Thursday, April 28, 2016

Apple Gets Hammered

Apple missed Wall Street analysts' estimates and its stock gets hammered. It lost $45B in market cap yesterday. As Tom Peters said, "So Apple sucks. Mere $11B profit on $50B quarterly sales. Meanwhile unicorn models don't even bother to talk about profits. Funny old world." I wonder how the VoIP darlings fare.

Meanwhile all this consolidation is due to:  (a) money is cheap and easy to get; and (b) organic growth to keep Wall Street happy is just not possible. Look at some of these deals:

In Healthcare, it is constant M and A:

Abbott to Acquire St. Jude Medical for $25 Billion. This after Abbott is in process of acquiring another company for $6B. Sanofi Offers to Buy Drug Maker Medivation for $9.3 Billion. AbbVie to Buy Cancer Treatment Start-Up for $5.8 Billion.

I was in this industry for a few short years (10). Healthcare gave up on R&D. Less risky to buy a company than to do research. Most Big Pharma pipelines for new drugs do not contain any blockbusters. It costs from $500M to $1B to bring a drug to market. Big risk. Better to buy. Better to invest in startups, and buy them if it works out.

What a crazy world we live in.

BY Simon Rothman

"Both founders and investors value traction. Everyone wants to see strong customer acquisition, transaction volume, and geographic expansion. Growth can be a positive signal of a business’ long term potential, which is why growth is a priority for every startup. Unfortunately, growth has become a proxy for success — even if it’s “bad” growth. And yes, there is “bad” growth. If the cost of customer acquisition (CAC) is greater than the lifetime value (LTV), a startup can grow itself to death."

Sometimes Wall Street uses the wrong metrics.

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