Donovan’s Views: Confidential succession plan for Apple

Posted by Dennis Sellers Jul 24, 2008 at 6:00pm

By Gaurang Donovan

New York Times reporter John Markoff’s latest article pointed out among other things that Steve Jobs is away on holiday this week. I guess that helps explain why he was not at this week’s third quarter earnings results conference call.

Jobs’ holiday timing might also point to how much confidence he has in Peter Oppenheimer and Tim Cook to carry out Apple’s business. Perhaps it could become a standard question during these conference calls going forward; “Is Steve Jobs at his desk this week?”

It also points out that he wants no part in them probably and has concluded it is best he use his time doing something else than dealing with financial analysts. I could easily agree with that.

Contrary to what I have read elsewhere this week, Steve Jobs has actually spoken of his surgery, health and work. I set out below what he actually said with a few snippets as reported at the time.

I also include what two other individuals said. These guys work with Jobs, saw him at the time of his surgery, and were interviewed shortly afterwards.

One of those was a board member known for his organization creating abilities as well as human relationship skills. He even commented that the board of directors at Apple had a confidential succession plan in place way back on 2 August 2004. I think Markoff must have remembered it too as his article mentions a plan.

Note the actual word “confidential” was used and isn’t it obvious the board has decided to keep it that way until it is necessary to reveal the details of it? The succession plan is not a secret. Its details are just not being revealed since it has not been necessary to do so.

Thus the board and its members have thought about successions, formed a plan, and it is there if needed. The quoted board member also mentioned an emergency plan being executed for Jobs’ surgery and recuperation period indicating the temporariness of it.

This marked a forethought of planning and again many voices heard this week failed to note it recently.

Now before I point you to these historical quotations, let’s review Peter Oppenheimer’s answer on Monday to the question of Steve Jobs’ health:

“Ben, Steve loves Apple. He serves as the CEO at the pleasure of Apple’s board and has no plans to leave Apple. Steve’s health is a private matter.”

That was most likely prepared and not just a “off the cuff” remark.

The statement was kept simple with utmost care to keep the privacy rights of the individual intact.

It was also a repeat of what an Apple spokesman said in 2004. I include that below as well.

While Oppenheimer’s answer on Monday was short in length, it provided the Chairman’s perspective on the matter (he likes doing his job), alludes to the continued satisfaction of the Board of Directors as to the role and performance of the Chairman (otherwise they would replace him), and it implies continuance going forward as there is no announcement on changes at the board level.

You can expect it to be repeated from time to time going forward if a disrespectful analyst or reporter asks a similar question again. A trader in need of some kind of sensational fear mongering false news story will no doubt try again to raise the red herring subject but may face his air time being reduced drastically. Why? Others have already questioned the timing of the New York Post article on Monday. They point out it was the day of the earnings results release yet it had been over a month from the last public appearance by Steve Jobs at the developers’ conference. Hmm. It was a well-placed article perhaps but not a well-timed one.

No one in this world is actually in a position to speak of Steve Jobs’ health except Steve Jobs, his medical doctors that are authorized by Steve Jobs to speak out or to people near him that he has shared information directly with (and are not likely to be forthcoming).

Anyone else speaking on the matter is merely speculating. Speculating here means: “I do not know what I am talking about.”

For those individuals requesting a public comment from Apple on this private health matter may I ask them to reflect on their thinking and what they are actually requiring; they are requesting an exemption to the right to privacy of personal medical information because the individual heads up large incorporated business that is publicly traded see its price moving upward and downward in price over time every day (and not because you represent some kind of threat to the wider public from a spreading disease).

So health privacy protection can be exempt if islet cell neuroendocrine tumors are involved with CEOs?

These calls for exemption cases could become “delicate” as to where some types of questioning could lead to given human ailments and human curiosity. Jobs wear glasses so does he suffer from a form of macular degeneration or myopia? He seem to take drinks of water or tea when making a presentation the three times he has been on a stage for Apple this year alone. Is he dehydrated, suffering from a cold, or on antibiotics for an infection and drinking plenty of fluids as directed? Or was his throat simply parched after speaking alone on stage in front of thousands after days of refining the presentation and practicing (hardly an act of ailing human being)? Where do you draw the line? Major surgery? Do we count the sutures, time under the knife, or the amount of anesthetic used? I do hope this causes reflection in the reader as to the idea of privacy on health and the reasoning behind the right to privacy if the individual chooses it. It applies even if the person heads up a board of publicly listed company, head of a public school, or a coach of a little league team with 15 players counting on him.

Having been around a trading desk and company research before, I realize I probably have to be more explicit for those members to understand why we draw boundaries for their behaviour in order to keep in check their natural instincts of greed. I apologize in advance to those more sensitive readers and suggest some skip to the next paragraph. I can easily suggest and argue there should be an exemption to that privacy right for every financial analyst, trader and hedge fund manager if they are trading shares in a public company or even making public comments on a publicly traded company. They should be forced to announce their testosterone levels, sperm level counts and liver enzyme levels. After all, the public is reading of their findings, can view only some of their trading actions, read their earnings projections, listen to their commentaries on share price movement influences of companies they might make significant personal investment in, and act on their recommendations to buy, sell and hold. Knowing just what levels were present at the time of the statement might indicate degrees of healthiness and stability while eliminating some confusion regarding their mental focus behind their decision making and analytical processes?

