Martin Hingley's Blog

ITCandor 2010 Vendor Ranking 2010

ITCandor is pleased to announce that Apple has achieved first place in our vendor rankings for 2010 based on a detailed analysis of all major vendors’ financial results.

• Apple came top – moving up from equal second last year; it achieved very high scores in almost all categories apart from headcount (where its 35k employees put it in 48^th position); it scored highest of all vendors in net profit per employee which was over $100k each for the year; we’ve reported regularly about Apple’s success and believe there are many things in its strategy for other suppliers to emulate
• Intel came in second position despite not being in the top 10 last year; its excellent performance was due to the resurgence of the PC market following the slump in the credit crunch; it scored highly on profit growth (352%) and profitability (25%); we’ve analysed Intel’s success during the year, looking at its desktop strategy as well as its introduction of Nehalem XL server chips
• Microsoft came third (up from fourth in 2009); it came second to AT&T in terms of absolute profit ($20.6b) and top in profitability (31%); like Intel Microsoft has enjoyed the resurgence of the PC market, with its Windows 7 operating system driving many sales
• Samsung came in fourth, not having been in the top 10 in 2009; not only does it have massive size (revenues of $105b, net profit of $11b and a headcount of 230k), but also enjoyed significant revenue (43%) and profit (153%) growth; it has a strong position in the mobile handset market; it also eclipsed the performance of HP, which this year was ranked in 14^th place
• Google was in fifth position (retaining its ranking in 2009); at 29% its profitability was second only to Apple and it also scored highly on profit per head which was $95k for the year; it is a key player in the developing Cloud Computing market and a pioneer of social networking applications; it has seized the advantage as advertising has shifted from print media to the Web
• AT&T was in 6^th position (down from equal second last year); it owes its high status to its massive size (its $123b revenues were second only to HP’s and its net profit of $22b was highest of all vendors); it has been helped by its strong association with Apple iPhones, but let down by the sluggishness of the Telecoms market in the year, where its 0.5% growth put it in 27^th position
• Cisco was in 7^th position in 2010, not having been in the top 10 the previous year; it owes its position to good scores across the board, of which the highest ranking was in profit per employee ($29k each); Cisco is at the heart of the Network wars; its success is partially due to competing with server vendors with its UCS products
• Vodafone was in 8^th position this year – down from first position in 2009; although still scoring highly in revenues ($70.6b), profit per employee ($42k) and net profits ($13.3b), it was let down by the sluggishness of the Telecoms service market; in fact its profits actually dropped by 2.2% in the year
• Telefonica was in 9^th position in 2010, down one position from last year; it scored very well on headcount (261k), net profit ($14.7b) and revenue ($80.3b), but was also let down by the lack of growth in the Telecoms market; revenue per employee at $77k was its worst score placing it in 57^th position in that category
• Research In Motion (RIM) was in 10^th position in our rankings in 2010; it has been the most successful smart phone vendor after Apple and enjoyed very high revenue per employee ($330k) and profit per employee ($95k); we have written regularly about market shares and growth in the smart phone and handset market

HP, IBM, Oracle, Ericsson Missed The Top Ten In 2010

There were some familiar vendors missing from the top 10 in 2010. HP dropped from 6^th last to 14^th this, IBM from 7^th to 17^th, Oracle from 9^th to 13^th and Ericsson dropped from 10^th to 55^th. There were many reasons to do with the comparative success of sub-market sectors, internal issues and acquisition strategies.  In the case of the latter, although acquired companies add revenues, there is a consequent drop in profits; typically there is also a ‘settling’ of revenues as the acquired businesses are merged into existing divisions. Systems vendors are missing partially because business spending on ITC has been weaker than consumer spending in the last year.

How ITCandor Vendor Rankings Are Calculated

For a view of the each vendor’s scores see Figure 2. The blue plane in each diagram shows the vendor’s ranking in each of 6 different criteria, which are:

• Revenue (Rev) – the annual revenue converted to $US at quarterly rates for the period between Q4 2009 and Q3 2010
• Net Profit (Pro) – the annual profit/income/earnings after tax
• Headcount (HC) – the total fulltime equivalent employees at the end of Q3 2010
• Profit/Revenue (P/R) – the profitability of the company assessed by dividing the revenue by the net profit
• Revenue Growth (RG) – the annual growth in revenues for the latest year verses the last
• Profit Growth (PG) – a similar calculation for annual net profit growth
• Revenue per Employee (R/E) – the division of revenue per headcount for the year
• Profit per Employee (P/E) – a similar calculation for annual net profit

The rankings are for a number of criteria.  In every case we’ve made the assumption that big is best (even in the case of employee numbers). Equal weight is given to each criterion before adding them up and dividing by 8 (for the number of categories). The maximum score is 97 and lowest achievable 1.
The averages for all ITC 97 vendors against the various criteria are as follows:

• Revenue ($b): $23,161
• Net Profit ($m): $2,200
• Headcount: 68,917
• Profitability: 9.5%
• Revenue Growth: 9.3%
• Profit Growth: 124%
• Revenue/Employee ($k): $85k
• Profit/Employee ($k): $8.1k

In all cases we’ve included annual figures up to the end of September 2010.

Some Conclusions – Let’s Celebrate With Apple

The ITC market is a difficult and complex one and it takes a great deal of expertise and strategising to get to number one position. In some of the last 30 years Apple wasn’t even been considered a candidate for survival, let alone leadership. However a number of factors have gone in its favour over the last few years: it has pioneered a proprietary, vertically integrated approach which appeals to users; it has taking a direct hand in developing ecosystems around its products (think about iTunes downloads and iPhone apps); it has spent massively on advertising, creating the world’s most aspirational brand; by and large it has created the best user experience in the technology field. ITCandor takes its hat off to them. Let’s see if it can come in tops two years running, or whether – like Vodafone – it will fall away.
As always, please let us know what criteria you use to rank vendors and who topped you list in 2010. Do you want to know where your own company came in the ranking? Contact us and we’ll let you know.

Filed under: Apple, Market Share And Forecast Tagged: | Apple, AT&T, Cisco, Google, Intel, Microsoft, RIM, Samsung, Telefonica, Vodafone