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ration_al

ration_al
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  • Salesforce.com: As An Investment, A Spent Force [View article]
    Paulo - i'm wondering if "free trials"- which CRM refers to as "marketing" in their 10k - should actually be a contra-revenue item, rather than marketing OPEX...eg CRM books 1yr contract revenues with a big customer, but gives that customer 3mo free...classify 3mo (25%) of that as a "free trial." If that were true, essentially CRM could be competing on price (9mos of revenue for 12mo of service) without having to show that in revenues. I'm not sure how GAAP defines free subscription trials in SaaS - but the hard question is: how much of opex is "free trial" expense and should that be contra-rev...if free trials are not meaningful, how much other fudging of pricing could be run thru opex, rather than contra-revs? This is esp important b/c 30%+ rev growth is the metric that drives this equity - could rev growth be a lot less than that b/c of inflated opex and deflated cogs? In both cases, net income is probably the same, so that prob wouldn't be affected.

    (no position)
    Aug 18, 2014. 02:43 PM | 2 Likes Like |Link to Comment
  • Danger Zone For This Week: Amazon.com [View article]
    David... I understand ROIC is important, but to for some industries/business models, it seems less so (i'm not necessarily referring to AMZN).

    i would be concerned that a company with a disproportionately abstract value-chain would get measured improperly - and that measuring all businesses the same (i.e. through your NOPAT/IC framework) misrepresents the future value-added efforts of a business relative to businesses that rely more on hard assets. Now I understand you make adjustments based on financial filings...but that misses the larger point of whether or not those filings are proper representations of what makes NOPAT tick.

    for example, using the financing method for a couple of the companies you have written about, i get a negative denominator - i understand that you take excess cash into account when you make a valuation, but valuing b/s cash at $1 vs carrying the optionality of extinguishing the debt/equity obligations of a business seem like two very different outcomes.

    maybe if you provide a reconciliation of your "invested capital - operating method" calculation to invested capital using the financing method, we could have a little more conviction in you calls...after all, theoretically, the two methods should be equal.

    The point being, does using the operating method or even a standard NOPAT/IC framework for a software/consulting/ab... business make sense? B/c it seems like the operating method simply finds whatever hard assets are laying around (chairs, buildings, computers, desks) and effectively chalks up all of the value creation to them. Intuitively, that doesn't make much sense.

    Here is a pretty good take on this phenomenon, albeit dated: http://bit.ly/11YzkUP
    May 22, 2013. 01:02 PM | Likes Like |Link to Comment
  • David Trainer's $240 Apple Price Target Analysis Just Doesn't Add Up [View article]
    i'd use (ebit x 1-tax) in the numerator

    as for "FA+NWC" vs "Equity + Leases - cash".....my definition simply means that all of the cash on the balance sheet could extinguish Apple's equity and liabilities, and there would still be balance sheet cash left over (plus OCF to fund working capital)...so apple, effectively, has a net negative capital base.

    IMO, at the end of the day, less important is the absolute definition, and more important is consistency with how you calculate it over time, so you can determine if indeed things are changing. Using my def...capital requirements haven't changed much....but profitability has quite a bit...even if profitability falls, capital requirements are so minimal, and virtually unchanging (relative to capital inflows), that ROIC remains immeasurably high.

    (I'm obviously long AAPL equity...btw.)
    May 17, 2013. 11:04 AM | Likes Like |Link to Comment
  • David Trainer's $240 Apple Price Target Analysis Just Doesn't Add Up [View article]
    i get a negative net invested capital for the denominator...makes it pretty hard to calculate ROIC when the denominator is negative:

    Net invested capital:

    $4bn in capitalized operating leases ($500m x 8)
    +
    135bn equity
    -
    145bn ST&LT cash/securities
    =
    -6bn net invested capital

    In that case, it's been consistently between -$2bn and -$5bn...all the while profitability has risen the whole time.

