So who do you think is #31 on the list on Forbes list of the most innovative companies in the world? One place above Colgate and one place below Procter and Gamble. Your first thought is probably why am I asking this on a blog covering semiconductors and going on about toothpaste manufacturers. The answer is Dassault Systèmes. Perhaps more to the point they are listed at #3 in the software and programming category, and #10 amongst European companies.
There are not many companies in the semiconductor ecosystem on the list. I don’t know how the entries are handled but the level of innovation required in EDA, IP, foundry and fabless is unbelievable. I think some of the smaller companies get caught by the minimum market cap of $10B. ARM comes in at #5 on the list, and ASML at #77, two places above Apple (and two behind LVMH Moet Hennessy Louis Vuitton, this list makes for strange bedfellows). Just scraping onto the list at #99 is Mediatek. And if you are interested, Salesforce is #1. The complete list is here. It will be also published in the September 2nd edition on dead trees.
Dassault increased sales by 5% last year, a 5-year total return of 16.7% and the mysterious “innovation premium” of 35.5. The innovation premium is a measure of how much investors have bid up the stock price of a company above the value of its existing business based on expectations of future innovative results (new products, services and markets). In addition to a minimum market cap of $10B, members of the list must spend at least 2.5% of revenue on R&D and have seven years of public data.
As Forbes says:Most innovation rankings are popularity contests based on past performance or editorial whims. We set out to create something very different with the World’s Most Innovative Companies list, using the wisdom of the crowd. Our method relies on investors’ ability to identify firms they expect to be innovative now and in the future. Companies are ranked by their innovation premium: the difference between their market capitalization and a net present value of cash flows from existing businesses (based on a proprietary formula from HOLT/Credit Suisse). The difference between them is the bonus given by equity investors on the educated hunch that the company will continue to come up with profitable new growth.
Dassault were 40th on the list last year, so they have climbed 9 places to 31st this year. In the software area, only Salesforce and VMware are ahead of them. Citrix, Intuit and SAP are the other software companies that are behind them in the top 100 innovative companies.
As of May, when Forbes recorded the data, Dassault had a market cap of $14.22B (today it is close to $17B which probably means their innovation premium has risen too). They have just over 10,000 employees and annual sales of $2.68B. They are the leaders in the 3D design marketplace, the standard for both aerospace and automotive design. With the increasing electronic and semiconductor content they are also moving to start to tie that part of the process in with everything else. It probably hasn’t escaped your notice that both the Airbus 380 and the Boeing 787 had electrical issues.