The Innovation Index is on a tear. The Innovation Index added 3% last week, and is now up 16% for the year. The Innovation Index has already surpassed the 2006 performance of 13.2%, and we are only in May 2007. The Innovation Index easily crushes the major U.S. indices by more than 100%, including the S & P 500, NASDAQ and Dow Jones. S & P 500 was unchanged during the week, and is up 6% for the year; NASDAQ was also unchanged, and is up 6% for the year; the Dow Jones Index gained a fraction, and is now up 7% for the year. This is the third week in 2007 where The Innovation Index is having double-digit gains.The Innovation Index closed at 80.15 on May 11, 2007, up 16% from the closing price of 69.31 on December 29, 2006.
What caused The Innovation Index to add another 3% in one week? Four innovators caused the jump, the largest increase coming from Research In Motion Limited (RIM) - (NASDAQ: RIMM) that went up 10% in just one week owing to key new innovation announcements, BUY rating with increased price target, and status update.
9 of the Top 20 Innovators showed positive gains (compared to 13 in the previous week), 9 of the Top 20 Innovators showed negative gains (compared to 6 in the previous week), and 2 Innovators were unchanged last week (compared to 1 in the previous week).
Can The Innovation Index four-peat, and have another week of gains? We will hold our breaths in anticipation.
Weekly Advances
RIM (NASDAQ: RIMM) was up 10% in one week owing to the following new innovations, and a status update and analyst upgrade. RIM is now up 19% for the year; can RIM match the 94% gain set in 2006 or come close to it? RIM introduced the BlackBerry Curve Smartphone, “the smallest and lightest full QWERTY BlackBerry smartphone. With its smooth and friendly design encompassing a large display, easy-to-use keyboard and intuitive trackball navigation system, this powerful new smartphone provides RIM's industry leading email and messaging capabilities, and consumer-friendly features including a 2 megapixel camera, enhanced media player and high-performance browser.” RIM also announced plans to introduce a new development tool that will enable developers to work within the familiar .NET programming environment to rapidly create rich client wireless applications for BlackBerry smartphones. Finally, RIM introduced the BlackBerry(R) Mobile Voice System (BlackBerry(R) MVS).
Besides RIM, Apple Inc. (NASDAQ: AAPL) went up 8% last week, and is now up 28% for the year. There is huge anticipation built into the market with Apple’s iPhone. The market for wireless phones is going to exceed 1 billion units in 2007; even if Apple gets 1% of the marketshare in the first year of launch, this will translate to 10 million iPhone sales. Nokia Oyj NOK1V.HE (NOK) hopes Apple’s highly anticipated iPhone will boost consumer appetite for pricier mobile phones with features such as music and video, Nokia's Chief Financial Officer said yesterday. S&P reiterated STRONG BUY opinion on shares of Apple.
Based on preliminary data, HP (NYSE: HPQ) expects to announce on May 16 -- when its second quarter results are scheduled to be released -- that it recorded revenue in the range of $25.50 billion to $25.55 billion, non-GAAP diluted earnings per share (EPS) in the range of $0.69 to $0.70, and GAAP EPS in the range of $0.64 to $0.65. The increase in second quarter revenue and EPS guidance was driven by strong operational results in the Personal Systems Group and in industry-standard servers. In addition, EPS benefited from higher levels of share repurchases during the quarter. The company stated previously that it anticipated revenue of approximately $24.5 billion, non-GAAP diluted EPS in the range of $0.63 to $0.64 and GAAP diluted EPS in the range of $0.57 to $0.58. HP estimates third quarter 2007 revenue of approximately $23.7 billion to $23.9 billion, non-GAAP EPS in the range of $0.63 to $0.65, and GAAP diluted EPS in the range of $0.59 to $0.61. HP also introduced “a wide range of mobile computing devices, services and infrastructure designed to significantly enhance the way individuals connect to the information, entertainment and people that matter most to them - wherever they are.” HP also announced “a prototype software suite and website to enable people to design, create and share location-based experiences, games and tours with friends, family and others, anywhere in the world. The site makes available a new HP Labs technology, code-named "mscape," that overlays digital sight, sounds and interactions on the physical world to create immersive and interactive experiences called mediascapes. Users equipped with a GPS-enabled mobile device running the mscape player can move through the physical world, triggering digital media - including images, text, sounds, audio and video - in response to physical events such as location, proximity, time and movement. Blending online information with gaming, storytelling and the outdoors, mediascapes can offer people of all ages a new way to experience their surroundings.” HP shares were up 3% on the pre-earnings announcement last week, and are now up 10% for the year.
