieftain has earned a reputation for commanding every aspect of operations -- from day-to-day running to broad strategic decisions -- suggesting he would not give up the job if he had a choice.

"It's really sad," the CEO told Reuters. "No one is looking at this as a business thing, but as a human thing. No one thinks that Steve is just stepping aside because he just doesn't want to be CEO of Apple anymore."

"It feels like another shoe is going to drop."

Brand research company Millward Brown said Apple's brand, which it values at over $153 billion, should remain intact.

"Steve Jobs resignation from Apple is sad for him as it presumably presages more illness. However he has left the Apple Brand in rude health so that the company is still poised for future growth," global brands director Peter Walshe wrote.

"The future direction is mapped out, the successor is in place (also a designer by background), and consumers rate the brand uniquely 'creative', 'fun' and 'adventurous.'"

'ARTISTS' TOUCH'

While Jobs did not give details on the state of his health, oncologists who have not treated the Apple founder said he could be facing several problems tied to his rare form of pancreatic cancer and subsequent liver transplant.

Such problems include possible hormone imbalances or a recurrence of cancer that is harder to fight once the body has already been weakened.

"Steve Jobs is the most successful CEO in the U.S. of the last 25 years," Google Inc Chairman Eric Schmidt said in a statement.

"He uniquely combined an artist's touch and an engineer's vision to build an extraordinary company."

Nokia CEO Stephen Elop said in a statement: "Steve Jobs is a visionary in the computing industry. We look forward to both Steve and his team having a positive impact on our industry for many years to come."

Elop was appointed last year to lead Nokia's fightback against Apple, whose iPhone posed a challenge that the world's biggest cellphone maker has yet to meet.

Analysts again expressed confidence in the Apple bench, headed by supply-chain maven Cook.

"I will say to investors: 'Don't panic and remain calm -- it's the right thing to do. Steve will be chairman and Cook is CEO," said BGC Financial analyst Colin Gillis.

Nomura's Global Technology Specialist Richard Windsor agreed, although he said rival smartphone makers would be quick to take advantage of any Apple weakness.

"This looks like a pretty smooth transition with the slight risk of a dent to its image if the next product launches are not perfect. Its competitors are waiting to pounce and here we think that HTC has the most to gain," he wrote.

Apple previously did not have a chairman, but had two independent co-lead directors.

(Additional reporting by Bill Rigby, Alexei Oreskovic, Sarah McBride and Jim Christie in San Francisco, Lisa Richwine and Nichola Groom in Los Angeles, Peter Lauria, Paul Thomasch, Liana B. Baker and Tiffany Wu in New York, Tarmo Virki in Helsinki and Georgina Prodhan in London)

(Editing by Andrew Callus and Maureen Bavdek)