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SEC extends Jobsian health probe

What did the board know?

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Steve Jobs may be back at work as Apple's CEO - part-time, at least - but his troubles aren't over.

And this time, they're not health-related.

A Wednesday report from Bloomberg cites the eternally loquacious "person familiar with the matter" as saying that the US Securities and Exchange Commission (SEC) is proceeding with its investigation, rumored to have begun in January, into whether Apple misled investors as to the state of Jobs's health during his recent medical leave.

Key to the probe is how Job's health could have gone from a simple "hormonal imbalance" on January 5th of this year to a condition serious enough for him to issue a statement on January 14th announcing that he would take an extended medical leave - an absence that included a liver transplant in April.

Simply put, what did Apple's board of directors know, when did they know it, and were they misleading investors by either withholding information or simply lying about Jobs's true condition?

Jobs's medical saga began back in 2004. In early August of that year, he sent an email to Apple employees informing them that he was taking the month off to recuperate from an operation that removed an islet cell neuroendocrine tumor - a rare form of pancreatic cancer.

This January, Jobs released an open letter to the "Apple Community" that his obvious weight loss during 2008, which had been "a mystery to me and my doctors," had been determined to be caused by that now-legendary hormonal imbalance. In the same letter, Jobs stated that "The remedy for this nutritional problem is relatively simple and straightforward."

A mere nine days later, however, Jobs announced that he would take a six-month medical leave because his health problems were "more complex" than he had originally thought. That complexity lead to the aforementioned liver transplant.

Apple is notoriously secretive, and Steve Jobs is notoriously private. But investors have the right to know details about a company in which they have a vested interest, including information about that company's leadership.

However, members of that corporate leadership also have a right to privacy - and that's where the legal issues get murky regarding how much information Apple's board of directors either could or should have released concerning Jobs's true condition.

It's unknown either what the board knew or what intelligence the SEC probe has brought to light - Bloomberg was unable to squeeze any information out of Apple, the SEC, or relevant members of Apple's board.

What is indisputable, however, is that Jobs's absence did not materially impair Apple's performance. In late April, the company released a financial statement that reported its first Jobsless quarter's profits were up 15 per cent from the same period during the previous year. And that was in the midst of the same Meltdown that was hammering other tech and consumer-electronics firms.

That solid performance is more than proof of Apple's health. It's also relevant to any legal action that the SEC or investors might be considering.

Peter Henning, a former federal prosecutor and SEC lawyer, told Bloomberg that despite Jobs's iconic status as Apple's visionary leader, the company's recent performance may prove that his health isn't material to investor's concerns.

"They did fine," Henning said. "Do you need to say more than, 'Our CEO has health problems and he's out on leave?' The question I think the SEC is looking at is whether it's material."

From where we sit, Apple's investors have little to worry about. The company's stock price is hovering around $135 per share today. Compare that with $75 in mid-January when Jobs announced his medical leave.

More will be known about how material Jobs's absence has been when Apple releases its next earnings report on July 21st. With the success of the iPhone 3GS, the reported popularity of its revitalized MacBook line, and rumors of an impending iPod refresh, we expect the investment community will have little to complain about.

Except, of course, about being kept in the dark about Jobs's true condition over the past year.

But solid profits have a way of soothing hurt feelings. ®

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