Related Video

Steve Jobs resigns as CEO of Apple

Wed, Aug 24 2011

• Apple Share Crunch Overdone, Nomura analyst says
• Ode to Steve Jobs
• Apple's loss may be Samsung's gain
• Apple suppliers fall in Asia, rivals up

1 of 9. Steve Jobs stands beneath a photograph of him and Apple-co founder Steve Wozniak from the early days of Apple during the launch of Apple's new ''iPad'' tablet computing device in San Francisco, California, January 27, 2010.

Credit: Reuters/Kimberly White

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)

original content on reuters

original content on yahoo

original content on yahoo

Related Video

Google deal sparks speculation

Mon, Aug 15 2011

• Breakingviews: Motorola a win for Google, concern for others
• Stocks recover from downgrade drop

1 of 2. A Motorola Droid phone is seen displaying the Google search page in New York August 15, 2011.

Credit: Reuters/Brendan McDermid

NEW YORK/SAN FRANCISCO (Reuters) - Google Inc's biggest deal ever, acquiring Motorola Mobility Holdings Inc for $12.5 billion, is an attempt to buy insurance against increasingly aggressive legal attacks from rivals such as Apple Inc.

The acquisition of one of the mobile telecommunications industry's most storied names is Google co-founder Larry Page's boldest move since taking over as CEO in April, launching the Internet giant into a lower-margin manufacturing business and pitting it against many of the 38 other handset companies that now use its Android software.

Motorola Inc was split this year into two: Motorola Mobility, which got the faster-growing cellphone and TV set-top box businesses; and Motorola Solutions, which sells gear like walkie-talkies to corporate and government clients.

Google is paying a massive 63 percent premium to gain access to one of the mobile phone industry's largest patent libraries. The company had been under pressure to build a patent portfolio after losing out to Apple, Microsoft Corp and others in a recent auction of bankrupt Nortel's assets.

Unlike the Nortel deal and others, the fact that Google avoided having to compete in an auction for Motorola by engaging in exclusive negotiations for the company underscores the pressure it was under to bolster its patent portfolio. Paying such a rich premium even though it was the only buyer dovetails with analysts' view that the increasingly litigious posture its competitors have taken over intellectual property left the Internet search giant with no choice but to pay up.

"No matter how you think about this, you have to look at it through the spectrum of the Android ecosystem under incredible attack from an IP (intellectual property) perspective. And this is Google going out and trying to fix that," said W.P. Stewart Advisors Chief Investment Officer Jim Tierney. "The biggest implication here is that Google wants Android to be one of the dominant phone operating systems for years to come."

Wall Street quickly anointed Microsoft a winner in this deal, with Windows benefiting should the move spur current Android partners to explore other options.

The deal also stoked speculation that struggling Nokia and Research in Motion would become takeover targets themselves, sending Nokia's shares up 17.35 percent and RIM's up 10.3 percent.

Google made its first foray into hardware by co-developing the Nexus One phone with HTC in 2010 -- an effort that met mixed results. Monday's deal, however, could mark the start of a shift to an Apple-style model, integrating mobile hardware with underlying software.

"Google decided to cross the Rubicon on the device side," said Fred Huet, head of telecoms and media consultancy Greenwich Consulting. "There has been growing frustration (at Google) about the lack and speed of internet centric devices.

"With Nexus they tried to show the industry what they thought was the right evolution for handsets and it did not have an impact .... With the patents they make sure that Android stays strong."

THE MORE THINGS CHANGE ...

The acquisition is likely to draw even closer regulatory scrutiny than usual, with the search leader already the subject of antitrust inquiries. Experts will want to review how it affects mobile industry competition.

But the deal -- which took Wall Street by surprise -- appears to mark a shift in strategy from Google's traditional Internet search and advertising empire and forays into video and social networking.

"The danger is that other handset makers feel disenfranchised," said Nomura Securities global technology specialist Richard Windsor. "Motorola is the weaker player. This could actually collapse the entire community."

Page, who also launched the ambitious Google+ social network since taking over as CEO, reassured investors on Monday this would not happen, saying Motorola will be run as a separate company licensing Android software in the same way as rivals like HTC Corp and LG Electronics.

Phone makers including Samsung officially said they welcomed a deal that will aid their own legal battles, but some analysts questioned the sincerity of those claims, noting that rival companies would now be unlikely to heavily promote Android since it would benefit a direct competitor.

