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Apple Stocks Stumble as Steve Jobs Takes Medical Leave

Looks like investors believe that Steve Jobs is the iron hand that holds the Apple together and without him Apple would really hit the floor.

Apple will fail without Steve Jobs ?

Apple will fail without Steve Jobs ?

Apple Inc. shares fell 4.4% in early trading Tuesday, erasing about $15 billion in market value, after the consumer-electronics company disclosed that company visionary Chief Executive Steve Jobs would take another medical leave.

Few CEOs have been as closely linked to his company’s success as Mr. Jobs has, and some say his presence is reflected in Apple’s stock price. Others, though, argue that any such premium was washed out during his last leave two years ago, and that the stock’s surge since January 2009—shares have nearly quadrupled–is based on the company’s strength in the market and balance sheet.

Apple is now the world’s most valuable technology company with a market cap of about $321 billion, as of the close Friday, according to FactSet Research, and will likely remain above Microsoft Corp. despite the stock declines Tuesday.

In early trading, shares of the Cupertino, Calif., company recently fell 4.4% to $333.18. Based on that price, the stock remains up 3% this month from its 2010 close of $322.56 and the company carries a market cap of $304.69 billion.

Mr. Jobs’s leave comes as the stock ended on another all-time high Friday. Apple shares, up 66% over the past 12 months, have rallied due to the success of its iPad tablet, expectations surrounding the Verizon Wireless iPhone and increased sales of its Mac computers, which last week were named the fastest-growing PCs in the U.S.

Evidence of Apple’s recent success is expected after the bell when the company reports its fiscal first-quarter earnings. Analysts, on average, expect Apple’s per-share earnings to rise 47% to $5.40 as revenue increases 56% to $24.43 billion, according to Thomson Reuters.

The 55-year-old’s leave shouldn’t derail the company’s current momentum, analysts say, but could have longer-term implications.

Mr. “Jobs’s absence should have no material impact on Apple’s financial performance over the next several years,” Needham analyst Charlie Wolf said. What Apple loses during the leave “is the ability to redefine markets and industries going forward—in short, the option value of future innovations.”

Goldman Sachs analyst Bill Shope recommended buying on any weakness because the long-term fundamentals remain intact. He said Apple’s multiple of 15.1 times earnings “already represents a significant historical discount, and we see no direct risk to earnings from this move.”

Mr. Shope, who reiterated his 12-month target price of $430, also said “Apple’s $51 billion in cash and investments could be partially distributed to shareholders to stabilize the shares.”

The leave marks the third time in the past decade that the 55-year-old CEO has been forced to step back from his role at Apple. He took medical leave in 2004 and then again in the first half of 2009, returning to the company in late June of that year. Mr. Jobs, a survivor of pancreatic cancer, received a liver transplant while on leave in 2009.

In his absence, Apple Chief Operating Officer Tim Cook will run the company. Mr. Cook, 50, and a longtime lieutenant, ran the company during Mr. Jobs’s previous leaves. Analysts don’t expect any major changes under Mr. Cook.

“We could see changes to more mundane corporate issues such as a dividend policy as we believe Jobs was the most vocally opposed,” Jefferies & Co. analyst Peter Misek said.

In May, Apple surpassed Microsoft as the most valuable technology company, capping a rise for a stock that hit a low of $3.19 in December 1997 and a more recent bottom of $6.36 in April 2003, according to FactSet Research. The historical share prices are adjusted for Apple’s 2-for-1 stock splits in 2000 and 2005.

“The major risk in the Apple story is Steve Jobs’ heath,” Mr. Wolf said. “Risks arising from the competitive landscape pale in comparison.”

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