The following 7 rules apply to public companies across a variety of industries – particularly to Enterprise Software, FinTech and Information Services companies. 1.) Make Your Numbers 2.) Regular, Transparent Investor Communication 3.) Drive Expanding Operating/EBITDA Margins 4.) Don’t Stockpile Cash 5.) Control Waste 6.) Use Debt as a Tax Shield 7.) Board Composition –…
Technology news items that caught our attention this week:
U.S. venture capitalists didn’t fund this Duke professor’s powerful facial recognition platform, so the Chinese government did: Link
Gamers rule the world. Now they have their own stadiums: Link
We extracted data from our recent CEORater CEO Personality Analytics research findings. We have focused on the personality trait “Openness” for the purpose of this note.
Recall that CEO’s who score high along the “Openness” spectrum tend to be more adaptable and are better at navigating through changing customer markets, particularly those that may be experiencing disruption from new market entrants, changes in technology, etc.
CEO’s who score low on Openness are less adaptable and less effective in navigating choppy waters, less effective in driving growth during periods of change. Note that ACIW CEO Phil Heasley scores low on Openness (75th percentile) and how this score compares to ACIW’s financial and operational performance.
For the record we are not long or short any of the stocks mentioned in our research.
Some have asked the question regarding our most recent article: Personality Analytics: Technology CEOs Analyzed – “what does it mean?”
Let’s contemplate one example as depicted in the enclosed picture which plots the 56 Mid-Cap Software CEOs we reviewed against the personality trait “Openness“. The output is that the two CEOs who scored in the 99th percentile (Ryu of Guidewire Software, “GWRE” and Marr of Tyler Technologies, “TYL”) are:
1.) less likely to suffer stalled revenue growth on their watch;
2.) less likely to allow their products and services to become stale;
3.) less likely to be disrupted by a competitor or new market entrant;
4.) less likely to see their respective customers move elsewhere and/or become disintermediated from customers;
5.) more likely to adopt new technology to deliver their respective products and services;
6.) more likely to identify adjacent market opportunities..
..as compared to the Mid-Cap Software CEO universe we analyzed (56 CEOs in total), all else held equal.
Square’s Jack Dorsey – Tech’s Best Value Over Past 14 Months
We dipped into our CEORater database as we regularly do and ran a query to return the Technology stocks with the greatest stock price appreciation over the period January 3rd 2017 through February 23rd 2018.
We then took the Top 20 Technology Companies as measured by stock price appreciation during the period and asked the question: “Which of the 20 Technology CEOs were the best value in terms of CEO Compensation required to generate each percentage point of stock price appreciation?” For example, in the case of Mr. Dorsey at Square (tkr: SQ, Dorsey is also CEO at Twitter tkr: TWTR) who finished first on our list, for every $7 dollars of CEO Compensation the Company generated one percentage point of stock price appreciation.
Second on the list was Take-Two Interactive’s (tkr: TTWO) Strauss Zelnick at $183 of CEO Compensation for every percentage point of stock price appreciation generated. The table below details the Top 20 CEOs. Further, below the table each CEO name is linked to his/her CEORater profile page where additional detail may be found.
- Jack Dorsey, SQ
- Strauss Zelnick, TTWO
- Tobi Lütke, SHOP
- Lew Cirne, NEWR
- Jack McDonald, UPLD
- Michael D. Rumbolz, EVRI
- Matt Maloney, GRUB
- Guy Sella, SEDG
- Valentin P. Gapontsev, IPGP
- Martin Plaehn, CTRL
- Brian Halligan, HUBS
- Chip J. Paucek, TWOU
- Jayshree Ullal, ANET
- Vlad Shmunis, RNG
- Steven W. Streit, GDOT
- Kevin M. Sheehan, SGMS
- Philippe Courtot, QLYS
- Joey Levin, IAC
- Jen-Hsun Huang, NVDA
- Reed Hastings, NFLX
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We have been critical of Xerox’s (tkr: XRX) senior leadership since 2012 when I wrote a letter to former Xerox CEO Ursula Burns advocating a strategic M&A plan (read my letter here). We agree with Messrs. Icahn and Deason that XRX put itself up for sale. Listen to our recent CEORater Podcast on the subject: Ep. 114: We’ve Been On The Xerox Case Since 2012
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