Andy Lees, president of the Windows Phone Division at Microsoft, said in a statement that, "Investing in a broad and truly open mobile ecosystem is important for the industry and consumers alike, and Windows Phone is now the only platform that does so with equal opportunity for all partners."

Some analysts also doubt that Google will continue manufacturing handsets in the long term.

"We don't think they necessarily want to be in the handset business. They want those patents first and foremost," said Brian Pitz, an analyst at UBS. "This is really a game of protection."

Analysts say that Google's rivals are likely to continue to enforce their patent rights on mobile devices through legal means. Microsoft, for instance, recently settled a lawsuit with HTC over the Taiwanese company's Android devices. Oracle is also seeking billions of dollars from Google for infringing on Java patents. Analysts expect Apple to continue its increasingly effective patent war against its rivals as well, which could hurt Google by potentially raising licensing costs that need to be paid to Apple.

While Apple's iPhone leads in market prestige and is considered more innovative, Android has managed to quietly surpass it in market share. Android held a 43.4 percent share of the smartphone market at the end of the second quarter, ahead of Nokia's 22 percent, according to Gartner data. Apple ranked third with 18 percent, the data showed.

Shares of Motorola Mobility jumped more than 55 percent on the news, while Google shares fell by roughly 1 percent.

The deal values Motorola Mobility at $40 per share in cash, a 63 percent premium to its Friday closing price. The terms of the deal also features an unusually rich reverse breakup fee of $2.5 billion, according to a source close to the situation.

"It's a deal that will take time to pay off, but they have a lot of cash and they want to chase after profit," BGC Partners analyst Colin Gillis said.

The deal delivers a windfall for investors including Carl Icahn, Motorola's top shareholder with a stake of just over 11 percent. The activist shareholder had been urging Motorola to look into splitting off its patent business -- one of the biggest in the industry -- from its handset business, ranked eighth in the world by Gartner in terms of unit sales. In late July, Icahn even went so far as to estimate that Motorola could be worth $44 per share, or $13 billion in a sale.

Despite cashing out for $4 less than what he estimated the company was worth, Icahn said he was "quite happy with this result."

It's unclear how much Icahn spent on his stake in Motorola since he started scooping up shares in 2007, but regulatory filings indicate it may have been about $3 billion. His stake in Motorola Mobility is worth about $1.34 billion at the deal price, up by $520 million since Friday. Including his stake in Motorola Solutions, Icahn's total stake is about about $2.9 billion in the two companies.

INTO THE LIVING ROOM

As part of the deal, Google also gets Motorola's set-top box businesses, giving its nascent TV operation a much-needed boost by providing it with a more direct route into the home.

Bernstein analyst Craig Moffett noted that Google, a frequent disrupter of the pay-television market via its ownership of YouTube and launching of over-the-top TV products that allow consumers to get streaming video in the home, will now be one of its largest suppliers.

"It will be fascinating to see whether this tempers their enthusiasm for disruptive business models as they have to face the practical realities of satisfying their cable customers," said Moffett. "I think the cable industry would be delighted to see Google inside the tent."

Google said it expects the deal to close by the end of 2011 or early in 2012, and that it was confident it would gain the regulatory approvals required in the United States and Europe and the blessing of Motorola Mobility's shareholders.

Others aren't so sure.

"The legal question here is would this deal give Google the incentive to make Android less open or somehow discriminate against the other smart phone and tablet makers," said Beau W. Buffier, a lawyer with Shearman & Sterling LLP. "That will be the key issues in any review both here in the U.S. or in Europe."

The fact that the deal has the support of other major mobile device players who have a stake in the matter should help Google in the regulatory process.

Lazard advised Google on the deal, while Motorola used Centerview Partners and Frank Quattrone's Qatalyst Partners, sources told Reuters.

(Additional reporting by Sayantani Ghosh in Bangalore, Nadia Damouni, Phil Wahba and Franklin Paul in New York, Lilly Kuo in Washington; Writing by Edwin Chan; Editing by Peter Lauria, Richard Chang, Phil Berlowitz)

original content on reuters

An Apple store employee gives a class on how to use the new iPad 2 during the China launch at an Apple Store in central Beijing May 6, 2011.

Credit: Reuters/David Gray

SAN FRANCISCO (Reuters) - Apple Inc's increasingly effective patent war against rivals like Samsung Electronics may mask its real target: arch-foe Google Inc.

The maker of the iPad and iPhone has sued three of the largest manufacturers of Google's Android-based devices -- Samsung, Motorola and HTC -- for multiple patent infringements across multiple countries, pointing out "slavish copying" of design and "look and feel."

