On February 25, 2009, Gabriel Madway wrote an article entitled “Apple Investors

Question

On February 25, 2009, Gabriel Madway wrote an article entitled “Apple Investors Get No Satisfaction on Jobs,” which appeared on Reuters.com. The article raises concerns about Steve Jobs’s health and the possible reoccurrence of his pancreatic cancer. The following excerpt is taken from the article: Jobs—who co-founded Apple and is credited with transforming it into a consumer juggernaut after returning as CEO a decade ago—announced . . . he would take a five-month leave of absence, handing over the reins of the firm and saying his health problems were “more complex” than originally thought.

Answer the following questions:

1. Is the article favorable, neutral, or unfavorable regarding future prospects for Apple Inc.?

2. Assuming you owned stock in Apple Inc., would you sell your stock based only on this article? If not, what additional information would you want?

3. Would it be a prudent investment strategy to rely only on published financial statements in deciding whether to invest in a company’s stock?

4. What sources do you think financial analysts use in making investment decisions and recommendations ?

Explanation / Answer

(1) The article seems to be unfavourable regarding future prospect of Apple Inc. The reason is the declining health of Mr. Steve Jobs who has brought the level of the company Apple to great heights. His decision making in the company was considered to be fruitful to give rise to new technology in the products which raised the revenues of the company Apple. His working experience was appreciated by the shareholders of the company who missed his absence during his prolonged disease. The investors of Apple use to have faith in Steve Jobs due to his par-excellence performance to raise the standards of Apple.

(2) An investor based on the current scenario of Apple where Steve Jobs is considered to be unwell by a prolonged cannot decide to withdraw there shares from the company. The reason is that Apple has a very good team work which was is headed by Steve Jobs. Apart from him, there are many other team member working with Apple such as Tim Cook who is Chief Operating Officer known for his dedication towards increasing the annual revenues of the company. It is seen that the shareholders have conducted re-election whereby, new team of eight members have been selected. It was attended by top businessman from companies like Google CEO and even politicians like former US Vice President, Mr. Al Gore. It shows the structuring of future prospectus by Apple in a well defined way. The products offered by Apple has shown tremendous development in quality and services so much that as per Tim Cook’s report the revenues just quadrupled on surging sales of its products over past four years. The trust of the company depends upon the quality and conduct of the services offered to the customers by Apple.

(3) It would be prudent to rely on the financial statements published which would help to decide the investment strategy into the company’s stock. The company has become a big brand around the world that there cannot be any misleading information on public platform. The immense popularity over a long period of time is because of the quality of the products offered and use of innovative technology every time in the company’s new launch that has made the rivals turned down by Apple. The company has maintained its good will in the marekt which is visible in its revenues which increases every year from previous records. The company has to keep its continuity in terms of bringing good and quality products and innovative technology every year. The company's strategy to pre announce its product and its cost before the launch has been successful in generating highest revenues every year. It show cases the new features brought in the product so well defined that the quality is always founds improved. The company cannot put wrong financial statement in a public platform to its customers or investors.

(4) The source which the financial analysts use in making investment decisions and recommendation is the annual revenues earned by Apple. There is always a launch of new product every year which shows enhanced use of in-built technology. This could be analysed by the pre-marketing strategy made by the company before the launch of its new product which raises the advance prediction of the sales of the product. Its revenues is always predicted n advance before the launch when a huge hype is created and pre-orders are taken from the customers. The revenues increases every year when the new product is launched at a higher price from the previous one due to improved and innovative technology and physical appearance of the electronic gadget for the convenience of the customers. This is another source for financial analyst to look at public response before the launch of new product and thereby, make decision about the investment in the company.

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