Cerner Founder/CEO Passes Away From Cancer
Something weird happened in financial markets this week, namely that Cerner Corporation (NASDAQ:CERN) and “Neal Patterson Cerner” were trending in the financial news. Which is unusual, because Cerner didn’t grow out of Silicon Valley; it’s a healthcare IT company based out of Kansas City.
Not to be disrespectful, but Cerner isn’t a “front page” kind of company. It lives in relative obscurity, so why are we talking about the Cerner stock price these days? Simple: Cerner CEO Neal Patterson passed away on July 9.
Patterson was an early winner in the IT market, having benefitted from the government’s push to update medical record storage. He essentially built his $1.7 billion fortune by automating medical processes.
I would argue that this makes him a Silicon Valley guru in spirit, if not in presence.
But there’s more to it than that. Patterson’s founder/CEO story sounds oddly familiar. It follows the same arc as Bill Gates, Mark Zuckerberg, and Elon Musk, which is probably why investors are in a mild panic about the future of the CERN stock price.
They don’t quite know how to evaluate the company without Patterson at the helm. He is the company’s face.
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At one point in the company’s history, CERN stock plunged 22% in a single session because Patterson sent employees a harsh e-mail. That’s how closely tied he is to the stock.
Who Will Replace Neal Patterson as Cerner CEO?
Stay calm, dear reader. Patterson’s death was not sudden or unexpected, which is the silver lining that investors are looking for. He laid out a succession plan.
Vice Chairman Cliff Illig will take over the top job. As far as successions, go, this is one of the smoothest I’ve ever witnessed. Not only is Illig a smart guy, he co-founded Cerner with Patterson and Paul Gorup.
All three of them dreamt up Cerner while sitting around a picnic table in 1979. All three of them are responsible for CERN stock’s historic rise. All three can claim part of the credit.
Chart courtesy of Stockcharts.com
So Illig is the perfect candidate to replace Patterson. He has been with the company since Day 1. He knows the firm inside out, and he understands Patterson’s long-term vision.
After all, Patterson became more vocal in his later years. His bout with cancer made him see things from the patient perspective, and he wanted to impart that wisdom into Cerner.
“We have incredible trust in our providers — we have to. But, ultimately, we are at their mercy,” said Patterson said in one of his last appearances. (Source: “Neal Patterson, a giant of Kansas City entrepreneurship, dies,” Kansas City Business Journal, July 10, 2017.)
“The [Electronic Health Record] needs to make medicine faster and safer, and there needs to be more participation from the patient. The industry’s not there yet. It’s still lacking, and I know I was put in this position to make it better,” said Patterson
As his friend and business partner, Illig is better equipped to fulfill this vision than a random carpet-bagging CEO.
What Does This Mean For CERN Stock?
Cerner stock is trading at $65.83 at the time of writing. It is roughly level from where it was a week ago, which is exactly where it should be. CERN stock should be flat in the short term.
The company had a smooth succession plan, and that’s really all you can hope for in these situations. That said, I expect a big movement after the next earnings announcement.
If the company underperforms by a hair, markets will think “We’re witnessing the unravelling of a great company. It’s all because Neal Patterson is gone!”
If the company outperforms expectations, markets will think “Cerner is able to thrive despite losing its iconic CEO, which means it is poised for a breakout!”
In either case, the reaction is going to be extreme. But, being the reasonable people we are at Profit Confidential, we’ll continue to judge the CERN stock price based on its merits.