Top 5 Global Tech Companies
Which global giants are the tech industry’s most operationally sound and financially successful organisations?
The fast-paced tech world is intensely competitive. Seemingly invincible companies close down with alarming regularity. Consider names like Yahoo, AOL, Nokia, and AltaVista. Each of these firms was once considered to a be market leader. They are now merely shadows of their former selves or have ceased to exist altogether.
Is it possible to identify tech firms that are highly successful and have staying power as well? That’s exactly what Thomson Reuters, an international news agency and market intelligence firm, has attempted to do.
It has recently published a list of the Top 100 Global Technology Leaders. The criteria for being included in this list? The firms must be “operationally sound” and “financially successful.”
But a world-class product and big profits are not enough to be included in Thomson Reuters’ list. Alex Paladino, global managing director of the Thomson Reuters Technology Practice Group, explains, “Tech companies operate at warp speed confronting competitive, regulatory, legal, financial, supply chain and myriad other business challenges.
“Oftentimes, their financial success overshadows their operational integrity, making it difficult to identify those organizations with true longevity for the future. With the Top 100 Global Tech Leaders we’ve identified the unique data points that embody technology-industry leadership….”
Here are the top five companies in Thomson Reuters’ list:
1. MICROSOFT CORPORATION
Current share price: US$96.54
1-year change: 49%
Market cap: US$743 billion
P/E ratio: 79
Microsoft’s #1 position is highly creditable as it is ancient by tech firm standards. The company was established over four decades ago. Microsoft Office, the set of desktop applications that includes Word and Excel, is over 28 years old, but still accounts for the biggest share of the company’s revenue.
In the last three months of 2017, Office and associated businesses generated revenues of US$9 billion. But that’s not to say that the company is over-reliant on its flagship product. Its cloud services segment, Azure, which was launched in 2010, had sales of US$7.8 billion in the quarter.
2. INTEL CORPORATION
Current share price: US$52.19
1-year change: 45%
Market cap: US$ 244 billion
P/E ratio: 26
Intel is even older than Microsoft. It was launched in 1968 and since then has built a reputation as a high-quality manufacturer of semiconductor chips. However, the company recently lost its crown as the world’s largest manufacturer of semiconductors, a position it has held since 1992.
In 2017, world chip production was valued at US$419.7 billion. Intel’s sales were US$57.7 billion to Samsung’s US$61.2 billion.
Despite this setback, Intel remains highly profitable. In the last quarter of 2017, the company posted sales of US$17.1 billion and income before taxes of US$6 billion.
3. CISCO SYSTEMS INC.
Current share price: US$45.37
1-year change: 32%
Market cap: US$ 219 billion
P/E ratio: 21.2
Cisco’s products form the backbone of the internet. It manufactures networking hardware, telecommunications equipment, and other high-tech products. According to the company, 85% of internet traffic travels across Cisco’s systems.
The company’s network security products are doing particularly well. Firms around the world are willing to spend large amounts to ensure that they can safely share data over the internet. Cisco’s security revenues have been increasing rapidly in recent years.
4. INTERNATIONAL BUSINESS MACHINES (IBM)
Current share price: US$159.31
1-year change: -10%
Market cap: US$ 147 billion
P/E ratio: 26
The inclusion of IBM in the list, especially at #4, is a surprise. The company’s share price has lost 10% of its value in the last year. This decline comes at a time when other tech stocks are trending upwards.
Has the company been included in the list because its long-term prospects are good? Warren Buffett, the legendary investor, has famously said about IBM stock that “our favorite holding period is forever.” But last year, his company sold a large chunk of IBM shares.
Explaining the sale, Buffett said, “I don’t value IBM the same way that I did six years ago when I started buying… I’ve revalued it somewhat downward.”
In 2011, when Buffett started buying IBM shares, the company had decided to sell off many of its traditional businesses and acquire new high-margin “cognitive and cloud” businesses. Obviously, its strategy has not worked out as well as it would have wanted it to.
5. ALPHABET INC. (GOOGLE’S PARENT COMPANY)
Current share price: US$1,160.84
1-year change: 35%
Market cap: US$ 806 billion
P/E ratio: 65
In the last five years, Alphabet’s sales have doubled and profits have kept pace with the increase in revenues. In 2017, the company had revenues of about US$105 billion and estimated pre-tax income of approximately US$26 billion.
Advertising revenues make up the bulk of the company’s sales. But it is making large investments in “moonshot” businesses. These include:
- Waymo – a self-driving car project.
- Nest – in 2014, Google acquired Nest Labs, a firm specialising in home automation products. This division concentrates on making programmable thermostats, smoke detectors, and security systems.
- Fiber – this division offers superfast internet services.
- Calico – dubbed the project to “cure death,” Calico’s objective is to extend human lives.
The company is investing heavily in these long-term projects. In the last quarter of 2017, operating losses incurred by these divisions increased to US$916 million from US$812 million in the previous quarter.
THE BOTTOM LINE
In Thomson Reuters’ list, Apple is at #6, followed by Taiwan Semiconductor Manufacturing, SAP, a European software firm, and Texas Instruments, a manufacturer of semiconductors. Accenture, a management consulting firm, is at #10.
Predictably, American companies dominate the top 100. The list contains 45 firms that have their headquarters in the US. Japan and Taiwan have 13 companies each. India’s tally is five.
But there are a few surprises as well. The UK’s only firm to make it to the top 100 is Computacenter, a computer services firm. Facebook, the social media juggernaut, does not make it to the top 10 – although it is in the top 100.
Investors wondering about Facebook’s rank will be disappointed. Thomson Reuters has ranked only the top 10. The remaining 90 firms are unranked.