When you look at Western stockmarkets this year, the change in sentiment on some of 2013’s high flying names could hardly have been starker.
Splunk, the stockmarket’s closest thing to a Big Data company, was valued at over $11bn in February despite having just $300m of revenue.
Yet by the middle of June had been de-rated to $4.5 billion – oh isn’t hindsight a wonderful thing; the problem is if you wrote that sentence a year ago the only difference would have been replacing the 11 with a 5 and by February you’d be feeling monumentally stupid.
David vs Goliath
Three months ago, when we entered the last company reporting period, we were focused on those smaller names and whether or not they could sustain their business performance and alleviate some of the concerns over valuation.
A different aspect to this that has gotten less attention has been the performance of the old hands in technology, the likes of Microsoft, Intel, Cisco and even Apple. So far this year Intel has risen 35%, Microsoft 22%, Cisco 16% and Apple 18%.
Hence this earnings season, the bigger names have been in focus. Has this change in market performance on their side been justified? Have the business fundamentals for these more mature companies changed sufficiently to support such a move, and perhaps to fuel it even further?
There are good reasons to expect this will happen at some point. Big companies have their place, and there are things they can do better than small companies. They have vast salesforce and reseller networks that can push a product very quickly to a large audience, when it is ready.
So on the basis that they are getting religion on cloud, mobile, social and data, it stands to reason that they would see rapid uptake of related products when they finally got them to maturity.
Coming of age once again
Based on what we have seen so far this week there is some evidence this is happening.
Having promised no growth at the start of the year, Intel told the market it is now expecting to add 5% to the top line in 2014, which given the baseline is an additional $2.6 billion of sales. Its reconfigured Internet of Things group grew 24% and its strategy of taking on tablets with innovative hybrids got some traction with a 9% rise in notebook sales.
Microsoft was even more impressive. Its commercial cloud business grew 147%! That is start-up territory, and it’s a $4.4 billion business. Overall growth was a solid 11%.
Finally, the big surprise news in the last week or so was the Apple/IBM collaboration. IBM MobileFirst for iOS (for enterprise). Inelegantly monikered, but nonetheless a profound concept.
We are at an interesting juncture then.
A handful of large companies are at last having some success with cloud and mobile products. So far the stock market has offered us a schizophrenic, zero-sum interpretation of this dynamic. But I believe that will change.
The success only serves to ratify the paradigm shift we are witnessing. Opportunity knocks, and for those with the vision and the execution, large or small, the spoils will follow.