MISSION INTANGIBLE

M:I Products

MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

Read future M:I posts via RSS RSS

Commander in Chief Reputation Impairment

C. HUYGENS - Thursday, September 07, 2017
Reputation drives  both hope and fear. That is why reputational value impairment can manifest as either dashed hopes or fearlessness.

Microsoft's Smith says in the beginning of 2017, business leaders looked around and wondered how they would navigate this new unpredictable environment. They feared being attacked by the commander in chief on social media. Now, Smith says, "I don't think people get up in the morning worrying about tweets. We have much bigger problems to worry about than that."

Read more in NPR.

Microsoft: New math

C. HUYGENS - Sunday, October 05, 2014
In the 1984 mockumentary, This is Spinal Tap, Nigel Tufnel, takes pride in an amplifier that is superior to all others -- it has volume knobs that go to eleven. When asked, "Why don't you just make ten louder and make ten be the top number and make that a little louder?," after much thought, Tufnel can only reply, "These go to eleven."



Consensiv's reputation insights and control authority Jonathan Salem Baskin, writing for Forbes, finds similar logic in the naming of Microsoft's latest operating system, the successor to Windows 8 known as Windows 10. "So 10 promises to combine the familiarity of 7 with some unnamed innovations in 8, along with additional, new features. The company should know by now that raising expectations of a “big leap” might not be such a smart branding strategy."

He has a point. Looking at objective measures of stakeholder expectations, expectations have apparently not been raised. The reputation value and risk metrics reveal much ado about nothing -- noise absent substance, again.

Read more.



Yahoo: Reputation by the numbers

C. HUYGENS - Thursday, March 06, 2014
Ken Goldman, CFO of Yahoo, was answering a question about the company's nagging human resource problem. ”When we came to the company, and we talked about acquisitions…frankly, companies did not want to be acquired by Yahoo…and for us to even acquire them we would have to pay a ‘Yahoo premium’ because they didn’t want to come here. That’s not the case any more.”

According to Yahoo's chief numbers guy, Marissa Mayer fixed Yahoo's #1 problem. Unfortunately, the actual numbers suggest otherwise. For while the annual report indicates Yahoo received in 2013 more than double the number of job applications it received in 2012, the applicants appear to be following the money. According to the career site Glassdoor, Yahoo was the third-highest-paying company in Silicon Valley for engineers last year, behind Juniper Networks and LinkedIn.

There's a reputation value link to this, and just like a recent note on Warren Buffett, it tracks back to costs. The thing about being a company with a great reputation is that this intangible asset usually provides savings on human resources costs. If a company has to pay an objectively measured premium to recruit employees, then the company's reputation (among labor) is not great.

CFO's should know better than to speak against their numbers. They're supposed to trust numbers - the same numbers trusted by the capital markets. Numbers are spin-free objective measures. It's the point Theodore Porter makes in his book, Trust in Numbers. Numbers are most trusted in environments where elites are weak, where private negotiation is suspect, and where trust is in short supply.

Let's look at some more Yahoo numbers. Yahoo is trading at 31 times earnings, just behind Google's 34x and way ahead of Microsofts' 14x. Those numbers are trustworthy, and they say investors have very high expectations -- arguably, frothy.

The expectations of other stakeholders are reflected in reputation metrics. Like other trusted numbers, they're based on objective quantitative criteria. The good news for Yahoo's stakeholders is that the 85th percentile ranking for the Reputation Premium among 137 peers indicates plenty of upside. It also may indicate that the reputation is not as strong as it could be for a company this prominent, and may explain the salary premium the company has to pay. (Paying top dollar and not making the 50 best places to work says all that another way).  The 4.0% value for the Consensus Trend, CT, suggests that stakeholders are fairly confident that Yahoo's reputation is properly valued.

The upside, therefore, is less likely to be realized, and that will disappoint the equity investors.



For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).

Microsoft v Nokia: Great expectations chapter 1

C. HUYGENS - Monday, September 16, 2013
Few things are as illustrative as an exercise of comparing and contrasting. Huygens this week is presenting three pairs of corporate reputation data for the sole purpose of the benefits described. First up are Microsoft (MSFT) and Nokia (NOK). The latter, having taken action motivated by a burning platform, appears -- as Huygens' friend, a fireman, likes to say -- to have saved another foundation. Claiming that foundation, intellectual property actually, is Microsoft whose patent department used to be headed by Marshall Phelps, formerly of IBM, who brought over IBM's tradition of amassing patents. But that's all inside baseball. Let's look at what the stakeholders expect, as reflected in the Steel City Re reputational value metrics.



Looking first at the vital signs is evidence that Microsoft's current reputational value volatility, what Consensiv, the reputation controls consultancy, likes to term the Consensus Trend, has reached parity with Nokia. What was formerly an indication of relatively high certainty of the appropriate reputational value at the 29th percentile from a pool of 85 companies for Microsoft, and average certainty at the 56th percentile from of pool of 74 for Nokia, is now in the 60th+ percentile for both. In absolute numbers, Nokia's current RVM (RVM is a non-financial measure of reputational value) volatility is around 10%, which puts it comfortably in the range of "expected big equity changes." The other metrics generally show that the same bottle of fine scotch could be used toast success at Nokia and drown sorrows at Microsoft, for the leading indicators are stable for the former, and negative for the latter. The bottom line, Microsoft's current reputation rank has fallen. It has lost significant amount of Reputation Premium; the opposite for Nokia. QED.

