Gregory Travis has been both a software developer and pilot. He addresses the 737 Max issue using both backgrounds in How the Boeing 737 Max Disaster Looks to a Software Developer in IEEE Spectrum. Warning: Wolfe’s Boeing analyst Hunter Keay disagrees with much of Travis’ analysis.
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CEO and executive compensation skews toward equity-based awards. NetApp, Cisco, Juniper, and IBM had the highest percentage of performance-based awards while HPE, Pure Storage, and Nutanix were more time-based. Time-based equity awards retain management while providing incentive to emphasize long-term decisions. Less tenured CEOs as at HPE and Pure tend to get more time-based rewards, while larger company CEOs as at Cisco and IBM see more performance-based comp.
Semis and Software have been material outperforming sectors year-to-date. Taking a longer view, Software broke away shortly after Marc Andreesen’s 2011 article Why Software is Eating the World (link). “My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.
Trillion Dollar Coach, co-written by Google’s Eric Schmidt, is now available. It explains the executive coaching methods of Bill Campbell. He went from coach of the Columbia football team to become a business leader at Kodak, Apple, and Intuit. However, his greatest contribution was being a sounding board for a who’s who of Silicon Valley, including Steve Jobs, the Google executive team, John Donahue, Al Gore, Ben Horowitz, Diane Greene, Bill Gurley, and many, many others.
Campbell had the gruff exterior one would expect of a football coach but an incredible warmth as well, often expressed through hugs. At his memorial service there were 2,000 people who considered Campbell their best friend. It started with trust and loyalty. Trust means integrity and discretion. Trust means disagreements will be accompanied by less emotional rancor. Meetings should start with conversation about family and fun, which creates bonds.
He coached teams more than individuals. Work the team, then the problem. A Google study found that excellent teams have psychological safety, clarity of purpose, meaningful roles, dependable members, and a mission that makes a difference. All points that Campbell intuitively knew and taught.
The Wolfe Tech Universe rose by 0.3%, behind the market’s 0.6% increase. Year-to-date tech is up a whopping 27% vs the market at 16%. Exhibit 1 now looks different, with Software falling behind over three months and Semis and IT Hardware leading. Top performers included IPOs Zoom (+72%) and Pinterest (+28%) as well as Qualcomm (+40%) and Nintendo (+15%). Laggards included MongoDB (-12%), PagSeguro (-11%), Alliance Data (-10%), and Atlassian (-10%).
Ben Thompson of Stratechery described his view of TV’s future by taking a job to be done approach. Different jobs require different business models.
Netflix is the leading provider of stories and entertainment over the Internet using a subscription model. Disney leverages its brand in its coming Disney+ sub as well as live-action ESPN through cable. Information and education is the long tail of content and best suited to YouTube. HBO and Showtime are specialists, likely to muddle along in finding streaming scale difficult to achieve.
Apple and Amazon are similar, using content to stir up consumer interest in their broader offerings.
Intraday yesterday 904/16/19) Apple issued a press release detailing a resolution with Qualcomm The agreement is surprising given that Apple seemed willing to go to the mat based on principle and its need to protect hardware margins by reducing its payments to Qualcomm. Apple may have decided that assuring modems for 5G phones in Sep of F20, especially with Intel apparently struggling to provide timely chip sets.
Clayton Christensen’s The Innovator’s Dilemma in 1997 introduced the concept of disruptive innovation. It helped explain how incumbents could be successfully challenged by upstarts, whether in computers or steel.
Tech has been incredibly strong. This week the Wolfe Tech Universe’s 1.3% gain again exceeded the market’s 0.5% increase. Software led the way; only the Internet sector lagged. All sectors are ahead YTD. Top stocks this week were Marvell (+12%), Fortinet (+10%), Yandex (+10%), and Okta (+10%). Laggards included Lyft (-20%), Roku (-11%), and GrubHub (-8%). Nvidia and Marvell have seen more short interest (p4).
Each week in Wolfebytes we show the names in our tech universe with the highest and lowest percentages of sell-side Buy ratings.
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