Cardinal Health, Inc. (B) Harvard Case Solution & Analysis

Robert D. Walter developed Cardinal Health into the most valuable company in the U.S. health care services business and the world's largest distributor of health care products. With earnings of $81 billion in 2006, was ranked Number 19 on the Fortune 500 list, and possessed a third of the drug supply company. This development was begun by Walter with Cardinal Foods, but understood that this company would never be a huge player in the food business given the existence of substantial, strong incumbents. Into the pharmaceutical supply business, the company was repositioned by Walter through a string of acquisitions. Cardinal Health was one of a handful of large U.S. company that had attained earnings per share growth in excess of 20 percent for 15 years straight. Nonetheless, Wall Street was questioning whether Cardinal Health could continue to grow through acquisitions at this rate that was exceptional.

This general uncertainty, coupled with questionable "stock crushing" bookkeeping practices among wholesalers, including one of their own suppliers, was weighing down Cardinal's stock price despite their ongoing earnings increase. Cardinal Health, the acquisition and merger juggernaut, had hit an earnings speed bump. In July 2007, Cardinal announced that it had reached a final settlement with the SEC of $35 million, concluding an investigation into disclosures from 2000 to 2004 and the company's historic financial reporting.


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