Says Steve Jobs worth $20 bn to Apple
One man’s worth
Apple: Steve Jobs has turned Apple into a technology powerhouse – twice. But how much is he worth to the company? If one compares the value of Apple’s revenue streams to the company’s market capitalisation - nearly $20bn.
That makes Jobs’ absence from an upcoming trade show where he’s historically the keynote speaker worrisome, especially amid speculation surrounding his gaunt appearance this summer. The premium Apple fetches above the fair valuations of its businesses is a measure of investor faith in his ability to stitch Apple’s whole together. That’s why questions about Jobs’ health matter.
Apple’s cash cow is its Macintosh computer line, which grew at a 40% clip this year. Mac sales fell 1% in November while Windows-based sales grew 2% – so its high-price may be a liability. Still, Apple’s margins are fat and should grow when the economy recovers. Assuming a multiple of 1.3 times revenue - or twice the industry average - the Mac business is worth about $19bn.
Then take the profitable, but nearly mature, business of making digital music players. Analysts think Apple’s margins on the iPod are about 30%. Using a low five times ebitda multiple, the iPod is worth some $14bn. The iTunes digital music business has razor thin margins, estimated to be around 5%, but business is booming. At six times ebitda it’s worth a cool $1bn.
Apple’s biggest variable is the iPhone. The company may sell as many as 45m of them next year, according to Piper Jaffray. Take out the cut it pays to partner AT&T, and Apple could make $1.5bn of ebitda. At a 30% premium to slower-growing rival Research in Motion, the business may be worth $17bn.
Lastly there are the company’s dependable hardware and software businesses to throw in. They’re probably worth $11bn on a Microsoft multiple of 2.8 times revenue.
Sum it up, and Apple’s slices are worth about $60bn. Its current market value hovers around $80bn. One could argue the difference is a measure of the Jobs premium. Apple is worth more than its parts because it has successfully harnessed the convergence and synergies between computers, cell phones and entertainment.
If the man who engineered this harmony were to fall ill, investors might not accord such a high premium. That’s all the more reason for Apple to reassure shareholders with a rock-solid succession plan.
jeff.segal@breakingviews.com
Context News
Apple has announced that chief executive Steve Jobs will not deliver the keynote address at the Macworld Expo in January. The company also said that this year’s trade show will be its last. The announcement raised speculation among Wall Street analysts that Jobs’ health could be deteriorating after similar speculation last summer caused by his appearance during an Apple press conference.