Wednesday, 22 July 2015

Apple, Microsoft shares tumble -- but did they need to?

A sign of things to come? Surely not ...
Today's news is full of share price falls for leading technology companies Apple and Microsoft. With sales somewhat down on experts' expectations Apple had US$ 62 bn wiped off its value in just eight minutes' trading (more than the market value of Colgate-Palmolive or Blackrock -- though still only around one-sixth of the national indebtedness of Greece at the time of composing this blogpost: you can check the current Greek debt figure here).  Microsoft's share price fall is much less spectacular, though it comes in the wake of reported earnings that came in slightly ahead of analysts' predictions.

While the two sets of expert analyses are different, as are the circumstances of the two tech giants, there is one thing about yesterday's news that is the same for each of them: assessment of a company's value has been placed on something as short-term as the most recent sales figures and none of the news items on the popular websites makes any reference whatever to the sets of patent portfolios, the markets in which those patents generate income or will do so, their likely duration and the extent to which their value is enhanced or leveraged by their use in conjunction with their own and third party trade marks. 

Anyone who has read Economics Nobel Prize-winner Daniel Kahneman's Thinking, Fast and Slow and who has absorbed his powerfully-made points about statistics, regression to the mean and the deficiencies of expert reasoning would be forgiven for thinking that the mass sell-off of Apple shares in response to a one-off dip in sales was a loser's strategy. And if it's logical to sell a successful, intangible asset-rich company's shares when a sales dip is announced, the decision to sell Microsoft shares when expectations are exceeded is even more baffling.  

Fortunately, in the real world we can come back to Apple and Microsoft in the future and measure yesterday's sell-off values against the companies' future performance. Then we will have some solid evidence as to whether the sale decisions were right or wrong.

1 comment:

  1. Has anyone published any research on the contrasting responses of investors to quarterly profit/loss reporting, depending on whether the corporation is either one that pays out dividends to its shareholders or retains the profits to reinvest in the business?