Apple's Core Problem

For nearly a decade Apple could do no wrong. Under the leadership of cofounder and CEO Steve Jobs, this Cupertino, Calif., outfit clawed its way back from near oblivion to its current spot as the hottest consumer-electronics company in the world. Along the way Apple has gained a reputation for putting out PR that's every bit as sleek and slick as its products. Even an options-backdating scandal from 2006 couldn't trip these guys up; Jobs and his PR handlers deftly sidestepped the charges. (Apple largely blamed the mess on the company's CFO and general counsel, but the SEC found that Jobs had been "aware of or recommended the selection of some favorable grant dates.")

But on Wednesday, that changed. Suddenly Apple's notoriously disciplined PR operation looks like the gang that couldn't shoot straight. After six months of dodging questions about Jobs's health, Apple announced that he would be stepping down for six months because of his ailing health. This comes only nine days after Jobs published an open letter declaring that his recent severe weight loss was caused by a "hormone imbalance" and would be easily treated. This isn't just bad PR. It may end up costing Apple money. Shareholder lawsuits will likely be rolling in.

The whole thing started last June when Jobs, who underwent surgery for pancreatic cancer four years ago, appeared onstage at a conference looking terribly gaunt. Apple's PR wizards claimed Jobs had lost weight due to a "common bug." When that didn't wash, Apple stonewalled, saying that Jobs's health was a private matter. Soon after, however, word leaked that he had undergone surgery a few months before and suffered complications afterward. Later, Jobs phoned a New York Times columnist and called him a "slime bucket" and then said he would talk about his health, but only if the conversation was off the record. The columnist reported that he couldn't say what Jobs told him, but that from what he'd heard, Jobs was fine.

But in December, Apple announced Jobs would not make his keynote speech at the annual Macworld show in January, and fears about his health flared up again. On the eve of the conference, Apple tried to assuage those fears by putting out the "hormone imbalance" story. And now this: Jobs says he'll be out for six months, and Tim Cook, Apple's chief operating officer, will run the ship while Jobs recuperates.

Hard-core Apple fanboys—the ones who have insisted for months that there's nothing wrong with Jobs—no doubt will now also swallow the story about Jobs returning to work in June. For those of us not living under the famous Steve Jobs "reality distortion field," however, is there really any reason to think Jobs will ever return? To put this another way: can we really ever believe anything Apple says about anything again?

Mistrust could easily result in lawsuits, particularly if the company's stock continues to drop in response to Jobs's medical leave, especially if it turns out that the company made false statements about Jobs's health.

My guess is that yesterday's announcement was, in effect, Jobs's letter of resignation, and that he'll never be back. It's a sad day for Apple. No one will ever fill his shoes.

© 2009