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This article was published on 6 December 2015 at 10:01.
The last change is the December 6, 2015 at 10:06.
The private equity fund Francisco Partners, based in San Francisco, has recently published a ‘ Excellent analysis of great importance to anyone looking to have some indication of the future of equities of high-tech companies. It is a newsletter that can give grounds for hope as the pessimists than optimists, and provides a perspective useful for those who questions the current valuations of companies in the sector.
Let’s start with the bad news. The 15 high-tech companies that had the largest market capitalization in 2000 were decimated, with a loss of about 1,350 billion dollars, more or less 60 percent of their total market value.
Only one, Microsoft has a market capitalization greater than that of 2000. An extraordinary aspect of this collapse is not affected, as you might think, the strombazzatissime internet companies in the recent past: on the contrary, has affected much of what were considered blue chips in the technology sector.
In 2000, Nortel sported a market value of 209 billion dollars, magnified, like her colleagues, the enthusiasm of the time; in the meantime declared bankruptcy. Other industry contacts have avoided such a shame, but the long-term chart of their shares presents an image somewhat disheartening: the market value of Cisco has shrunk from 403 billion to 144 billion dollars, the Intel 288 161 and that of the EMC 218 to 51.
For the class of 2000, housing prices in ‘Technotown “fell mainly in the districts of systems, hardware and semiconductors. The reasons are the continued decline in the cost calculation, the rise of open-source software, the movement of data on the “cloud” and the appearance of huge data centers where companies like Amazon, Google and Facebook design their approaches.
Now a word from areas where the weather is sunny. Fifteen companies combined were worth less than $ 10 billion in 2000, now it is among the 50 largest technology companies in terms of market capitalization, with a total value of 2,100 billion dollars. (If we include in the Amazon account, instead of entering in the retail sector, the figure rises by another 250 billion.)
Apple, which still in 2000 was considered little more than a curiosity, is passed from 6 to 659 billion dollars. A scrolling list pop out some recurring themes: the power of innovation, moving towards China, the benefits of patience and the virtues of the efficiency of capital.
Many of the high-tech companies that today are worth more in 2000 did not even exist. Facebook, LinkedIn and Twitter added together to arrive just 33 years of seniority. Even Google and Salesforce in 2000 were only shapes on the horizon. Today these companies, overall, worth 850 billion dollars. Apart from the systems ‘customized’ they use in their data centers, and in the case of some sideline as Google Nexus phones and laptops Chrome, none of them gets his hands dirty with heavy things like the hardware. They have built their fortunes on the wise distribution of software, especially in the cloud-based version, and – in the case of Facebook, LinkedIn, Twitter (and Google’s YouTube service) – organizing and collating the contributions of their users.
Piled together with the fourth, fifth and sixth place in the ranking of the most valuable high-tech companies today are Alibaba, Tencent and Baidu. A trio that is now 409 billion dollars, evidence of the progress made by China in the last decade and a half and they foretold the trend of the coming decades, whereas Beijing focuses more and more to produce its own technologies.
a bleak fate awaits those high-tech companies that Western underestimate the scale of the challenge represented by the large number of Chinese competitors are emerging, driven by ambition and a regime working hard to match in Europe and the US.
Finally, an observation on the other two issues that stand out from this list: patience and profits.
Almost all those who invest in technology companies squander huge sums of money chasing fads and frenzies impromptu global instead of focusing on the enduring strength of those businesses that are emerging from the right side of history.
And for the founders and CEOs of all “unicorns” billionaires currents, there is another message in the long term. Almost all today’s high-tech giants born around 2008 were created with a contribution of capital content. Google, for example, consumed only 8 million dollars before becoming profitable. Means that sooner or later will become a new fashion category of companies, a rare species known as the unicorn profitable.
The author is president of the investment fund’s risk Sequoia Capital and is the author, with Sir Alex Ferguson , Leading. The views expressed here are his personal. Representatives of the fund Sequoia Capital hold interests in some of the companies mentioned.
(Translation by Fabio Galimberti)
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