And then there is Nokia (NYSE:NOK), the world’s biggest telephone handset-maker. Quotes the Economist, “We are standing on a burning [oil] platform,” Nokia’s CEO, Stephen Elop, wrote in a memo to all 132,000 employees. If Nokia did not want to be consumed by the flames, it had no choice but to plunge into the “icy waters” below. In plainer words, the company had to innovate -- quickly.
The value of Apple’s reputation for innovation, earned by actually being innovative, is that while the most respected company in the world only commands 4% of the telephone handset market, it commands 50% of the profits. That's pricing power, a benefit of a superior reputation, in the extreme.
Turning to the reputation metrics, Apple’s popular standing is reflected in its stable top ranking in the Steel City Re Corporate Reputation Index. Over the trailing twelve months, it has made the jump from the 97th percentile to the 100th percentile among the 51 companies in the Electronic Data Processing Equipment sector, and over the past six months, it hasn’t budged from that spot. Its corresponding trailing twelve month return on equity is 58.63% greater than the median of its peer group, its EWMA volatility is 1%, its trailing twelve week reputation velocity is 0.0, and its trailing twelve week reputation vector is undefined.
Its peer group shows a U-shaped drop and recovery in reputation standing relative to the market as a whole, and the intra-sector volatility is at the upper end of average. Significantly, the intangible asset fraction of the group has been progressively rising these past 12 months.
Nokia should wish for such metrics. Over the trailing twelve months, it has dropped from the 36th percentile to the 19th percentile among the 30 companies in the Diversified Electronics sector. Its corresponding trailing twelve month return on equity is 52.22% below than the median of its peer group, its EWMA volatility is 2%, its trailing twelve week reputation velocity is -10%, and its trailing twelve week reputation vector is -.8% which is a material level.
Its peer group shows a slight rise is reputation standing relative to the market as a whole, and the intra-sector volatility is at the low end of average. Last, its intangible asset fraction has dropped from 86% to 78% of market capitalization while the median of its peer group now stands at 88% of market cap.
Mr. Elop believes that one advantage Apple has over Nokia that he believes he can overcome is its access to the innovative genius that is resident in Silicon Valley. Stay tuned, as Finland comes to California.
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