IBM (NYSE: IBM) touted Blue Gene, the fastest supercomputer in the world and the descendent of Deep Blue, as using 131,000 processors to routinely handle 280 trillion operations every second. Blue Gene is also the world's most energy efficient computer, according to green500.org. IBM also announced it is redirecting $1 billion per year across its businesses, mobilizing the company's resources to dramatically increase the level of energy efficiency in IT. Called "Project Big Green," IBM's initiative targets corporate data centers where energy constraints and costs can limit their ability to grow. The initiative includes a new global "green team" of more than 850 energy efficiency architects from across IBM.
IBM Details "Project Big Green"
IBM is using its expertise and energy-smart technology innovations to outline a five-step approach for clients that is designed to dramatically improve energy efficiency:
1. DIAGNOSE: Evaluate existing facilities -- energy assessment,
virtual 3-D power management and thermal analytics
2. BUILD: Plan, build or update to an energy efficient data center
3. VIRTUALIZE: Virtualize IT infrastructures and special purpose
processors
4. MANAGE: Seize control with power management software
5. COOL: Exploit liquid cooling solutions -- inside and out of the
data center
IBM also launched its first-ever public "ThinkPlace Challenge," a three-week open forum designed to foster global collaboration on innovation opportunities and economic development issues facing the African continent. IBM shares were up 3% last week, and are now up 9% this year.
Weekly Declines
Cisco Systems Inc. (NASDAQ: CSCO) declined 5% on earnings report that did not excite the investors and the outlook that appeared soft – Cisco is now down 3% for the year. Cisco, said fiscal fourth-quarter revenue will increase 15 percent to 16 percent from a year earlier. Analysts on average expected growth of 16 percent to $9.23 billion, according to a Bloomberg survey. Net income in the third quarter jumped 34 percent to $1.87 billion, or 30 cents a share, from $1.4 billion, or 22 cents, a year earlier, Cisco said. Sales in the period ended April 28 gained 21 percent to $8.87 billion. The profit and revenue exceeded analysts' estimates. Starbucks Corporation (NASDAQ: SBUX) saw another week of decline at 4% and is now down 16% for the year. Yahoo Inc. (NASDAQ: YHOO) cooled off from the merger rumors with Microsoft Corporation - (NASDAQ: MSFT) and lost 3%; although Yahoo is still up 18% for the year. Finally, Southwest Airlines (NYSE: LUV) shed 3% last week on rising fuel costs; Southwest is having another down year at negative 7%.
Yearly Leaders and Laggards
Who sits on the top of The Innovation Index? Amazon.com, Inc. (NASDAQ: AMZN) dropped 3% last week; although leads all innovators with 56% gains for the year. Apple Inc. (NASDAQ: AAPL) is next with 28% appreciation for the year. America Movil (NYSE: AMX) notched another percentage to rise to 22% gains for the year. There are six innovators with double-digit gains for the year, including: 3M Company (NYSE: MMM) at 10%, eBay Inc. (NASDAQ: EBAY) at 14%, HP (NYSE: HPQ) at 10%, Intel Corporation (NYSE: INTC) at 11%, RIM (NASDAQ: RIMM) at 19% and Yahoo Inc. (NASDAQ: YHOO) at 18%.
Starbucks Corporation (NASDAQ: SBUX) is down 16% for the year.
The Innovation Index Annual Report
I posted The Innovation Index Annual Report earlier in the year that included three Chapters:
Chapter One - Total Innovation Activity at the Top 20 Innovators
Chapter Two - The Top Innovator - The Innovator of Innovators
Chapter Three - The Innovation Insights and Roundup
About The Innovation Index
The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.
The Innovation Index has returned 119% over the last five years. This assumes an investment in each stock of The Innovation Index (buying each stock). An average of $100 invested in The Innovation Index on December 31, 2001 returned $219 as of December 29, 2006. By comparison, $100 invested in each of S & P 500, NASDAQ and Dow Jones Index returned $124. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by 77% over the last five years.
The Normalized Innovation Index has returned an impressive 174% over the last five years. This assumes equal investment in each stock of The Innovation Index as of December 31, 2001.
Alphabetical list of the top 20 Innovators of The Innovation Index and their stock ticker symbols:
3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Dell Inc. - (NASDAQ: DELL)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Microsoft Corporation - (NASDAQ: MSFT)
Research In Motion Limited - (NASDAQ: RIMM)
Southwest Airlines Co. - (NYSE: LUV)
Starbucks Corporation - (NASDAQ: SBUX)
Target Corp. - (NYSE: TGT)
The Proctor & Gamble Company - (NYSE: PG)
Wal-Mart Stores, Inc. - (NYSE: WMT)
Yahoo! Inc. - (NASDAQ: YHOO)
The Innovation Index will analyze the positions and standings of the top 20 Innovators at the end of each year. For 2007, there will be no further changes in The Innovation Index.
Disclaimer: I invest in the stocks comprising The Innovation Index.
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