Category Archives: ICT

24/4/16: Silicon Valley Blues Go Into a Sax Solo…

In recent weeks, I have been covering growing evidence of pressures in the ICT sector bubble (the Silicon valley blues of shrinking VC valuations and funding). You can track this coverage from here:

Now, with its usual tardiness, the Fortune arrives to the topic too, in a rather good exposition here:

Good summary graphic from Renaissance Capital:

But, of course, what is more interesting in the sector development is the horror show of earnings reporting that is unfolding across mature segment of the tech sector. These are well-covered here:, offering the following summary:

So let's see: earnings in mature segment are falling or the 5th quarter in a row (even when you control for Apple performance); earnings of Apple (tech leader) are into their second consecutive quarter of severe pressures. And unicorns (which don't even offer any serious basis for fundamentals-based valuations, including those on the basis of earnings) are rapidly taking on water. You don't really need a CFA to get this one right...

21/4/16: Taking Sugar From the Kids Pantry: Tech Sector Valuations

In a recent post I covered some data showing the trend toward more sceptical funding environment for the U.S. (and European) tech start ups:

Recently, Quartz added some interesting figures to the topic:

Things are not quite getting back to fundamentals, yet... but when they do, tech sector hype will blow up like a soap bubble in a tub. When the entire sector is valued on the basis of some nefarious stats instead of hard corporate finance parameters, you are into a game that is what Russian Roulette is to a Poker table.

30/7/15: Irish 1Q 2015 Growth: Sectoral Contributions

Some very strong headline figures on Irish growth in 1Q 2015 are out today from the CSO so I will be blogging on these in a number of posts today.

To start with, let's take a look at data on GDP composition at Factor Cost - in other words, contributions of various economic sectors to GDP on output side of the National Accounts. The analysis below references real GDP (adjusted for prices changes).

In 1Q 2015:

  • Agriculture, Forestry & Fishing sector posted growth in output of 5.8% y/y. This contrasts with growth of 21.0% recorded y/y in 4Q 2014 and with 16.5% expansion y/y in 1Q 2014. This is the slowest growth in the sector since Q3 2013. Overall, in annual terms, the sector accounted for 2.02% contribution to the overall GDP growth (Factor Cost GDP) or EUR50 million y/y (compared to EUR194 million added by the sector in 4Q 2014). The sector was the second smallest contributor to growth in GDP (at Factor Cost) in 1Q 2015 after Building & Construction. Quarterly growth in the sector was negative: in 1Q 2015 Agriculture et al sector shrunk (on seasonally-adjusted basis) by 30% compared to 4Q 2014 and this contrasts with 25.4% growth q/q recorded in the sector in 4Q 2014.
  • Industry (ex-Building & Construction) grew strongly in 1Q 2015, posting y/y expansion of 9.63% compared to 8.71% expansion in 4Q 2014 and 0.56% growth in 1Q 2014. This marks 1Q 2015 as the fastest growth quarter (y/y terms) since Q3 2014 and the second fastest growth quarter (y/y) since Q4 2010. As the result, the sector accounted for 39.1% of all growth recorded in GDP (at Factor Cost) in 1Q 2015. The sector was the single largest contributor to GDP (at Factor Cost) growth in 1Q 2015. A caveat here is that this sector growth is strongly influenced by the MNCs, especially Pharma, Bio and Medical Devices sectors, but more on this when I am covering external sectors performance in subsequent posts. Quarter on quarter growth in Industry (ex-Building & Construction) was much less impressive than annual growth rates. In 1Q 2015, Industry contribution to GDP actually was negative on q/q basis at -0.31% compared to 5.16% growth recorded q/q in 4Q 2014 and 3.35% growth recorded q/q in 1Q 2014.
  • Building and Construction sector posted positive y/y growth of 3.26% in 1Q 2015, which contrasts positively with a -0.16% contraction y/y posted in 4Q 2015. However, 1Q 2015 y/y growth was much weaker than 9.66% growth recorded in the sector in 1Q 2014. Overall, Building & Construction sector contribution to growth in GDP (at Factor Cost) stood at 1.38% in 1Q 2015 - the smallest positive contributor to growth in 1Q.
  • Distribution, Transport, Software & Communication (DTSC) sector made a strong contribution to growth in 1Q 2015, with activity up 6.5% y/y. The rate of annual growth is relatively steady in the sector, having posted growth of 5.4% in 4Q 2014 and 5.93% growth in 1Q 2014. The sector accounted for 29.1% of total growth in GDP (at Factor Cost) in y/y terms. The caveat applying to these figures is that the sector includes many ICT-related MNCs which have been recently posting growth in tax optimisation-linked activities. Quarterly growth in the sector was also positive, with 1Q 2015 activity up 2.11% on 4Q 2014, after posting growth of 1.05% q/q in 1Q 2014.
  • Public Administration & Defence (PAD) sector posted another quarter of annual contraction in activity, shrinking -5.52% y/y in 1Q 2015 after posting -3.09% decline in 4Q 2014. In contrast, the sector expanded by 2.21% in 1Q 2014. Overall, sector made negative contribution of -3.4% to annual GDP (at Factor Cost) growth in 1Q 2015. This marks the largest contraction in annual growth rates in the sector since 2Q 2012.
  • Other Services (including rents) sector posted another quarter of steady growth, rising 4.42% y/y in 1Q 2015, having previously posted growth of 4.40% in 4Q 2014 and 4.12% in 1Q 2014. Sector contribution to overall growth in GDP (at Factor Cost) was 30.1% - second largest after Industry ex-Construction.
Chart below summarises sectoral shares of GDP growth in 1Q 2015:

The above clearly shows that the bulk of growth in 1Q 2015 by sector must be compared against growth in exports to attempt to control for MNCs activities before drawing any conclusions about headline growth figures anchoring to the real economy. I will do this in subsequent posts, so stay tuned.

Overall, real GDP at Factor Cost posted growth of 6.1% y/y in 1Q 2015 - a healthy figure compared to 5.28% growth recorded in 4Q 2014 and to 3.87% y/y expansion in 1Q 2014. Thus annual rate of growth accelerated in 1Q 2015 compared to 4Q 2014 and to growth a year ago.  Overall, sectoral activity expanded GDP by EUR2.47 billion in 1Q 2015 compared to growth of EUR2.176 billion in 4Q 2014.

As chart above shows, annual growth rate is currently running above the period average (2012-present) and marks statistically significant rate of annual growth. Which is very good news.

On a quarterly basis, GDP (at Factor Cost) grew by a more modest 0.74% quarterly rate in 1Q 2015, slightly slower than in 4Q 2014 when it expanded 0.79% q/q and much slower than in 1Q 2014 when it grew at 1.57% q/q.  This marks 1Q 2015 as the slowest quarter over the 5 consecutive quarters and the second slowest in 8 consecutive quarters.

Longer-term trends:

Based on annual rates of growth and levels performance, Irish real GDP (at Factor Cost) is on a renewed positive trend. Once again - good news.

Stay tuned for more analysis of the National Accounts figures in subsequent posts.

15/4/15: Global Information Technology Report 2015: Who’s the Best? Not We…

We have Silicon Docks and all the ICT IP stuffed into 'knowledge development boxes' and shipped via this country across the world that one can dream about, we have European HQs of dozens of ICT firms that are here solely for the reason of Ireland having the best workforce and skills in the world, and we have policymakers that cut ribbons on 'future jobs' reports on a monthly basis, promising tens of thousands of ICT sector employees 'in your neighbourhood near you' in the next 5-10-15-20... years… or sometime after the tenure of the Government of the day.

And we rank 25th in the world in the Global Information Technology Report 2015, right between the Digital/ICT Powerhouses of Belgium and France. Yes, that is right - we rank the lowest of all English-speaking advanced economies in the world: big, small, oil and natural resources rich and poor, small and large.

Don't believe me? Well, here:

In regulatory frameworks sub-index - the so-called "Environment Sub-index", Ireland ranks 12th. Which is, basically a bunch of political tosh. We rank 14th in "political and regulatory environment pillar (nine variables) [which] assesses the extent to which the national legal framework facilitates ICT penetration and a safe development of business activities, taking into account general features of the regulatory environment (including the protection afforded to property rights, the independence of the judiciary and the efficiency of the law making process) as well as more ICT-specific dimension (the passing of laws relating ICT or the software piracy rates)." Doh!

In laws relating to ICT we rank 23rd. Where it matters more… things are slipping and sliding and slipping again.

In IP protection, we do better - 14th place. Because someone needs to guard the prevailing interest of MNCs more than creating legal system to support general ICT sector.

We do better in Business and Innovation Environment - scoring 13th place, just ahead of Chile and Israel. But when it comes to availability of latest technologies - the cutting edge 'innovation' stuff - we are 22nd. Below Puerto Rico and New Zealand…

Capital of VCs is Dublin. And we have all the cash disbursed by state innovation funds and enterprise funds and entrepreneurship funds… but… we rank 46th in the world in Venture Capital Availability.