And the courts are beginning to listen: recent success in blocking sales of Samsung's latest Galaxy tablet in most of Europe and Apple's challenges to the Korean giant in Australia reflect an aggressive effort to defend its top position in the red-hot mobile market from the runaway success of Android.

While the lawsuits don't take direct aim at the operating software -- yet -- many of the features under contention are connected to and enhanced by it. Apple CEO Steve Jobs once referred to the software as being the soul of any device when he introduced the company's iOS 5 system in June.

Brian Marshall, an analyst with Gleacher & Co, said Apple is starting to flex its patent muscle with some early success but its real battle is with the Android software. "Apple doesn't really care too much about the actual OEMs."

Apple's lead is now under siege in smartphones from Google's free Android software, already the world's most-used mobile system with 550,000 devices activated every day.

Its momentum could be hampered by successful patent infringement lawsuits against adopters like Samsung.

"The way Google gets sucked into it is through the marketplace," Ron Laurie, managing director and patent consultant at Inflexion Point Strategy, said.

Any injunction won by Apple, if enforced, could mean that Android may be forced to take out the offending feature from its software design. "That would make it less attractive and people would go elsewhere," Laurie said.

Google Chairman Eric Schmidt has said rivals are responding to Android's success with lawsuits "as they cannot respond through innovations."

HIGH STAKES

At stake is a booming one-year-old market that analysts are already predicting will eclipse the decades-old PC market in a matter of years, a market that Apple fears Google's software could eventually dominate the way it now leads the smartphone arena.

The tablet market is expected to grow from under 20 million tablets last year to over 230 million in 2015.

While Apple is still the leader by far in the tablet market, research firm Informa expects tablets running Android to catch up with Apple's iPad and surpass it in 2016.

Samsung, experts say, has the best chance of attacking the iPad's commanding hold on the market. Apple's 75 percent share is expected to fall to 39 percent in 2015, when Android's will grow to 38 percent, according to Informa.

A less visible benefit of Apple waging and winning patent battles against the likes of Samsung, HTC and Motorola would be that Android may effectively no longer be free because of potential licensing costs that need to be paid to Apple.

Android's major vulnerability lies in the patent arena. Being a fairly new entrant in this market, Google hasn't built up enough intellectual property in the way Apple or Microsoft has.

"All this will end up making Android less 'free', Jean-Louis Gassee, venture capitalist and a former Apple executive, said. "But by how much? Five dollars a handset, no problem. Fifteen dollars -- then it is trouble."

Apple knows the power of licensing -- from the losing side as well. It recently forged a cross-licensing patent deal with Nokia, agreeing to make a one-time payment in hundreds of millions of dollars and pay continuing royalties.

But it is Google that had been caught off guard in the patent battle, being historically and philosophically opposed to gathering them as a defensive or offensive move. But that is changing with Google now in the hunt for key patents.

This has sparked an expensive arms race between technology giants as they try to outbid each other to stockpile on valuable patent portfolios up for grabs.

In the high-profile tussle for 6,000 wireless patents from bankrupt Nortel Networks, Google kicked off the tug-of-war with a stalking horse bid of $900 million -- far greater than anyone expected. But Apple -- allying with Microsoft, Sony and others -- swooped in to snap them up eventually for $4.5 billion, a price tag that sent shockwaves through the industry.

Google's chief lawyer, David Drummond, last week lashed out against Apple and others, accusing them of "a hostile, organized campaign against Android by Microsoft, Oracle, Apple and other companies, waged through bogus patents."

In the wake of the injunction against the Galaxy in Europe, Apple is seeking a similar ruling against Motorola's Xoom in German court. It won a preliminary ruling last month from a U.S. trade panel that HTC infringed two of Apple's patents.

But Apple is not the only one enforcing patent rights on Android mobile devices. Microsoft recently settled a suit with HTC over the Taiwanese company's Android devices. Oracle is seeking billions of dollars from Google for infringing on Java patents through its Android system.

Analysts expect Apple to continue to be the aggressor.

"It's clear that the tablet wars are going to be fought on many, many fronts," Michael Gartenberg, technology analyst with Gartner. "Clearly lots of companies are seeing opportunities here who don't plan on ceding the market to Apple, and Apple is using everything in its arsenal to defend itself."

(Reporting by Poornima Gupta; Editing by Edwin Chan, Gary Hill)

original content on reuters