Cubegeek

The Stern Spreadsheets

Interesting resource:

I was looking around to see if Raytheon does Hyperion in my hometown - they have about 7500 employees around here. I really should get into that account. Turns out that they do a lot of Earned Value Analysis. So looking up a model of that to have in my holster I found a treasure trove of spreadsheets.

Hi! With time, the number of spreadsheets on this page has also increased. To help you in finding the spreadsheet that you might want, I have categorized the spreadsheets into the following groups:
1. Corporate finance spreadsheets: These spreadsheets are most useful if you are interested in conventional corporate financial analysis. It includes spreadsheets to analyze a project's cashflows and viability, a company's risk profile, its optimal capital structure and debt type, andwhether it is paying out what it can afford to in dividends.
2. Valuation Inputs Spreadsheets: In this section, you will find spreadsheets that allow you to
a. Estimate the right discount rate to use for your firm, starting with the risk premium in your cost of equity and concluding with the cost of capital for your firm.
b. Convert R&D and operating leases into capitalized assets
c. estimate the right capital expenditures and diagnose the terminal value assumptions to see if they are reasonable.
3. Valuation Model Reconciliation: In this section, you will find spreadsheets that reconcile different DCF approaches - FCFE versus Dividend Discount Model, FCFE versus FCFF model, EVA versus Cost of capital and Net Debt versus Gross Debt Approaches.
4 . Big-picture valuation spreadsheets: If you are looking for one spreadsheet to help you in valuing a company, I would recommend one of these 'ginzu' spreadsheets. While they require a large number of inputs, they are flexible enough to allow you to value just about any company. You do have to decide whether you want to use a dividend, FCFE or FCFF model spreadsheet. If you have no idea which one will work for you, I would suggest that you try the "right model" spreadsheet first.
5 . Focused valuation spreadsheets: If you have a clear choice in terms of models - stable growth dividend discount, 2-stage FCFE etc. - you can download a spreadsheet for the specific model in this section.
6. Valuation of specific types of companies: Valuation is all about exceptions, and these spreadsheets are designed to help value specific types of companies including:
a. Financial Service firms: While dividend discount models tend to be the weapon of choice for many, you will find an excess equity return model here.
b. Troubled firms: You will find an earnings normalizer spreadsheet, a generic valuation model for valuing a firm as a going concern and a spreadsheet that allows you to estimate the probability that a troubled firm will not survive.
c. Private companies: You will find spreadsheets for adjusting discount rates and estimating illiquidity discounts for private companies.
d. Young and high-growth firms: You will find a revenue growth estimator as well as a generic valuation model for high growth firms in this section.
7 . Multiples: You can estimate equity as well as firm value multiples, based upon fundamentals.
8 . Valuation in Acquisitions: You can value synergy in an acquiisition and analyze a leveraged buyout.
9 . Valuation of other assets: In this section, you will find a model for valuing income-generating real estate.
10 . Value Enhancement Spreadsheets: In this section, you will find a spreadsheet that reconciles EVA and DCF valuation, a model for estimating CFROI and a DCF version of a value enhancement spreadsheet.
11. Basic option pricing models: In this seciton, you will find Black-Scholes models for valuing short term options, long term options and options that result in dilution of stock (such as warrants). In addition, you will find spreadsheets that convert Black-Scholes inputs into Binomial model inputs and use the binomial model to value options.
12. Real option models in corporate finance: In this section, you will find three basic real option models - the option to delay, the option to expand and the option to abandon. In addition, the value of financial flexibility is considered as an option.
13. Real option models in valuation: In this section, you will find models to value both a patent (and a firm owning a patent) as an option, natural resource firms and equity in deeply troubled firms.
These spreadsheet programs are written in Excel and are not copy protected. Download them and feel free to modify them to your own specifications. I do have video guides available for some of the most accessed spreadsheets. I hope they are useful.

HP + Palm = Third Way

Right about now I'm asking myself why it is that IBM doesn't own a phone company. It used to. It was Rolm. Tipped off by Enderle, I am thinking about what moves and what doesn't move in the computer industry.

What's moving now is the peripherals market, and the hottest peripherals are now owned by Apple. They are enabled by the network market and the hottest networks are still boring, but the changing of new and old protocols are making it interesting. Matters of net neutrality, Flash vs Ogg vs H.264 and the adoption of cloud strategies are what's making it interesting. Database technology is undergoing a renaissance too.

