Apple _ Tech's Bubble of Calm Is Likely to Prove Brief - btbirkett@gmail.com - Gmail

Tech's Bubble of Calm Is Likely to Prove Brief - btbirkett@gmail.com - Gmail





Finally, what messages are markets sending to CEOs? Investors have significantly rerated Apple. Its out-sourced business model is very profitable but requires little capex. It employs remarkably few people, just 132,000. That’s $15m of market cap per employee. Apple generates extraordinary levels of free cashflow which can then be used to buy back shares and enhance future growth rates.



Alternatively, the FTSE 100 does a lot more capex, $108bn vs Apple’s $8bn. Companies in the UK benchmark employ 4.6m people (so each employee valued at just $426k) and generates much more sales ($2tn vs $275bn at Apple). But the equity market has responded to the latest bout of QE by rerating Apple not the FTSE 100. This may encourage CEOs of the UK’s biggest 100 companies to adopt more Apple-like business models, so shed employees and reduce capex. Policymakers should take note. Presumably, they want CEOs to do exactly the opposite.