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Apple board eyes CEO candidate

Apple's revamped board is holding its first face-to-face meeting and it is believed to be reviewing a CEO candidate, according to sources.

As the beefed-up board of directors at Apple Computer (AAPL) holds its first face-to-face meeting, observers speculate that the group is mulling over candidates for a new CEO to head the beleaguered company.

A tricky issue facing the board: whether the new CEO can establish his or her own authority and credibility in the presence of board member and Apple cofounder Steve Jobs.

"Whoever it is, is going to have to tell Steve Jobs to be a board member, period," said Louis Mazzucchelli, equity analyst with Gerard Klauer Mattison. "Jobs can't be seen to be second-guessing this person, so basically you revoke his hall pass and go from there. It's hard to do, but that's going to be an important prerequisite for the job."

Jobs reportedly turned down the position of CEO at the end of July in favor of retaining his position at the head of Pixar Animation Studios. And some observers maintain that Jobs will see that it is in the best interest of the company to keep out of the new CEO's hair.

"If Steve Jobs wanted to be CEO of Apple at this time, he probably would be," said J.P. Morgan analyst Daniel Kunstler. "There is speculation that whoever gets in there will be second-guessed on a daily basis by Steve Jobs. I hope that doesn't happen. Apple doesn't need a figurehead, it needs a CEO. And Steve Jobs knows that."

But the challenge for Jobs and a new CEO would be to move Jobs' high profile to the back burner. "He will remain the center of attention," said Stephen Dube, an analyst with Wasserstein Perella Securities, noting that good candidates a few months ago are probably no longer interested because many big decisions have already been resolved.

"The moves that Steve Jobs has made [for the company would make this] a difficult job for anybody. We have already seen the Apple position on licensing and the decision to not spin off the Newton division. A new CEO won't be making those decisions, and those are the issues that would fall in the lap of a new CEO," said Dube. "The new CEO is now boxed in" to the new direction for the company.

Some of Apple's board members are on analysts' lists of favored candidates. Intuit chief executive Bill Campbell, named to the board last month, "would make sense," according to Mazzuchhelli. And Jerome York, formerly a chief financial officer at IBM, received a ringing endorsement from Kunstler.

"He did a remarkable job at IBM as CFO in terms of looking at the business and changing the model to something cash-generative when IBM was somewhat floundering," said Kunstler. "He's someone who's proven he can turn around a challenging situation. It wasn't as dire as it is now with Apple, but it does give him a fair amount of credibility. And Apple needs all it can get."

But not everyone is convinced. If Jobs can't sit back and be just a board member, analysts say a low-profile individual will likely end up in the number one spot. Or, Jobs will have to leave Apple altogether, which is unlikely.

Dube said York is ?not an operating guy--he has made a lot of money being a background guy,? and his profile is too high.

It was not clear who the candidate was nor whether Apple would soon announce a new CEO, but one industry source said that some Apple employees are expecting a CEO to be named shortly, possibly as early as today.

Katie Cotton, a spokesperson for Apple, said "There's rumor out there, and we don't comment on rumors or speculation, period. We don't disclose internal meetings to the public. If we have an announcement to make, we'll hold a press conference, but we certainly wouldn't preannounce it."

Apple has been looking for a CEO to replace Gil Amelio, who was ousted by Apple's board in July after only 17 months with the company.

But Intuit's Campbell told Reuters yesterday that Apple was having a board meeting last night and part of today. Campbell would not comment on the agenda of the board meeting, nor would he comment on whether the board would review any CEO candidates.

The meeting will be the board's first face-to-face meeting since the new board members were named last month at the MacWorld trade show.

When Apple stunned the computer world with news of a $150 million investment by Microsoft last month, the company also announced a major board shake-up and named four new board members: Campbell; former IBM CFO York; Larry Ellison, the CEO and chairman of Oracle; and Apple cofounder Steve Jobs.

Campbell said that the board has had several meetings via telephone conference calls, but this was the first in-person meeting. Campbell would not describe the board meeting, but some analysts said they believed the board meeting was not a regularly scheduled one, because it does not fall at the beginning or the end of a quarter, when Apple's regular board meetings take place.

"It's not on the regular calendar that I'm aware of," said James Staten, a Dataquest analyst. "They don't normally meet outside of those times." Apple's fourth quarter and fiscal year ends Sept. 30.

Staten said another big topic of discussion, besides the review of any possible CEO candidates, is Apple's ongoing discussions with the remaining clone companies over future licensing of the Mac OS.

"They haven't resolved anything with Motorola yet," Staten said. Motorola's Computer Products Group has not returned repeated calls seeking comment on its licensing talks.

Since Jobs took over as the company's de facto leader, Apple has made some abrupt changes in its strategy and, some industry analysts say, shown a return to its monopolistic past.

Last week Apple paid $100 million to buy back its license for the Macintosh operating system and other assets of Power Computing, a move that was seen as the death of its cloning policy that it began in 1994. Yesterday, Apple confirmed reports that it has decided not to spin off its Newton handheld computer business into a separate subsidiary.

Jobs has done a "phenomenal job of revitalizing the company," Campbell said, adding that there is "no question that he is the leader." But Jobs has repeatedly said that he is not interested in becoming Apple's CEO and that he plans to remain head of Pixar.

Reuters contributed to this report.