By Joseph Galante
Feb. 25 (Bloomberg) -- Scott Grannis has owned Apple Inc. products for two decades, from his first Mac in 1987 to the latest iPhone. He bought his first Apple shares in 2001 for $9.25 each.
For all his enthusiasm, Grannis says he’s not happy with how the company handled disclosures about the health of Chief Executive Officer Steve Jobs.
“Even being a fan of Apple, I wish they would’ve been a little more forthright,” said Grannis, 59, the former chief economist at Western Asset Management Co. in Pasadena, California. “I’ve felt slighted. I’ve felt disappointed.”
Apple’s disclosures on Jobs’s health have some investors split: They love the company and its products yet say the board should be more forthcoming. Jobs took a five-month medical leave Jan. 14, just nine days after saying he would stay at work while receiving a “relatively simple” treatment for a hormone imbalance.
While Grannis said he hopes Jobs will regain his health, he said the lack of clarity in Apple’s statements raises questions about what’s going on behind the scenes.
Apple holds its annual meeting today at its headquarters in Cupertino, California. The event will give shareholders the opportunity to quiz executives and directors, who have remained silent about the CEO’s health since he went on medical leave. Grannis doesn’t plan to attend.
Apple rose 25 cents to $90.50 at 9:31 a.m. New York time on the Nasdaq Stock Market, almost 10 times the price Grannis first paid for the shares. He said Apple remains a good investment because of the Mac and the culture of creativity Jobs created.
‘Evangelist’
Grannis isn’t alone in calling for more transparency. Apple needs to disclose who will take over for Jobs if he can’t return to work, said Michael Yoshikami, chief investment strategist of YCMNet Advisors in Walnut Creek, California. Yoshikami said he won’t buy Apple stock for the $800 million fund he helps manage in part because the company hasn’t said enough about Jobs’s health.
“It doesn’t give me a lot of comfort that the guy who was the evangelist might not be around and that the company isn’t telling me who the next evangelist will be,” said Yoshikami, adding that the recession’s effect on the technology industry is also keeping him away from the stock.
Jobs, who turned 54 yesterday, told shareholders last year that the board could choose his replacement from Apple’s management. Apple has had a confidential succession plan for several years, the company said last month. Steve Dowling, an Apple spokesman, declined to comment.
Buy at $7.50
Grannis is a long-time believer in Apple. He first bought shares in January 2001, the year Apple introduced the iPod media player and began opening retail stores to sell its sleek computers and gadgets.
A year later, Apple slid to about $7.50 as personal- computer demand fell after the Internet bubble burst. With the stock trading close to Apple’s cash reserves, Grannis said he thought the market was predicting the company would disappear.
“That’s crazy, I thought,” said Grannis, who at the time considered Apple’s new operating system superior to Microsoft Corp.’s Windows. “Something that good can’t disappear.”
He knew he could be wrong, and calculated how much he could afford to lose if Apple were wiped out. Then he halved that amount and bought more stock. He declined to say how many shares he owns today.
Unbeknown to Grannis and other investors, about a year later Jobs was diagnosed with a form of pancreatic cancer, according to a 2008 article in Fortune magazine. Apple decided not to tell investors about it after consulting with lawyers, the magazine said, citing people familiar with the matter.
Cancer Surgery
On Aug. 1, 2004, Jobs, then 49, disclosed that he had a successful surgery to remove the tumor. The stock fell 7.9 percent that week, before recovering those losses later that month.
Over the next two years, the stock soared fivefold as Apple forged a partnership with Intel Corp. and introduced new versions of the iPod. As Grannis watched the stock climb to $80, he said he kicked himself for not buying more shares in 2002.
In 2006, Grannis seized a buying opportunity after Apple tumbled to $53 on concern that iPod demand was slowing. Predicting the company would keep winning sales from rivals, he used the remainder of the budget he’d allocated in 2001 to buy more stock.
In June 2008, concern that Jobs was unwell emerged after he showed up at a developer conference looking frail and thin. Apple said he had a “common bug.”
‘Oh Shoot’
“I remember thinking, ‘Oh shoot, this is not good. I bet the stock is going to trade down,’” Grannis said. “But I never seriously considered selling.”
The next month, responding to concerns about Jobs’s appearance, Apple said he had no plans to leave the company and that his health was a private matter.
Jobs looked thin when introducing new iPods at an event in San Francisco on Sept. 9. The stock fell 25 percent over the rest of the month, mirroring slumps in global stock markets after the collapse of Lehman Brothers Holdings Inc.
On Jan. 5, Jobs said in a letter to employees that he was suffering from a hormone imbalance that had caused him to lose weight.
Then on Jan. 14, Jobs said he would give up day-to-day operations to Chief Operating Officer Tim Cook while taking a leave of absence to deal with health problems that were more complex than initially thought.
‘I Cringed’
“I cringed when I saw the news,” said Grannis, who was sitting at his computer at the time. “But I immediately thought that the market had had plenty of time to figure out that Jobs had health issues.”
Apple shares fell 8.4 percent over the next three trading days, and have now lost about half their value since concern over Jobs’s health emerged in June.
Piper Jaffray & Co. analyst Gene Munster, who estimated last year that Apple would fall 25 percent if Jobs left the company, now says investors have priced the possibility that he may not return into the stock.
The information Apple has shared with investors has been vague and created more confusion, said Nell Minow, founder of the Corporate Library, a Portland, Maine-based research firm specializing in corporate governance.
“It’s time for the board to develop a spine and get a little nosey and say we need to be kept up to date,” Minow said. “The board has one obligation and that is risk management. They’ve done everything wrong up until now.”
Relying on Jobs
Not all investors agree with that criticism, saying Jobs’s health is ultimately a private matter.
“As much as the board of directors should have been a little more forthcoming with public disclosures, how many other companies do we ask this of?” said Daniel Hung, who writes about Apple on his blog The Curious Investor and owns the shares. “The only thing I could fault them on is relying on Steve Jobs so much over the years that it’s becoming a public issue now.”
Grannis says he will continue to visit Apple retail stores to see how packed they are. He says he hears all the time from people who are switching to the Mac from Windows PCs.
He considered buying more Apple shares after Jobs announced his leave. He says he didn’t because of other investment losses and the significant portion of his portfolio Apple accounted for.
“I have to believe Apple has built a culture of excellence and innovation that can thrive even in the absence of Steve Jobs,” Grannis said. “I’m in this for the long haul.”
To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net
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