Nokia: Stained shorts

C. HUYGENS - Tuesday, September 03, 2013
Surprise, surprise! Shorting securities is a high risk gamble. Never mind that a key motivator is a deep-seated belief that a company is doomed. Dead is dead. But equity investors have a wonderful way to resurrect companies in advance of a sale. Nokia (NOK), pronounced dead by Huygens long ago, returns to help Microsoft (MSFT) address its own problems. The street says Microsoft is buying hardware, intellectual property, and a former Microsoft executive who may replace Ballmer.

Over the past five years, Nokia has lost 80% of its value falling from $21 to less than $4 on Friday. Today it is up 40% in early morning trading. Nokia shareholders are celebrating. Nokia shorts are turning to NetFlix (NFLX) shorts for advice. Microsoft investors are less enthused. The stock is down 4.75% in early morning trading.

That equity investors were surprised should not be surprising, looking at Steel City Re's reputational value metrics. Stakeholders as a group were seeing upside, but no there was no expectation of a major event. Stakeholders collectively were progressively giving Nokia some additional reputational premium that was pushing its equity returns to above average levels relative to the 72 peers of the telecommunications equipment sector. The expectations were for continued increase in the reputation premium (CRR). Also, while forecast stability, a vital sign, was only in the 14th percentile, the consensus trend (RVM Volatility) was below average suggesting a uniformity of expectations. These data all suggest that shorting Nokia at this time would have been a bad idea, but they also indicate that there was no real expectation of a major upside event.

Reputation: Expectations need to be managed

C. HUYGENS - Sunday, August 25, 2013
In an essay in Forbes magazine, Mission Intangible Monthly Briefing moderator Jonathan Salem Baskin, Managing Director of Consensiv, a provider of reputation controls, explains why managing expectations is an important element of reputation value creation and protection. Read Batman, Ballmer, And The Dangers Of Expectations.

Microsoft: Xbox Marks the Spot

C. HUYGENS - Friday, August 02, 2013
Being an iconoclast, Huygens readily welcomes into the fold any person, place or thing that affirms his belief that reputation is a measurable attribute based on behavior. For this reason, Huygens is delighted to introduce readers of this blog to his newest friend, Xbox program manager Michael Dunn.

Xbox just introduced a new policy -- a reputation ranking -- that will help stakeholders use the product and interact in its virtual community. It's all about risk management. "Our new reputation model helps expose people that aren’t fun to be around and creates real consequences for trouble-makers that harass our good players," explains Dunn. Read More.

Apple: Golden

C. HUYGENS - Wednesday, May 01, 2013
Apple Inc., rated AA-plus by Standard & Poor's Ratings Services which a notch below rival Microsoft's AAA, borrowed $17B at record low rates yesterday. Notwithstanding S&P's rating and misgivings of some equity investors, it borrowed $5.5B for 10 years at 2.415% which is comparable to Microsoft's cost last week of 2.413%. Overall, Apple sold $17B in bonds to a market that expressed an appetite for $50B of the company's notes.

Reputation is best valued through behavior. Apple is being offered credit at such low rates because the market expects to be repaid--the benefit of an excellent reputation in the credit market. "There was $52 billion worth of orders for the deal, making it one of the most hotly desired bond deals Wall Street has ever seen, said bankers at Deutsche Bank," reported the Wall Street Journal.

For a broader understanding of the relationship between expectations, stakeholder behavior, and value, read Reputation, Stock Price and You: Why the markets reward some companies and punish others. For an understanding how how measures of reputational value such as those calculated by Steel City Re can inform managerial decision making, visit Consensiv.

Microsoft: The big yawn

C. HUYGENS - Friday, April 12, 2013
While Apple (AAPL) has given its shareholders, and more broadly its stakeholders, an exhilarating roller coaster ride,  Microsoft (MSFT) has been plodding along. Its not exciting anyone. Its not really disappointing anyone. Its just lumbering along. Which is great for a utility or an oil company or even a giant pharmaceutical, but its not the sort of thing technology companies are supposed to do.

Jonathan Salem Baskin, who moderates the Society's Mission Intangible Monthly Briefing, wrote this week in Forbes magazine, "Can Microsoft maintain its holding pattern going forward? Again, there’s no crime in being consistently unremarkable, and Microsoft makes money hand over fist. But its reputation — the intangible value it gets from its stakeholders — seems stuck in the mud. And if there’s one thing I’ve learned over the years, it’s that reputations aren’t static, they’re earned anew every day. Performing down to expectations isn’t a value-add strategy, and it leaves open the room for other businesses to grab the reputation high ground, or market conditions to ultimately pass you by."

The Steel City Re Reputational Value Metrics, described further in the book, Reputation, Stock Price and You, are measures of reputational value and ranking. The former is represented by the RVM and is expressed in Gerken Units; the latter is expressed in percentile units. To Mr. Baskin's point, the one-year historical RVM volatility is only in the 10th percentile of the peer group, and while the current RVM volatility is above the group median, the company's ranking, the CRR, has actually drifted downward slightly over the trailing twelve months from aroun the 77th percentile to the 72nd percentile. On the bright side, indicators of change show expectations of some transition with a greater than even probability. Still, given that this was a year Microsoft was expected to "wow" the market, the silence associated with the company's reputational volatility is deafening.




Recent Comments


SuMoTuWeThFrSa
     1
2
34
5
6
7
8
9
10
11
12
13
14
1516
17
1819
20
2122
23
24252627282930
 

Subjects

Archive