Apple stock jumps 33 percent

A management shakeup and an infusion of $150 million from Microsoft Corp. sent Apple Computer Inc.'s stock soaring Wednesday, closing up $6.56 to $26.31 per share.

Wall Street's reaction indicates a sense of momentum and direction after the appointment of Oracle Corp.'s Larry Ellison, William Campbell of Intuit Inc. and Jerome York, a former chief financial officer at IBM, to Apple's board of directors.

The 33 percent jump pushed the stock to its highest level since October 1996 and up more than $13 per share since the ouster of former chief executive Gil Amelio.

While most financial analysts said the double whammy of good news bodes well for the company's stock, most anticipate a correction in the days to follow after the initial euphoria subsides.

"It's very positive for investors and you're seeing that in the stock today," said Louis Mazzucchelli, an analyst at Gerard Klauer Mattison. "But it will pull back when people wake up and realize they still have some significant revenue challenges ahead."

Perception is often more important than reality, especially among the herd-oriented mavens on Wall Street. A management makeover and an infusion of $150 million from one of the industry's juggernauts has sent investors scurrying back to the Macintosh bandwagon.

"The shakeup of the board was a big, big deal because to most of Wall Street, it [the board] was widely viewed as incompetent if not a complete failure," said Art Russell, an analyst at Edward Jones. "Now they pretty much have an all-star lineup. As an investor, I'd feel much better now with these people in charge."

Leadership, especially in the chaotic technology industry, often determines where investors and their brokers distribute their cash.

"You look at successful companies like Dell, Compaq and Microsoft," Russell said. "Sure they have great products, but they also have qualified, dynamic management who understand that getting people excited about technology is just as important as delivering it. That's something Apple hasn't been able to do in a long time."

From an investing standpoint, Wednesday's developments couldn't have come at a better time. After Amelio's unceremonious departure, many investors were wondering if and when Apple would ever get its act together.

"Apple's fundamentals continue to improve gradually in small increments," Mazzucchelli said. "I'm predicting they will make a profit next year of about $1 a share and maybe as much as $2.20 a share in the following year. Suddenly, Apple is becoming a very interesting story."

Microsoft's investment didn't have much impact on its stock price as it closed up 13 cents to $143.44 per share.

"A lot of people were asking, 'So what's in it for Microsoft,'" Russell said. "But they have a vested interest in seeing Apple survive. They have more than 8 million installed users of Microsoft Office running on Macintosh platforms. That's worth several hundred million dollars."

There's also some speculation that, though Bill Gates and company would deny it, Microsoft needs Apple to remain as a viable competitor to ward off the anti-trust zealots.

"Some people have said that this investment might be something of an insurance policy for anti-trust purposes," Russell said. "If Apple were to fail, you can imagine all the people screaming that Microsoft had won and taken over the universe."