Sunday, 25 August 2013

Economic Value Subtracted

We've all heard of Economic Value Added (EVA) - it's not often, though, we see such a spectacular example of Economic Value Subtracted as Steve Ballmer's stewardship as CEO of Microsoft.

Last Friday  (August 23), he announced he would be retiring within the year. Microsoft's share price immediately jumped from US$32.39 (its close on Thursday) to US$35.21 (at the opening on Friday) and finished the day on US$34.76, up 7.3%. With 8.33 billion shares on issue, the gain in capitalisation meant that the financial markets believed that Microsoft was US$19.7 billion worse off with Ballmer than without him.

Perversely, Ballmer himself became a beneficiary of his own departure: his 3.9% stake in the company went up in value by some US$770 million.

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