Only Google seemed to have its head in the game of comprehensively coming up with a 'new' computing paradigm which is network centric and going after the desktop. That was until the introduction of Apple's iPad. Apple now has an opportunity and is showing evidence of the vision to disintermediate Microsoft's desktop domination.

Think about it this way. The desktop has been, for a generation, the dominant computing metaphor. It is how must computing work is done today and it is the desktop metaphor including the mouse and keyboard that is how must of us do what we call 'computing'. 30 years ago it was the green screen. 10 years before that it was the punched card. What are you touching when you are using a computer? That is the question. Those who define and dominate win, and it starts with the generation of data and ends with the consumption of data. That, broadly speaking is what the computer industry is all about, it is about interface domination. What goes on in the black box is only of concern to the industry professionals - the battles in the marketplace are won and lost on interface.

For example. What is gaming? Gaming is an interface market with competition between the iPhone + iPad, XBox360, PS3, DS, Wii, and the Desktop. The game console wars are pretty much over and the winner is Microsoft. They dominate and so now everyone must write to XBox. However Microsoft has opened up a new front with Project Natal. Interface.

All this has to do with HP + Palm because HP has perhaps determined that it needs to be its own software integrator. HP can now extend its compute capacity into a new interface. This is key.

Apple Courts Hysteria

There are two kinds of hysteria. Good hysteria and bad hysteria. Apple has had its share of the good and now it's getting some of the bad. Apple has recently put itself in the enviable position of the company its customers trust to put the latest and most fabulous technology into the hands of the most technically unsophisticated people. One of their mottos: It just works. Now it turns out that unsophisticated people who appreciate all that technology can hack it too. Is that karmic or what?

For years, like a lot of pros in the IT business, I resisted the smarmy swooning over the iPhone. I had a smartphone that could do everything it could do, plus some things it could not and still has not done. So I observed the hysteria and madness with a bit of perplexity, like watching fans swarm the Rolling Stones when you don't see what's so great about their music. Or seeing a dead Michael Jackson suddenly matter more than when he was alive. 

Like with any technology, even if it's advanced enough to pass for magic, there are always limits. And of course people try to hack those limits. There are jailbreaks and knockoffs, deliberate exploitations and there are bugs and glitches at the end of the performance envelope. Still, you can make a perfect product with imperfect technology. Hysteria helps make that leap from good to great. 

Yesterday, I was reminded that the last time there was this much public love over a product, it was the New Beetle. I got one the first year, a black turbo, and people used to stop to talk to me about it in gas stations. Kids would wave. Chicks would stare. Drivers would honk. Chicks would stare. Ahh those were the days. One time... nevermind. Anyway. The brakes on that car were great, but they would burn through pads like crazy.  But you put up with such flaws.

The opportunity to hack an iPhone or to modify your car comes from the same motivation. If this thing is so perfect, I wonder if I can change it. The video below gives the technically unsophisticated individual an opportunity to say they're smarter than Steve Jobs. It is the easiest hack in the world: just pinch it in the right position. Crippling the miraculous iPhone is like blowing up the Death Star, or solving Rubik's Cube. It gives one a sense of power and accomplishment. If Steve Jobs is so smart, why did he make this mistake, one might ask. And hey, what's up with AT&T? Everybody 'knows' that AT&T is inferior to Verizon even if only 4% of the population could even tell you what kind of cell technology lies beneath the '3G' marketing.

Now I'm an iPhone 3 guy, and I've got my hands on the new one and I like it. For me, the three most important things about the new product are the improved speed, the video camera and the high resolution screen. The improved look and feel is a nice to have, as is the battery life. Multitasking? Meh. If I'm that focused on my phone, something's wrong with me.  I've made a logical decision to hold off on purchasing, primarily because the rest of my family is on Verizon and there's marginal value in the hand me down. I've been rather surprised by the number of people lined up at the local Apple Store, and the number youth I've seen around my town with this phone already. But it's a public phenomenon and that goes beyond logical decisions.

I want Apple and Jobs to succeed. I like their approach to the entire market and I wish there were three such companies instead of one, just like I'm glad there is Mercedes, Audi and BMW. But you get the audience you deserve, and when hype can make you, hype can kill you. 

APB-1 Benchmark Results

(from the archives)

Now here's something we haven't seen in a while.

Download OLAP Benchmark Comparison_3

Download OLAP Benchmark Results Summary_3

Big Dog: The Aha Moment

Looking at this robot, it's clear that the guys at Boston Dynamics are onto something big. There are several segments of this video where I almost instantly recognize animal styles of mobility. The first is most obviously a dog. Then when I see the robot carrying a heavy load, I see moving men on opposite sides of a table, one walking forwards and the other backwards. At the end is clearly a horse.

