Crossroads

At the intersection of technology, finance and the Pacific Rim.

Saturday, June 03, 2006

Last wednesday we discussed the financial performance of Apple. And it became clear how leadership and market position lead to strong financial performance, especially in the key indicator of ROI. I am sure that Steve Jobs does not sit around thinking too much about ROI though as an investor you should since Book based ROIC, I believe, is correlated with stock price. And as you listen to Steve Ballmer next week, you should reach a similar conclusion.

ROI is the sum of a company's activities and not an end in itself. Of course mature companies operating in mature spaces focus much of the energy in determining capital allocation and expected ROIC. But this is less of an issue for innovation-based companies. Rather the key is people -- their recruitment, direction, and engagement. By engagement I mean their involvement with and for the Company.

Take a look at the interview with the CEO of Nokia in 2004 and his financial management philosophy.

On the internet side, our principal topic for next week, there is no doubt that the capabilities provided by the on-line world are changing consumer behaviour and, accordingly, competive positioning. See how online payments are changing the banking industry. And one last article on how EBay could be getting into the blog and wiki side of net publishing as a way of tieing their auction/commerce activities with social media. Give some thought to this.

And as one last addendum to our Apple session, please take a look at Apple and gaming.

3 Comments:

Blogger LeftBack said...

Before I purchased my IBM T30 with Windows XP in 2002 I seriously considered purchasing an Apple laptop based on its superior engineering and the reputation of the Mac OS platform. In the end, what dissuaded me from going the Mac route was its poor support for games. These days I have no time for gaming whatsoever; however, before I began my MBA I enjoyed playing Battlefield2 quite often. And I’m not the only one: millions of people play computer games – it’s an industry with a $25 billion turnover. Given the considerable interest in gaming, Apple’s lack of support for this area acts as a significant disincentive for potential Apple customers. A look at Apple’s current game offerings will show you why – they’re lame! As one commenter noted, the only way out of this conundrum is for Apple to support Direct X and, more importantly, to increase its market share from 5% to 10%, thereby making it worthwhile for game companies to build games for the Mac platform. This might not be necessary if Mac’s new Boot Camp device, planned for the next release of Mac OS X, Leopard, works the way it should. As Apple explains it, Boot Camp “lets you install Windows XP without moving your Mac data, though you will need to bring your won copy to the table, as Apple Computer does not sell or support Microsoft windows.” My issue with Boot Camp is that it sounds a little awkward for the average user to implement; however, once it’s up and running, moving to a Windows platform for gaming is a simple matter of toggling from one platform to another.

1:51 PM  
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