Welcome back to week 8 of the Big Idea Portfolio. This time, a huge boost from market-beating results at salesforce.com (NYS: CRM) lifted the portfolio. Details below, but first let's dig into the numbers:
Apple (NAS: AAPL)
S&P 500 SPDR
Source: Yahoo! Finance.
* Tracking began at market close on Jan. 6, 2012.
** Adjusted for dividends and other returns of capital.
While short sellers bemoaned Friday's 9% rally as the result of overstating the impact of technical changes to contract terms, their grousing overlooks the most confirming part of the report. You'll find it in CEO Marc Benioff's comments during Thursday's conference call with analysts:
I'm thrilled to announce that since closing the fourth quarter, we've already topped ourselves by signing our first ever nine-figure transaction in the opening days of Q1. ... We're going to be discussing the details of this nine-figure transaction on our first-quarter call. I just want to let everyone know how excited we are about the transaction, and it's with ... a very large insurance company.
Go ahead and laugh if you like. Call salesforce.com outrageously valued. Call Benioff a showman, even. But if you're still thinking of this company as a niche supplier easily disrupted by Microsoft's (NAS: MSFT) low-cost Dynamics suite, take a slow, deep breath and realize you're deluding yourself.
The valuation argument is also getting long in the tooth. Large deals prove that online access and delivery is disrupting traditional business software. What's at risk? At minimum, all the revenue attributed to Microsoft's Business and Windows divisions (roughly $39 billion); at least 50% of Oracle's software revenue, if you figure that half is spent on front-end systems such as sales, service, and support (roughly $12 billion); and 50% of SAP's software revenue, for similar reasons (roughly $7 billion). That's $58 billion of addressable revenue for salesforce.com, which has yet to crack the $3 billion mark. I'll take my chances on the long side, thanks.
The week that was
A mixed week for the major indexes ended with a thud, when the Dow closed just short of the 13,000 watermark. The S&P 500 and Nasdaq both ended higher, with the S&P reaching a new three-and-a-half-year high of 1,365.74.
But it was tech stocks that led the way. Apple added more than 4 points to my scorecard, and that's despite a high-profile trademark lawsuit that began in China and has now landed in a California courtroom. Bankrupt computer maker Proview claims Apple infringed on rights to the "iPAD" name that was used to market at least 10,000 "Internet Personal Access Devices" between 1998 and 2009. Investors seem to think Apple will prevail; I expect a small settlement.
Lesser-known tech stocks also outperformed. OmniVision Technologies (NAS: OVTI) , whose image sensors power advanced camera phones, kicked off a 16% rally when management projected a huge increase in fourth-quarter revenue. On Friday, social-commerce specialist Bazaarvoice (NAS: BV) surged 38% on its debut day in yet more evidence of enthusiasm for cloud computing issues.
Such is the wild world of investing in innovators. See you back here next weekend for more tech-stock talk. In the meantime, you can check out the Fool's latest special report -- "3 Stocks That Will Help You Retire Rich" -- and add the Big Idea portfolio stocks to your Foolish watchlist for ongoing, up-to-the-minute coverage. Both the report and the watchlist as 100% free to use:
At the time thisarticle was published Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team. He owned shares of Apple, Google, OmniVision Technologies, Rackspace Hosting, Riverbed Technology, and salesforce.com at the time of publication. Check out Tim'sWeb home,portfolio holdings, andFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.The Motley Fool owns shares of Apple, Google, Microsoft, and Oracle.Motley Fool newsletter serviceshave recommended buying shares of Riverbed Technology, Rackspace Hosting, Microsoft, Google, salesforce.com, and Apple, creating bull call spread positions in Apple and Microsoft, writing covered calls in Riverbed Technology, and shorting salesforce.com. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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