Management Accounting
[pic]
Financial Accounting
Case Study: ARM Holdings Plc
Stock Market Value vs. Visible Equity
The Tech Market Amplification
[pic]
Lex Bradshaw-Zanger
January 2003
Stock Market Value vs. Visible Equity – The Tech Market Amplification
Introduction
How do we place a value on knowledge? In fast-growing sectors like biotechnology and computer software, including some parts of GIS (Geographic Information Systems), a large part of the value of the company resides in the knowledge embodied in its patents and in its staff. Sveiby (1997) pointed out the huge growth in the difference between Sun’s stock market value and its book value in 1995±96 because of the announcement of Java; this represented a major increase in its intangible assets. He categorised the different types of intangible assets as below.
| |Intangible Assets (stock price premium) |
|Visible Equity |External Structure |Internal Structure |Individual |
|(book value) | | | |
| |Brand, customer and |The organization: |Competence |
|Tangible assets |supplier relations |management, legal |Education, |
|minus visible debt | |structure, manual |experience |
| | |systems, attitudes, | |
| | |R&D, software | |
The prolonged rise in stock prices from 1993-2000, fuelled by rapid development of technology, was an extraordinary period for large capitalisation growth stocks. During this same period the surge in the development of new computer and communication technology, and a speculative market in internet
Financial Accounting
Case Study: ARM Holdings Plc
Stock Market Value vs. Visible Equity
The Tech Market Amplification
[pic]
Lex Bradshaw-Zanger
January 2003
Stock Market Value vs. Visible Equity – The Tech Market Amplification
Introduction
How do we place a value on knowledge? In fast-growing sectors like biotechnology and computer software, including some parts of GIS (Geographic Information Systems), a large part of the value of the company resides in the knowledge embodied in its patents and in its staff. Sveiby (1997) pointed out the huge growth in the difference between Sun’s stock market value and its book value in 1995±96 because of the announcement of Java; this represented a major increase in its intangible assets. He categorised the different types of intangible assets as below.
| |Intangible Assets (stock price premium) |
|Visible Equity |External Structure |Internal Structure |Individual |
|(book value) | | | |
| |Brand, customer and |The organization: |Competence |
|Tangible assets |supplier relations |management, legal |Education, |
|minus visible debt | |structure, manual |experience |
| | |systems, attitudes, | |
| | |R&D, software | |
The prolonged rise in stock prices from 1993-2000, fuelled by rapid development of technology, was an extraordinary period for large capitalisation growth stocks. During this same period the surge in the development of new computer and communication technology, and a speculative market in internet