As was the case in 2013, during the 1H2014 equities of cloud companies have lagged broad market benchmarks. In 2013, the 2nd half of the year reversed the trend - cloud equities not only caught up but also outperformed the market finishing the year up over 32.22% vs. S&P 500 up 29.69%.
Igor Stenmark Blog
Commentary on issues affecting technology buyers, vendors and investors
Blackberry today announced a termination of its planned buyout and a replacement of its CEO Thorsten Heins with former Sybase CEO John Chen as an interim Chief Executive. A smaller ($1 Billion) round of funding will take place instead.
Going private and restructuring the company is in our view the most viable long-term path forward for Blackberry. Company needs a real strategy that is different from everything management has tried during the last 24 months. As a mobile phone maker Blackberry is "dead". It still has many users worldwide, it still has great technology, but the game is over and all the rest of it matters little. The question is: What's next?
We believe that Blackberry could be re-born as a mobile device company. Five years from now, mobile smartphones and tablets will be only one of many Internet-enabled smart devices. A broad spectrum of connected gadgets and sensors ranging from smart alarm clocks and thermostats (a la NEST) to cars, cargo containers and heavy industrial equipment, is likely to hit the market. The opportunity in this space is wide open and Blackberry at least has the technology and some remaining talent to deploy in this area. The company has hinted at the automotive market apps a while ago, but we do not believe it really focused and funded this effort in earnest.
One thing is clear, - if the new management team tries to once again revive Blackberry as only a smartphone maker, its chances for success are limited. Our expectation is that Blackberry will be bogged down for a while in survival mode and not be able to refocus on new opportunities till at least mid-2014, if at all.
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This morning Twitter raised the price of its proposed IPO from $11.1 Billion to $17.4 Billion. The Internet Valuation Model we published last week predicted $17Bil market cap for Twitter. The revised Twitter valuation is also inline with average EV/Revenue multiple for LargeCap Internet stocks. The price increase must be reflective of demand for Twitter IPO shares. There is a high probability that at the open of trading, Twitter shares will trade above the trend line for its peer group. As a reminder, - there are numerous LargeCap social media stocks (Facebook, Linkedin, et al) that trade above the valuation trend line.
After a long period of under performance in 2013, cloud equities caught up and surpassed major market performance benchmarks. The MGI Cloud 30 Index has been making and breaking new highs and the pull higher has now accelerated vis-a-vis the market overall.
The upward trend in cloud equities is intact. On Friday, July 26 2013, The MGI Cloud30(tm) Index reached an all-time-high of 247.02. But even with the latest surge in performance, the cloud stocks have markedly under performed the broad equity index benchmarks like S&P 500. The gap between MGI Cloud30 and S&P 500 has narrowed considerably from over 17% earlier this year to just over 3.5% as of Friday. While it is difficult to assess how many investors have followed this arbitrage situation, it is clear to us that the interest level is clearly rising.