Tax rankings? Well, we do well-ish - ranked 26th. You see, many newcomers to the zero sum game of beggar thy neighbour tax competition are ahead of is, but majority of them are developing countries. Majority, but not all.

We rank 27th in the world in terms of time it takes to start a new business and 23rd in terms of number of procedures it takes to start a new business. That is pretty dire for a country aiming to be an entrepreneurship powerhouse. But then again, the report is not even looking at self-employment and sole traders. My guess, in that early stage entrepreneurship area we would be closer to 50th place.

Want a real wallop? Take Government procurement of advanced technologies - a proxy for how advanced is the public sector in ICT adoption and deployment… we rank dis-respectable 62nd. So our mandarins and ministers presiding over the digital strategies and ICT development and policies are working in an environment that is worse than many African countries when it comes to procuring advanced technologies for their own use. Never mind, abacus is fine for computing economic impacts and jobs potential for all those white papers on Innovation Ireland.

Per report, "The readiness subindex measures the degree of preparation of a society to make good use of an affordable ICT infrastructure and digital content, with a total of twelve variables." In readiness we are… 29th in the World (Ukraine is ranked 28th and Poland 30th). Like the 'neighbourhood'?

"The infrastructure and digital content pillar captures the development of ICT infrastructure" which ranks Ireland 26th in the world, below Slovenia and ahead of UAE. How? Well, our mobile networks coverage puts us into 66th place, between Georgia and Tunisia. Our electricity production environment is ranked 35th, our international internet bandwidth is ranked 20th, and in secure internet servers we rank 21st.

Here's a good one: "The affordability pillar assesses the cost of accessing ICT, either via mobile telephony or fixed broadband internet, as well as the level of competition in the internet and telephony sectors that determine this cost." Why is it good? Because we spent many years talking about cost competitiveness. And here Ireland ranks 87th in the world. Mobile tariffs here are so expensive, we rank 125th in this area in terms of affordability. Fixed broadband tariffs? Better - at 59th in the world. Level of competition index for Internet services, international long distance services, and mobile telephone services puts us at the top tier, ranked 1st with a long list of other 61 countries with the same ranking.

Now, wait a second: in a regulated sector with high degree of competition, prices are still dear. How can that be? Why, of course, only if the regulator is fixing them in excess of what the market would set them. Happy times all around, unless you are a consumer. Oh, and do note - our politicians endlessly talk about the need for 'labour cost competitiveness', but where we really lack competitiveness, it turns out is in the old fashioned regulated services that politicians and public sector regulate and/or legislate.

Finally - skills. The report measures these quite esoterically. "The skills pillar (four variables) gauges the ability of a society to make an effective use of ICT thanks to the existence of basic educational skills captured by the quality of the educational system, the level of adult literacy and the rate of secondary education enrolment."

So this is about basic skills, not specific ones. And here we rank well: 8th in the world overall, 5th in how well does the educational system in your country meet the needs of a competitive economy, but only 24th in the quality of math and science education in schools. This, by the way is the stuff of secondary education, not real level of ICT skills present in the economy (those require tertiary as an entry level and fourth and higher levels education for serious engagement). But, when it comes to high school enrolments (secondary education) we are tops of pops, ranked 6th.

So with all these 'skills' achievements, you would expect that we are heavy users of ICT and new technologies - skilled, savvy, early adopters... but, when it comes to actual usage of ICT in real life, Ireland ranks 28th in the world.

Stop and pause, again: for all the achievements of our Docks and Valleys, Centres of Excellence and Start Ups programmes, Innovation Academies and FDI, incubators and accelerators, hubs and labs, summits and venues relating to tech… Ireland's actual usage of real ICT is just a notch worse than Belgium's (ranked 27th) and a notch better than Saudi Arabia's (29th).

You really don't need to go any further than that to either throw the report into a bin or bring the Government policy papers on ICT sector strategies into your local recycling centre. Because either one spoofs or the other. The two are simply not compatible.

Unless, of course, you remember that we are the land of FDI… where everything is possible: technologically weak domestic economy, government and society can coexist with technologically advanced foreign/exporting economy and society; technologically un-enabled ministers and officials can write eloquent papers about technologically enabled economy… Ah, there, all good now... we are the best... there...

Update: h/t to @prfnv for the following link: which lists top 200 universities in Computer Sciences... of which none are from Ireland.