The article by Koch, Fenili and Chebula tries to investigate the impact Apple’s founder Steve Jobs health has on the profitability of the company through an analysis and evaluation of stock/share price and market capitalization. Their study is based on conventional event study methods which gives them a platform to focus on major events pertaining to Job’s health impact on investor confidence in Apple stocks as well as market capitalization.
After their evaluation, they concluded that the adverse information concerning Job’s health has no statistical correlation to the impact of Apple’s share price.
However, some investors hold that Job’s health is critical to the company’s operation and profitability of which their analysis gives a clear cut that equity markets remain independent of Job’s health and thus the decline or increase of Apple’s share price and market capitalization is a matter of market forces. The authors conclude that Jobs health condition has little impact on the share price and market capitalization although the impact is not as always negative or huge as the observers and other analysts apparently hold.
Since Apple is one of the world’s most valuable companies and has been positioned at number two after Exxon which tops the list, it has also been rated as the most valuable technological company in the world where its fortunes have been closely interlinked to Jobs.
Immediately after Jobs resignation, the share prices receded down to around 6.5% (Koch, and Fellini, 2011, p. 1). This had a compounding effect on the market capitalization of Apple because it was deemed to have lost a total of over $20 billion of its market value.
What really worries the investors is the management team that is to succeed Steve Jobs when it comes to management of Apple business (Hung, 2009, p. 1). The other most pressing issue is the agility on innovation and vision.
In retrospect, Jobs was a visionary as well as an innovator and this simple practicability of a genius is what has made Apple to be what it is today, a market leader in the technology spectrum especially in the realms of product innovation, portability and function-ability (Hung, 2009, p. 1).
The investors are most worrisome for the fact that the new management may get engaged in fruitless investments which may have a negative impact on Apple’s profitability in terms of share price and market capitalization due to lack of the basis of the company’s vision since its inception in 1976 and also because of the manner in which Jobs Autocracy carried the company to its heights.
The major hitch the new management is supposed to dwell on is the way in which it will seek to maintain run-rate free cash flows like those between the year 2007 and 2008. The other pressing issue is the aptitude to conserve, maintain as well as build upon cash and its short term equivalents (Hung, 2009, p. 1). These two issues are of great concern on the returns of the investors thus creating the need for the new team to progress in continuance of producing high computing products so as to maintain its current niche.
The fact that shares dropped at an alarming rate of 5% just hours after news of resignation of Jobs as the CEO, is enough proof that the share price as well as the market capitalization of Apple is dependent on the co-founder. Though there might be a mix of investor perceptions and confidence due to the demise of Jobs, the stock prices continue to trade at a potentially attractive discount (Sakuma, 2011, p. 1).
Reference List
Hung, D. (2009). Steve Jobs Value – Per Apple Share. Seeking Alpha Portal. p1. Web.
Koch, J. and Fellini, R. (2011). Do investors care if Steve Jobs is healthy? International Atlantic Economic Society 2011. Web.
Sakuma, P. (2011). Apple shares tumble in after-hours trading as Jobs resigns. Press Association-Ima. p1. Web.