Will the “traders” of CNBC Fast Money step up to the plate and reveal all immediately please. We just really need to know given your loud spoken public statements on air this week. Besides you are very public figures given the frequency of your appearances on the show. Perhaps then we can understand the next time you profess such knowledge on Apple financial and corporate matters but seem to be unaware that Steve Jobs had attended only 3 conference calls in 11 years, and was currently away on holiday at the moment. What did the host say about looking silly? You guys look even sillier now as Jobs was not even in the state. The New York Times article reveals the names of a couple of financial analysts. Don’t shy away and let’s have your levels too. There is no hiding from your side of the argument as you are very public figures and should reveal as well. Perhaps some of these guys will quiet down now.

There is reasoning that all medical information, yours and mine, is simply confidential and private unless we as individuals choose to share it. Any board may choose to inquire about the chairman’s health but they can’t expect an answer if silence is the choice (unless they made it part of their contractual stipulations). They can still determine if they are satisfied with the Chairman’s performance based on other criteria. Three straight record quarters in a row of just about every revenue and profit metric reported might persuade them to stick with him.

°

Here are the snippets I dug out in looking back over the last four years of articles saved.

°

Steve Jobs spoke out in a company wide email on 1 August 2004 announcing the the surgical removal of his islet cell neuroendocrine tumor.

Team,

I have some personal news that I need to share with you, and I wanted you to hear it directly from me.

This weekend I underwent a successful surgery to remove a cancerous tumor from my pancreas. I had a very rare form of pancreatic cancer called an islet cell neuroendocrine tumor, which represents about 1 percent of the total cases of pancreatic cancer diagnosed each year, and can be cured by surgical removal if diagnosed in time (mine was). I will not require any chemotherapy or radiation treatments.

The far more common form of pancreatic cancer is called adenocarcinoma, which is currently not curable and usually carries a life expectancy of around one year after diagnosis. I mention this because when one hears “pancreatic cancer” (or Googles it), one immediately encounters this far more common and deadly form, which, thank God, is not what I had.

I will be recuperating during the month of August, and expect to return to work in September. While I’m out, I’ve asked Tim Cook to be responsible for Apple’s day to day operations, so we shouldn’t miss a beat. I’m sure I’ll be calling some of you way too much in August, and I look forward to seeing you in September.

Steve

PS: I’m sending this from my hospital bed using my 17-inch PowerBook and an Airport Express.

°

Apple Public Relations were asked for further details and their response was reported by the San Francisco Chronicle in an article the next day.

Apple spokesman Steve Dowling said the company would not comment on when or where the surgery took place, or where Jobs was being hospitalized, saying the matter was a “private family matter.’’

San Francisco Gate: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/08/02/MNGMJ816F41.DTL

°

The Chief Operations Officer Tim Cook and the independent board member Bill Campbell were quoted on the same day in articles by the Wall Street Journal and Bloomberg News:

The Wall Street Journal

Mr. Cook said Mr. Jobs’s doctors say his prognosis is “excellent.” Mr. Cook added that everyone at Apple “knows what we need to do. Steve is a very hands-on CEO and we’ve discussed on a weekly basis plans for the many, many months ahead.”

Bill Campbell, an Apple director, said the board executed the plan that they had in case of any emergency with Mr. Jobs. He added that there is a confidential succession plan in place.

Bloomberg: http://www.bloomberg.com/apps/news?pid=10000103&sid=agjmrjv.XLO4&refer=us

If Jobs’s recovery were to extend beyond September, ``the board feels totally comfortable with Tim and the experienced management team we have in place,’’ Apple board member William Campbell, who is also chairman of software maker Intuit Inc., said in an interview.

Jobs will continue “to have his hands on the tiller’’ and be in touch with Cook and other Apple executives while he recuperates, Campbell said. “I was over there a little bit ago. He is awake, alert, energetic, his color is good. He’s animated and the doctors have communicated that Steve’s prognosis is extremely good.’’

°

Two months post-surgery in October, 2004, Business Week carried an interview with Steve Jobs where he commented on his resumption of full-time work and relationship with Tim Cook.

Q: Seriously, a lot of people give you much of the credit. How much of it is you?
A: Look, I was very lucky to have grown up with this industry. I did everything in the early days—documentation, sales, supply chain, sweeping the floors, buying chips, you name it. I put computers together with my own two hands. And as the industry grew up, I kept on doing it.

Not everyone knows it, but three months after I came back to Apple, my chief operating guy quit. I couldn’t find anyone internally or elsewhere that knew as much as he did, or as I did. So I did that job for nine months before I found someone I saw eye-to-eye with, and that was Tim Cook. And he has been here ever since.

Of course, I didn’t tell anyone because I already had two jobs [CEO of Apple and of movie maker Pixar Animation Studios (PIXR )] and didn’t want people to worry about whether I could handle three [jobs]. But after Tim came on board, we basically reinvented the logistics of the PC business. We’ve been doing better than Dell (DELL ) [in terms of some metrics such as inventory] for five years now!

Q: You’re back at work on a part-time basis. Are you going to come back full-time?
A: Yes. That was one of the things that came out most clearly from this whole experience [with cancer]. I realized that I love my life. I really do. I’ve got the greatest family in the world, and I’ve got my work. And that’s pretty much all I do. I don’t socialize much or go to conferences. I love my family, and I love running Apple, and I love Pixar. And I get to do that. I’m very lucky.

Business Week: http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041012_4018_db083.htm

°

Finally, almost a year after surgery, Steve Jobs addressed the graduating class at Stanford and shared a great amount of detail of his ordeal.

About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn’t even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor’s code for prepare to die. It means to try to tell your kids everything you thought you’d have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.

I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I’m fine now.

This was the closest I’ve been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:

No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Stanford Report: http://news-service.stanford.edu/news/2005/june15/grad-061505.html

(Columnist Gaurang Donovan is an Australian “mystery man” who wishes to keep his identify secret for personal and business reasons—Dennis)

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