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2HRS2GO: Jobs pay a bit much

No one can deny Steve Jobs his due as the once-and-present CEO of Apple Computer (Nasdaq: AAPL).

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Most people know of the company's turnaround under the current Jobs reign, though it should be noted many of the technologies Apple is riding began development under prior administrations. Still, Jobs re-energized Apple.

Just as important, Jobs (with a lot of help from CFO Fred Anderson) has done an amazing job with the nuts-and-bolts of business. Previously Jobs was always seen as a marketing guy; now he's demonstrated operational prowess, to the point where Apple runs on less than a day of inventory.

(You could even worry Apple is just showing off dangerously now, since small supply makes it harder to satisfy sudden surges in demand and leaves the company more vulnerable to price increases. In fact, Apple's gross margin fell more than expected in the latest quarter largely because of a spike in DRAM costs; other computer companies most affected by memory chip prices were Dell (Nasdaq: DELL) and other low inventory outfits. But that's just nitpicking.)

Most important for shareholders, their stock has gained more than 700 percent in the two and a half years since Jobs became CEO. Profits and revenues keep rising. New products continue rolling out. And advertising has improved.

Until now, Jobs has worked for $1 a year. Now that he's accepted CEO as a permanent post, the board has decided to reward him with a Gulfstream V jet and 10 million options at a strike price equivalent to Apple's market price a week before yesterday, according to a press release. The jet cost $45 million, but with taxes the total charge to Apple comes out to $90 million.

Most Apple shareholders don't mind, judging by the responses I've seen. Investors see it as a small price to pay for their massive stock boon.

That's a shame.

A shame because Apple has always portrayed itself as an organization with higher moral and artistic aspirations than other companies. Surrounding Think Different with images of Einstein, Gandhi and other visionaries tells you all you need to know about Apple's pretensions.

Until now Jobs could claim to be nothing more than someone who came back to Apple because he cares about his first love. Yes, he unloaded the stake that came with the NeXT sale, but that's ok, because he wasn't getting paid anyway.

Now it turns out Apple believes in material reward as much as the next company. Everyone knew that anyway, but Wednesday's action lays it out in the open. No more fig leaves to hide behind.

Ten million options? Not many CEOs who get the equivalent of 4 million options a year, or a bonus of $36 million annually (the cost of the Gulfstream spread out over 2 1/2 years).

Don't get me wrong, the Jobs bonus actually isn't the most egregious CEO package around. But it's up there. It's higher than the pay of Bill Gates or even Qualcomm CEO Irwin Jacobs, whose company provided much better shareholder returns than Apple last year.

If Apple truly wants to set itself above the industry rank-and-file, it can Think Different about CEO pay. Instead of options, which are all upside and no risk for the recipient, how about giving Jobs 5 million shares of stock outright, so he feels the pain as well as the gain of shareholders?

(Update: Okay, 5 million is a bad idea, but I still prefer giving CEOs stock as opposed to options. As far as the actual number, how about issuing enough shares to equal the Black-Scholes value of the 10 million options?)

I won't begrudge him the jet, but now that Jobs is permanent CEO, how about giving him a six-figure CEO package with a bonus package that can also be applied to Apple's broader workforce?

Then Apple's board won't have to consider another CEO bonus in 2002.

Quality tech doesn't equal great investment

Yesterday's piece on Corel (Nasdaq: CORL) drew plenty of ire, mostly couched in variations of "You don't understand Linux, you dumb, uninformed, so-called journalist."

The critics miss the point.

If having superior technology is all that matters, we'd buy almost everything from AT&T (NYSE: T) or Lucent Technologies (NYSE: LU) nowadays, because all modern electronic hardware, several bandwidth technologies and the most popular server operating system today (and tomorrow, if Linux advocates have it right) stem from developments of Bell Labs.

Or maybe we'd genuflect before Xerox (NYSE: XRX), developer of the graphic user interface, laser printing, networked computing and object-oriented programming.

Or perhaps the entire IT industry would revolve around UNIVAC, the first prominent computer company, supposedly (being neither a mainframe user nor alive in the 1950s, I can only go by reputation) with better mainframes than the Big Blue organization that ended up dominating the Big Iron market.

At the very least, we might be using desktop PCs running CP/M instead of a GUI originally derived from DOS. Sometimes I wish CP/M had won the IBM contract, and I say that as someone who regularly used a CP/M microcomputer a long time ago and remember preferring it to MS-DOS machines.

Many people have told the stories of how these innovations failed for their respective developers and instead made others rich. Obviously the lesson hasn't sunk in yet, so it bears repeating yet again: technology by itself doesn't make a great company. It's as self-evident as a business truism gets, yet stock buyers continually make the mistake of buying a company solely on the basis of perceived product quality.

Does Microsoft have the best technology? No.

Has Microsoft been the best software investment of the last two decades? You bet.

Maybe Microsoft broke the law in the process. I have my doubts about whether the antitrust case is worth the effort and tax dollars, but the point is both debatable and irrelevant.

Microsoft had a business model and carried it out with near perfection, to the point where even Larry Ellison says he wishes he had an antitrust problem. Microsoft proves great execution -- in every sense of the word -- makes a great company.

Perhaps Corel Linux is the greatest thing since the development of intercourse, though the technologically-savvy people who use Linux implementations of Red Hat (Nasdaq: RHAT) or Caldera might beg to differ. But, hard as this may be to believe, the quality of Corel Linux doesn't matter nearly as much as management's ability to run a tight ship.

Problem is, the track record of Cowpland and Friends stinks. Corel has lost far more than it's earned in the last couple of years. Its latest quarter featured a return to operational red ink. The company doesn't seem concerned about providing accurate Wall Street guidance. And key executive positions need to be filled, including CFO, the most critical non-CEO position in the eyes of Wall Street.

The strength of the overall Linux movement aside, investing (although not necessarily trading) is about individual companies. You can't buy shares of Linux, only shares of Linux companies. Some are good, some are bad, and some aren't real Linux companies at all, but merely firms trying to get cheap PR.

Know the difference. 22GO>