When a Rock Star CEO Leaves the Stage

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/17/AR2009011700356.html

When a Rock Star CEO Leaves the Stage
Sunday, January 18, 2009; Page F02
Frank Ahrens

Companies run by charismatic, high-profile chief executives are exciting to follow, but are they a good investment? Can too much of the company's value depend on one person?

An example to look at is Apple and its founder and rock star chief executive, Steve Jobs.

Jobs, a pancreatic-cancer survivor, has lost a great deal of weight and has appeared less frequently over the past year, stoking rumors of poor health.

Last week, Jobs said his health problems turned out to be "more complex" than previously revealed. He's taking a five-month leave of absence from Apple, turning over day-to-day operations to Chief Operating Officer Tim Cook.

Shares of Apple took a hit. Maybe no American chief executive is perceived as being more crucial to his company's future than Jobs is to Apple's.

Jobs co-founded Apple in 1976 but was ousted in a power struggle in 1985. Apple's results were mixed without him, and the company wandered strategically. In late 1997, Jobs returned. Apple's share price immediately began climbing as Jobs focused his company.

It soared when he introduced the revolutionary iPod and iTunes in 2001 and kept rising with the rollout of the innovative iPhone, hitting nearly $200 per share in December 2007, from about $3 in 1997, adjusted for splits and dividends. It has dropped by more than half since that peak, closing yesterday at $82.33 per share, clearly hurt by the recession. Its losses over the past half-year have been comparable in percentage to those at Dell and Microsoft, but analysts speculate that the stock would be trading higher were Jobs healthy and visible.

If you're an Apple shareholder, you're wondering how deep Apple's bench is.

If you're not, you may be looking around at other "cult of personality" companies with a wary eye.

Consider Rupert Murdoch's News Corp. -- a vast media and entertainment empire that includes movies, newspapers and satellite networks. All of which the 77-year-old Murdoch will turn over to his 36-year-old son James at some point.

World's Richest Man Warren E. Buffett is inextricably linked to his Berkshire Hathaway investment firm. The 78-year-old Buffett has said he has identified potential successors.

An example of a cult stock that has managed the exit of its leader while keeping a relative handle on investor value is Microsoft. Shares of the company's stock held fairly steady in the upper $20s throughout the beginning and middle of last year as founder and icon Bill Gates stepped aside to make way for the company's new chief executive, Steve Ballmer.