5by5 | Mac Power Users #65: Workflows with Horace Dediu

(Note this is not the Critical Path, but a guest appearance on the sister show Mac Power Users.)

Episode #65 • December 5, 2011

Katie and David are joined by Asymco publisher Horace Dediu, who talks about how he researches and publishes his analysis of the mobile marketspace and his thoughts on the future of presentation tools.

via 5by5 | Mac Power Users #65: Workflows with Horace Dediu.

Does Growth Matter?

In last week’s discussion of Apple’s (historically low) valuation, comments arose that perhaps the company’s discount is not unique. Can we look at comparable companies and determine whether the relationship between growth, size and valuation are consistent?

The challenge is in finding “comparable” companies. Apple is characterized by being large in terms of market capitalization, highly profitable, in the technology sector and growing relatively quickly. One can find a cohort of companies with each of these characteristics but not all.

Here is an attempt at looking at the largest companies by Market Capitalization (the so-called Mega-caps) to spot patterns of valuation. Some of the companies in the top 20 mega-caps were technology companies so I thought I’d highlight them. I then also added a few of the top 20 technology companies by capitalization to create a larger sample.

The group I settled on is shown in the list below ranked by market cap.

Companies below $130 Billion in market cap (i.e. below Novartis) are in the top 20 technology list but not in the top 20 overall list.

I then plotted the P/E rate vs. 5 year Growth Rate for these companies, separating the tech sector by color (Red):

The pattern is not encouraging. It appears that there is no correlation. Perhaps the technology companies are, as a group, further up and to the right, but overall they are equally unobservant of growth.

For example, SAP has grown less than 5% in five years and yet enjoys a P/E of 20 whereas Microsoft has grown 18% and has a P/E of less than 10. The non-technology sector companies are similarly broken. Berkshire Hathaway, a conglomerate, is rewarded for slow growth and China Mobile is punished for relative high growth.

But you’ll notice that some companies are not on this chart. That’s because they are outliers. Their growth or P/E are so far out of this cluster that the would make it impossible to discern individual performance. The complete “top 20” picture is shown in the following chart which will require either a large display or a lot of scrolling (1300×1364 pixels): Continue reading “Does Growth Matter?”

The big bang theory of computing

HP’s CEO Meg Whitman admitted that, when iPads are included, Apple will overtake HP as the world’s leader in computer shipments.

“We need to improve our game and our products to take over the leadership position. Apple could go past HP in 2012. We will try to become the champion in 2013.

When the quarterly shipment data is seen as a chart the doubt of this happening disappears:

 

 

 

 

 

 

 

 

 

Note that the combined iPad+Mac has already overtaken Dell. In fact, Continue reading “The big bang theory of computing”

The thermodynamics of Apple's share price

Andy Zaky at Bullish Cross wrote a great post on Apple’s valuation, showing the deep discount of Apple’s earnings vs. an average company. It essentially states that Apple’s money is not green.

Felix Salmon took it forward by enumerating a few explanations that might be used for the despondent valuation. None are successful arguments, but that should not be a surprise.

To understand the phenomenon a bit more precisely, I maintain and think about these charts:

This shows Apple’s share price (“P” in blue) and its earnings per share (“E” in green). In addition Continue reading “The thermodynamics of Apple's share price”