This is the beginning.

Dropbox Security Note

If you use Dropbox, note that when you wipe files from any of your linked machines, they are not going to be wiped from the other machines, merely deleted.

Verizon Vs AT&T

Riddle me this:

The software release of iPhone 4.0 is in July and it boasts true multitasking capabilities that have not been seen on the iPhone before. AT&T is the ONLY wireless carrier with a network that you can use voice and data at the same time. It is also the largest and strongest network out there, capable of handling heavy iPhone usage and keeping up with the necessary improvements to keep up with the growing iPhone community.

I have read so many ridiculous comments online from people who think that a 4th gen iPhone would be a 4G network phone... Anyone who knows Apple products knows that they always label their products by generation... 1G 2G etc, the 2G iPhone was the first 3G network phone and it was named iPhone 3G. I don't think Apple would name a 4th generation iPhone as 4G, but it's possible. It does NOT mean that it has to be on a 4G network, but some people don't get it. On Sprint, Verizon, T-Mobile, etc, you cannot use an iPhone on their network and get the experience out of it that Apple wants you to have. Period. You cannot use voice and data at the same time on ANY of those networks, only on AT&T. So unless verizon is going to spend trillions of dollars rebuilding their entire network from CDMA to GSM, in the next year or 2, an iPhone won't work with Verizon. The technology just isn't there.

It's true that all we ever hear about is dropped calls, coverage area and lack of tethering when it comes to the great faults of AT&T, but these are essentially marketing matters not necessarily indicative of the network technology's capability. I am so accustomed to hearing the spin, and the hope that Verizon will carry the iPhone that I never hear whether or not it is technically possible. I hear it's not *legally* possible.

Last episode of Cranky Geeks, I also heard that part of the technical problem with iPhone networking has to do with the fact that Apple hired Palm's second string dev team to build the networking stack in the iPhone OS itself. I know for a fact that the power of the phone and the update in the OS can make a huge difference, because I experienced that first hand dealing with the second to latest vs the latest Treo back when I was on Sprint two years ago.

Verizon's web/data offering sucks. I went through this exhaustively when I tried to find a way to get out of Sprint and onto the same plan as my wife and kids. They had no phones, not even the Palms they had, that came close to what I wanted. VCast is for teenagers not for tech people who don't care about ringtones, sports scores and music videos.

So the real question for me works like this. Sprint is advertising 4G. It's not real 4G is it? It's just a faster EVDO right?

Computing Interfaces, Human Scale & The Death of Interoperability

Right about now I'm asking myself why it is that IBM doesn't own a phone company. It used to. It was Rolm. Tipped off by Enderle, I am thinking about what moves and what doesn't move in the computer industry.

What's moving now is the peripherals market, and the hottest peripherals are now owned by Apple. They are enabled by the network market and the hottest networks are still boring, but the changing of new and old protocols are making it interesting. Matters of net neutrality, Flash vs Ogg vs H.264 and the adoption of cloud strategies are what's making it interesting. Database technology is undergoing a renaissance too.

Only Google seemed to have its head in the game of comprehensively coming up with a 'new' computing paradigm which is network centric and going after the desktop. That was until the introduction of Apple's iPad. Apple now has an opportunity and is showing evidence of the vision to disintermediate Microsoft's desktop domination.

Think about it this way. The desktop has been, for a generation, the dominant computing metaphor. It is how must computing work is done today and it is the desktop metaphor including the mouse and keyboard that is how must of us do what we call 'computing'. 30 years ago it was the green screen. 10 years before that it was the punched card. What are you touching when you are using a computer? That is the question. Those who define and dominate win, and it starts with the generation of data and ends with the consumption of data. That, broadly speaking is what the computer industry is all about, it is about interface domination. What goes on in the black box is only of concern to the industry professionals - the battles in the marketplace are won and lost on interface.

For example. What is gaming? Gaming is an interface market with competition between the iPhone + iPad, XBox360, PS3, DS, Wii, and the Desktop. The game console wars are pretty much over and the winner is Microsoft. They dominate and so now everyone must write to XBox. However Microsoft has opened up a new front with Project Natal. Interface.

All this has to do with HP + Palm because HP has perhaps determined that it needs to be its own software integrator. HP can now extend its compute capacity into a new interface. This is key.

