Question

Apple Computer CEO Steve Jobs announced he was taking a leave of absence for health reasons. Jobs has been fighting cancer and also recently underwent a liver transplant. Even though the computer giant is in good hands with Chief Operating Officer Tom Cook taking over the stock price fell by​ US$6.40, or nearly two​ percent, on the news.

Jobs is widely known as a visionary and a micromanager. Under his leadership Apple has transformed the computing industry. While​ Jobs' health outlook is unknown many investors are betting on his recovery and return. Those who bought Apple stock when Jobs stepped down in 2004 for health reasons made a nice profit when he returned to the helm.

   Question

“When a financial manager makes good or bad financial decisions the impact of these decisions will be reflected in the​ company's Stock price”. Do you agree with the decision taken in the above case?

What decisions you will take to improve the stock price of Apple Computers in this situation?

Answer 1

The statement " When a financial manager makes good or bad financial decision the impact of these decisions will be reflected in the compnay's stock price" is 100% correct. Financial decisions can be in any form such as stock split, change in face value, issue of bonus shares, right shares, declaration of dividends, buy back etc. This decision can have good or bad impact on the share price of the company. For eg. if company announces 100% dividend at that time share price of that company will rise. In other case if company announces resignation of CEO, MD, at that time share price of the company fill fall.

In this case, Apple Computer CEO Steve Jobs announced that he will take leave on the medical grounds or health reasons & the operations of the company will be in the hands of Chief Operating Officer Mr. Tom Cook. After this announcement share price of the company fell by US $6.40 or nearly 2%. This announcement was made just before the announcement of the first quarter earning of Apple which was $5.39 per share on sales of $24.4 Billion. If you are a holder of Apple stock than you would prabably think that you should sell some shares & get money back home. But by not selling it you would have taken a risk which proved later on to be rewarding.

Jobs, who co-founded Apple in 1976, took two previous leaves for cancer surgery in 2004 & for the transplant in 2009. He wrote an email to employees by stating that he will continue as Apple CEO as he loves Apple so much & he hope to be back soon. He further said that he will continue to be involved in the major strategic decisions for the company. Jobs had full confidence in Cook & rest of executive team that they will do a terrific job executing the plans for the year 2011 which they have in their minds. Jobs disclosed on Jan 14, 2009 that he was taking time off from apple & apple announced that he will return to Apple on June 29. So from Jan 15 to until his return to Apple back share price of Apple rose to 70%. So if you have bought stock on the day, when Steve Job has announced his leave, you could have made hugh money. Jobs health leave was to be considered as great buyig opportunity of Apple's shares.

So I completely agreed on the decision taken by Jobs & Cooks in this case.