We all use a computer, and we’re all familiar with computer brands. Some of the most famous corporations in the world, such as Apple, IBM, HP, Dell, and Acer are in the computer business. A closer look at the value of 13 different computer brands reported in transactions is rather sobering.
Low multiples: This month’s peer group analysis from Markables includes brands such as Compaq, Gateway, Sun, IBM, and Packard Bell, among others. Enterprise valuation multiples indicate low profits for the sector, with sales/EV multiples ranging from 0.18x to 0.64x (see the table below). Many businesses struggle to keep pace with critical mass, mass market commoditization, short product life cycles, and new technology. Trademark royalty rates range from 0.4% to 1.5% on revenues, with a median rate of 0.5%. Considering the high portion of trademarks with short useful lives, trademark value accounts for an average 10% of enterprise value.
Two opposing aspects influence trademark value: business profitability and brand strength. While large brands in the mass market show some signs of brand strengths, they often have weak profitability. On the other side, specialized niche offerings show better profitability but are rather unknown brands. Most computer trademarks are assumed to have finite lives and are to be replaced by new brands and new products sometime in the future.
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