As the number of interfaces goes up, the influence of architects of APIs increases as well. What Apple is doing to squish out competition on it's platform begins to defy the mantras of interoperability. Apple can afford to do so because what I call 'development economies of scale' make it such that organic developers are not really competitive. Once a small group of in-house programmers have access to resources that allow them to develop technologies at a sufficient sophistication, a labor market for programming becomes surplus, and then barriers to entry build. Who actually needs to build a better spoon? You cannot get many jobs in spoon design. It's not because there is no spoon, but because the spoon has already been perfected.

Interoperability was important when teams of developers were still working on technologies that had not been completed to human scale. What do I mean by that? A technology that is complete to human scale means that you have a technology whose marginal improvement cannot be perceived by most humans. It's not about distinguishing them from magic, it's about distinguishing them at all. For example, it has long been the case in the audio electronics industry that the capability of the technology to record, transmit and reproduce sound has gone beyond the capabilities of human perception. Any good salesman at the stereo store will tell you that only 1 out of 50 people can actually hear the difference between a good $500 speaker and a good $5000 speaker. Why pay for the difference if you can't hear the difference? The clever stereo salesman would steer the prospective customer into believing he could hear the difference, but most of the time the customers could not - especially if they liked Cindy Lauper.

So how do people choose speakers today? Fashion, style, interface. The technology is complete to human scale - as such there is no need in the mainstream, to innovate. That's why 30 years ago, stereo components were the hot item, whereas today video components are hot. People can certainly perceive the difference between black and white and color. And now we are seeing the difference between low and high definition define the market. When everybody has HDTV, we'll all just buy for fashion, style, interface. The technology is done. It doesn't need to move.

While the technology is still developing to human scale, small innovators can make a difference. Market makers will corral them and interoperability will matter. Once there is no more need for integration, the industry won't care about interoperability just like the TV industry no longer needs pin socket standards for the tubes in their audio amplifiers. Single companies can integrate the technology from end to end, streamline, lower costs and improve quality - but sell interface.

HP, with its acquisition of Palm now has an interface for mobility. It can now build phones. Does anybody care about the developers of Palm apps? No. They will now be HP apps and the API can be streamlined to fit HP's needs for mobility. 

So what technologies are done and not moving in the computing industry because they have now reached human scale - the limits of human perception? Well, that's an interesting question that I'll start to think about. And while I do so, I'll keep an eye towards what happens when another interface solves another problem moving that problem towards human scale. This is how I can identify shifts in markets and opportunities for different vendors to leapfrog.

For example. I think a class of applications will emerge in the multitouch paradigm that will approach human scale that have never reached it in the desktop metaphor. I think that multitouch gestures can become a vocabulary for expression that will allow a much greater throughput than could be expected from keyboard & mouse. Guitar Hero showed a way to game that closer approximates the human scale of musicianship. There could never be a better way to play guitar via keyboard. You need to approach a guitar. Furthermore, as I've indicated previously, I think that sorting, distributing and shuffling will be better accomplished through multitouch interfaces than with mouse & keyboard interfaces.

Flash & Cold Fusion

My two cents.

Flash on Apple? No. What difference does it make? It's the difference between legacy applications and new stuff, which is to say if the trend continues that Android will suck up all of the Flash world and Apple rejects it, Apple will be in the better long term position.

I seem to recall that Flash was the stuff of Web 1.0, back when it used to belong to a company called Macromedia and the greatest authoring tool in the world was Dreamweaver and HomeSite. Are you kidding me? And back when Adobe purchased Macromedia, what I recall was that the whole edifice was crumbling under its own weight. Adobe was the ship almost too late to save a drowning witch. Considering the number of other video standards that are out there, the big deal with Flash just doesn't seem to be a big deal to me. The best developers will easily adapt to new tools.

Just because you can name a product Cold Fusion doesn't mean you can defy the laws of thermodynamics.

A High School Math Memory

In Father Cooper's basement I learned many embarrassing things. One of them was that I didn't know what factorial meant. But there was an HP calculator in that basement that I could program. The factorial function meant 1x2x3x4 all the way to n. On the HP calculator, the biggest number it could handle was 99.999999 E99. And the closest way to get to that number was to program in 69 factorial. If you did so, the display would whir and after about 20 seconds it would flash the answer.

At the time, the idea that you could get a machine to count to such a ridiculously large number (which is bigger than the number of atoms in the known universe) in under a minute was crazy cool and mind-bending. There was no such need for those kinds of numbers, but here was a machine that could count that high.

My iPhone can count higher. It can do 103 factorial in a split second giving me 9.9029 E163.