tag:blogger.com,1999:blog-8152901575140311047.post1246904191605055463..comments2024-03-19T05:19:06.448-04:00Comments on Musings on Markets: The Compressed Tech Life Cycle: The Investor ChallengeAswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-8152901575140311047.post-46007776390849536062016-07-12T05:34:20.849-04:002016-07-12T05:34:20.849-04:00The defense that is offered, when someone notes th...The defense that is offered, when someone notes that nothing lasts forever, is that if a company lasts decades, you might as well use the assumption of "forever", since your value will be approximately the same number. <br /><br /> <a href="http://www.welcometelecom.co.uk/voip-services/" rel="nofollow">voip</a><br />chanduhttps://www.blogger.com/profile/07672425246099299691noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-91548972459682796802016-01-08T11:30:19.635-05:002016-01-08T11:30:19.635-05:00Sir,
Thanks for excellent valuation research int...Sir, <br /><br />Thanks for excellent valuation research into the technology companies. I have read your work since the late 90s and see you several times during conferences. <br /><br />As a professional tech investor, I do share your views on the challenge on the life cycle. It is becoming even more so as the speed of penetration has just accelerated as you have seen it for smartphones. As tech's driver has shifted from industrial to the consumer device and service for the last decade thanks to the ease of the internet and the homogeneity of consumer behavior, a service/product tends to have a sharp adoption curve (i.e. short life cycle). As a side note, more new tech will get closer to the industrials space, which might affect the average shape of life cycle to a certain extent. <br /><br />Valuation is challenging and requiring in-depth insight into what makes the selected (invested) companies have a foundation to generate new product life cycles from it. That is, of course, difficult to quantify - as each product cycle should have a unique and specific shape of EBITDA margin and capex & R&D cycle. That is to say, there is a gap of discount (intuitively) for the company that has a foundation that is not scalable or leveraged to expand/tap into new opportunities, although not doing so makes sense as it can generate - unsustainably - high FCF in the meantime with a higher certainty. <br /><br />Valuation in my view is a quantified (and subjective) investment opinion. I am not sure if my response contributes to your research but hope it does. <br /><br />Best Regards, <br /><br />Shawn <br />Anonymoushttps://www.blogger.com/profile/17463780468146389884noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-66697359196735191772015-12-28T12:36:20.011-05:002015-12-28T12:36:20.011-05:00Dear Prof. Damodaran,
I have two more technical qu...Dear Prof. Damodaran,<br />I have two more technical questions: <br />1. Why don't you take the losses into account when calculating the value per share for the tech company up until year 5? I understand that a discounted cash flow model, by definition, only takes future cashflows into account. But somebody has to take the burden, right? So what does the DCF implicitly assume when moving on the time line?<br />2. Shouldn't the ROE be affected by the cashflow generation over time?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-26944736763848834362015-12-23T03:03:54.691-05:002015-12-23T03:03:54.691-05:00I whole-heartedly agree with the sense of your com...I whole-heartedly agree with the sense of your commentary. In India, where I practice, people are refusing to shed/ modify their old knowledge, and seem to be losing the race. An eco system which accepts failure ( i.e., zero or negative growth ) is critical to peomote entrepreurship. Tax laws will need to reward this investment behaviour<br />V SRINIVASAN FCA<br />velransrini@gmail.comvelransrinihttps://www.blogger.com/profile/09312572000972969274noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-66035031868050630132015-12-22T23:32:50.426-05:002015-12-22T23:32:50.426-05:00Sir,
Thanks for the insight into tech co'...Sir,<br /> Thanks for the insight into tech co's. But i observe, that most of the not's were highlighted. i request you to throw light about do's also, means , some method to identify the GARP company. Will you sir? Hope you publish comment of people from India also...<br /><br />H.VenkatsubramanianUnknownhttps://www.blogger.com/profile/05434191692193311277noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-1328534151202976582015-12-22T19:19:32.222-05:002015-12-22T19:19:32.222-05:00Tech companies buy back stock because they issue m...Tech companies buy back stock because they issue massive amount of cheap options to employees and upper management, and they need to somewhat offset the dilution from these options or face ballooning outstanding shares. Net, net the buybacks do zero for minority shareholders because of the massive option issuance. It's not a question of enhancing shareholder value. They don't really care about minority shareholders. It's a money machine for insiders and employees. Essentially, it's nothing but a shell game (and the private market has now expanded this game dramatically). How it all manages to stay afloat is a topic for another comment.Anonymoushttps://www.blogger.com/profile/10021435237247673669noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-18975843064918682582015-12-22T18:29:21.225-05:002015-12-22T18:29:21.225-05:00The old economy market analysis techniques still w...The old economy market analysis techniques still work because of the simplicity of changing only a single factor, the cost of capital (requested return*). If one predicts a flash and burnout, which the graphics support, the reward changes and so does the risk of receiving that reward. *The alternative term “required” return is not used because it infers that an investor should get a return just for bearing risk.Appraiser Not Investornoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-30649092007825233892015-12-21T19:51:23.422-05:002015-12-21T19:51:23.422-05:00Based on your template for risk adjusting value fo...Based on your template for risk adjusting value for a public company (Value + Discrete Risks = Adjusted Value) can a discrete risk be for a tech company the probability of an excessive takeout premium. For example if I calculate a software company with very high revenue growth in early stages, then moderating, and eventually rapidly declining to 0 (perhaps in 15-20 years as a result of quantum computing) and the value is so very far apart for where the market value is, is it fair to assume the market is pricing in a discrete probability of a takeout and a takeout based on something very lofty like 10x sales in 5 years discounted back to today? If this is done you can also get a sense of the implied probability the market is assigning to the business as a going concern and as a takeout. Or based on your experience is it more related to the human experience of the market being too confident and overpaying for growth? Buntyhttps://www.blogger.com/profile/15936676423696686649noreply@blogger.com