    Instead of just assuming ROIC is going to 70...why not try to explain what exactly allowed apple to generate such profitability in the first place...that's where the rubber meets the road. Something tells me that neither Trainer nor columbia university wonk have any clue...they just say "competition" and steve jobs is gone....regarding jobs, he worked on several products in the pipeline (according to aapl lawyers)...including several future iterations of the iphone that should dribble out over the next 3-5 years...http://bit.ly/YZGI0p
    May 16, 2013. 06:47 PM | Likes Like |Link to Comment
  • Storage/hard drive stocks are outperforming, possibly aided by Veeco's Q1 bookings numbers: the company reported hard drive equipment bookings totaled $27M, down 7% Y/Y but up 60% Q/Q in spite of slumping PC demand. Veeco added on its CC (transcript) hard drive customers are "starting to make selective technology buy decisions" once more. STX +2.6%. WDC +2.6%. EMC +1.8%. NTAP +2.7%. XRTX +1.6%. QTM +5.1%. EMC reports tomorrow morning. Also, LED/solar equipment makers Aixtron (AIXG +9%) and GT Advanced (GTAT +2.7%) are getting a lift from Veeco's numbers and bullish Q2 commentary[View news story]
    just subscribed to market currents a few weeks ago...it really is an excellent service...i've been a subscriber to TFOTW for years too...so kudos to seeking alpha.
    Apr 23, 2013. 11:06 AM | Likes Like |Link to Comment
  • Apple And Boeing Stumble: Was Outsourcing Innovation Part Of The Problem? Part I [View article]
    the only thing that stops me short of unsubscribing from this noise is that seeking alpha sends intermittent, time-stamped news-breaks that are extremely helpful...they don't seem to have a name for this and it seems to just get lumped in with all of the other authored pieces, so it's probably not a product yet, but they are very similar to fly on the wall updates...but those seeking alpha "news-breaks" updates are very helpful...i would seriously pay $ (or enable a filter, if possible) to get more of those and less of the uninformed conjecture.
    Apr 16, 2013. 11:14 AM | 3 Likes Like |Link to Comment
  • Google Shopping Express: Flawed Concept For Google And Retailers [View article]
    i went thru and did the x-action to the last step (just to see shipping...then i cxl'd it)...target was going to charge me $15.32 for standard shipping on that pack of diapers (arriving sometime next week)...my total was $65.15 after tax...significantly higher than walgreens' $54.99 + tax.

    so shipping is a pretty big variable that makes comparison shopping a bit harder.

    further, i'm not representative of any population, but i usually buy one thing at a time, online...but i've been trained by Amazon, given free shipping w/ Prime...so buying multiple things online isn't normally what i do. In-store is usually when i purchase multiple things.

    n.b. target wouldn't tell me the cost of shipping until after i had entered my credit card and was one step from completing the order.
    Apr 3, 2013. 05:07 PM | Likes Like |Link to Comment
  • Google Shopping Express: Flawed Concept For Google And Retailers [View article]
    you are flat out wrong about walgreens/target and huggies

    walgreens has free shipping over $25...so $54 + no shipping = $54

    target has free shipping over $50 so...at $47 you still have to pay shipping which probably brings $47 pretty close to $54.
    Apr 3, 2013. 02:59 PM | Likes Like |Link to Comment
  • Warren Buffett Violates His 'Ham Sandwich' Principle With Goldman Deal [View article]
    could interpret "ham sandwich" as:

    He won't buy a small cap and/or a company without a moat any time soon.

    In a gigantic company, mgmt is redundant. e.g. President can be taken out by one of 10 SVP's; vacant SVP seat can be filled by any one of 100 VPs. etc. etc. No way stumpf can run a company like wells fargo by himself - if he is replaced by a ham sandwich - the SVP's and VPs take over and are able to execute b/c the company has some advantage/moat beyond the executive suite (scale)
    Mar 27, 2013. 01:13 AM | Likes Like |Link to Comment
  • Berkshire Hathaway Is A Sell [View article]
    munger is much older than buffett and likely to step aside first. that will give you a pretty good indication of how weak the brk shareholder hands are when he does. yeah i know he's no buffett...but he's pretty darn close.

    further, I can't imagine the board hasn't had the same discussion and concerns.

    for instance, the board has already approved a buyback at 120% of book...as of friday, that was $76.14 x 1.2 = $91. If he's still running the place in 10 months and the company does 12% ROE for 2013...120% will be $100.

    Assuming no more elephants, that is ~$25-$30bn in cash that will be available to counter any weak handed selloff at a min of today's price.
    Mar 4, 2013. 08:46 AM | Likes Like |Link to Comment
  • Qualcomm: Greatly Undervalued [View article]
    10 years of 16% top-line growth seems pretty optimistic

    growth is hard - only 5 companies out of thousands w/ market caps above $1bn, were able to maintain positive growth (much less 16% growth) for 10 years straight in this harvard study.

    http://bit.ly/Zobrju
    Feb 22, 2013. 05:19 PM | Likes Like |Link to Comment
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