Today I had
the real honour to meet and talk to Frank Quattrone at a Prince’s Trust Internet & Media Leadership Group lunch.
Frank is something of a legend having been one of the first investment bankers to specialise in Silicon Valley tech back in the early 1990s with Morgan Stanley, Deutshe Bank and Credit Suisse. He advised Next when Apple acquired them in 1996 thus bringing Steve Jobs back to the fold (you know the rest of that story!)
In 2008 he founded Qatalyst Group which has since been responsible for advising on some of the biggest deals around. Starting with advising Google on Yahoo (OK it didn’t happen..) through Data Domain (sold to EMC), Palm (sold to HP), 3Par (sold to HP), Netezza (sold to IBM) all the way through to his two most recent deals – advising Autonomy on its sale to HP and Motorola Mobility on its sale to Google. Indeed Qatalyst were the advisers on 5 of the largest 10 deals in 2011. Quattrone put up a chart showing that Qatalyst clients have achieved roughly twice the relative price than those deals done where they were not involved. That’s a pretty stunning record!
The chart from Quattrone’s presentation that really impressed me is reproduced below. The chart shows the market value of stocks at four timepoints. 1996 - when Apple acquired Next. 2004 - when Google IPOed. 2007 – the last NASDAQ peak. 2009 – the last NASDAQ trough. Quattone lists his 8 ‘challengers’ – Apple, Google, Qualcomm, Facebook, Amazon, VMWare, Salesforce and ARM and compares them to the ‘Incumbents – Microsoft, Intel, Cisco, HP, Dell, Nokia and RIM.
The chart really demonstrates so well the ‘Diversity of Performance’ theme we have had in HotViews over the last 5+ years. How Intel has shrunk as Qualcomm and ARM have come ‘eat their lunch’. How Nokia and RIM – so powerful (and valuable) back in 2007 - have seen their value erode in favour of Apple. How Microsoft, Cisco, HP and Dell are mere fractions of their former selves. Indeed the ‘Incumbents’ have halved in value since 2007 whereas the ‘Challengers’ have 
doubled in value. The totals, by the way, are pretty much the same! It’s just that there has been this massive shift in value from one group to the other.
And this is really ramming home the story of the last decade. Before that, you could invest in ‘the IT sector’ and your investment would have grown dramatically. But invest in that tech basket of Challengers and Incumbents in 2007 and you’d be showing little growth. Whereas if you had invested in just the Challengers your investment would have double, tripled if you’d put it all in Apple or up 6x if you’d been lucky enough to invest in Facebook! Picking the winners is not just a ‘nice to have’ - it is the ONLY way to value creation. ‘Average is just no good anymore.’ How many times have we said that?
We asked Quattrone what the chart would look like in 5 years time but he said that history was easier to predict than the future! Whatever, I’m sure Quattrone will still be doing the biggest deals and, one suspects, still getting the best value for his clients