As I’ve been writing up these various companies in my “Year-End” summary, I was thinking about different kinds of companies, and why, for instance, I had more confidence in BOFI long term than I did in SWKS (although I had plenty of confidence in both). I’m putting these ideas out for discussion.
It seems to me that the difference is that BOFI faces the public and thus has hundreds of thousands of customers, so when it’s doing well, you can be reasonably sure it will continue to do well. SWKS, on the other hand (or AMBA, for instance), has corporate customers, and several huge ones, like Apple and Samsung in the case of SWKS, and GPRO in the case of AMBA, who presumably are continuingly pressing for lower prices and presumably could switch to a different supplier - although the SWKS CEO did say in the last conference call that there are fewer and fewer companies that can produce products with the complexity now required (and thus compete with them).
Now XPO would be somewhere on the spectrum between them. They face companies but seem to have literally hundreds, even multiple thousands, of customers who use their services, and thus seem much, much more toward the widely-distributed customer base end of the spectrum.
FB is complex. It faces the public in getting users, but it relies on its income for advertisers, who rely on the numerous users, but if the advertisers were too concentrated that would represent a danger. (I have no reason to think they are, by the way, but it’s possible that losing a few very large advertisers could hurt them a bit.)
I’d be glad to hear thoughts on this spectrum, and other examples.
Saul
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