Twelve years ago, I was an honorable computer industry analyst. To explain, the “computer industry” of A-shares is basically equivalent to the software industry, because there are few companies that do hardware in A-shares; even if there are, they are snatched away by the communications industry next door (such as ZTE) . Therefore, it is not unreasonable to call us “software analysts”.
The software we are studying is not “less technical” personal application software such as QQ and 360, nor is it “vulgar money-swindling” entertainment software such as online games. Every software industry analyst has a heart to give guidance and encourage words, just as every listed software company has a vision to subvert Microsoft and beat IBM.
I still remember that there were three concepts that A shares were most passionate about at the time:
The first is the “nuclear high base”, that is, “core electronic devices, high-end communication chips and basic software products” . The first two have nothing to do with the software industry, while the latter is the home field. From 2009 to 2015, at least 50 software companies in A-shares claimed to be doing operating systems, databases, and middleware at a certain point in time, and some of them have really received special subsidies from the state.
The second is “cloud computing”, including public cloud and private cloud , covering the three levels of IaaS/PaaS/SaaS. Since most of the A-share software companies do not have the ability to do the basic layer and platform layer, they have repeatedly emphasized: the application layer is the future, and in the future we will eat up the trillion-dollar cloud computing market!
The third is “information security”, including basic and general security technology products, as well as solutions tailored to the industry (especially local governments) . This type of company was particularly developed in 2010-13, with more than 20 companies listed on the A-share market.
At that time, we didn’t think that Internet companies like Tencent and Alibaba were so powerful, or even that they were “giants”. They launched a few products with no technical content and had hundreds of millions of consumer users. They were considered giants? Are you worthy too? If China’s information technology industry will produce global giants, it will only be produced in nuclear high-tech or cloud computing companies that study “hard technology.” Science and technology are the primary productive forces, no one can deny this!
I still remember in early 2010, in a meeting room in an office building in Lujiazui, I discussed with two old fund managers about “Which one has greater long-term potential, an Internet company or a software company”. We all agree that a company like Tencent lacking core technology has no future; Baidu may have it because Robin Li himself is a technical background; as for Alibaba, what kind of company is it that sells fakes online?
At that time, there were a few more popular concepts, and occasionally stir them up. For example, software outsourcing/business process outsourcing has also created a number of GEM stocks; but everyone always thinks that outsourcing is too low and more suitable for Indians, so it can only give a P/E ratio of 30 to 40 times. .
There are also various industry application solutions, which are actually system integration plus a lot of messy custom development. Many software companies have done it before, but the financial statements will not deceive people. Everyone slowly discovered that this kind of “solution” business only has a gross profit margin of 20-30%, which is not as profitable as an agent. Therefore, this kind of business can only give a price-earnings ratio of thirty to forty times, and generally cannot appear in the key recommendation list of the brokerage research report.
The most powerful companies that can enjoy seven to eighty times or even hundreds of times the price-earnings ratio must be those companies that have mastered the “stuck neck technique”, can lead the technological trend, and even go to the neck of others. I remember that in 2010, a brokerage company put forward a concept: “Langqi Zhonghua”, which means Inspur Information, Qiming Information, China Software, and Teamsun. It is said that they have mastered the “stuck neck technology”.
Later, Yonyou Network (also called Yonyou Software at the time) , Aerospace Information, Taiji Shares, Venus Star, Zhongke Jincai… were also added to this list by brokers. The conditions for entering the list depend on “can be falsified”-as long as no one can prove that you can’t pinch others’ necks, then you can pinch others’ necks without accepting rebuttals.
Theoretically, studying the software industry requires a strong basic technical skills, at least a little knowledge of programming, and a little knowledge of the frontiers of computer technology. The strange thing is that among the software industry analysts, not many are actually born in the software industry, and they don’t seem to be very popular either. In a nutshell: they know too much.
As early as the beginning of 2010, a buyer researcher friend and I went to investigate a company that was said to have “mastered the core technology of basic software.” After listening to the two-hour brainwashing speech by Secretary Dong, I said that my brain was not enough, and I hurriedly quit to buy coffee. After taking two sips of coffee, the buyer’s friend sneered: “What core technology, it’s just carrying boxes!” He studied computer at university, and worked as a programmer for two years after graduation. Every lie of Secretary Dong’s is almost close to him. Streaking.
This type of researcher is very unpopular with fund managers, regardless of whether they are buyers or sellers. I once had an old colleague who looked at the electronics industry, but was also quite knowledgeable about software technology. When going out for a roadshow, his mantra was: “That’s it!” For example: “A certain company claims to be able to go to IOE and engage in domestic substitution, but in fact that’s the case, cheating money.” And: “A certain company has mastered the world. First-class big data technology? It’s a hell, that’s it!”
Not only has a fund manager made serious demands on our leadership, and he does not want him to come to the roadshow in the future, but also hopes that he will control his mouth. One of them said very frankly: “Perhaps he knows technology, but he doesn’t understand the capital market.” In the final analysis, the A-share software industry is a big show, and it needs to dance as much as possible before the end. If someone not only does not dance, but also shouts “This is a scene” to the audience, it will not only be hateful, but will also be criticized by the audience.
At the end of each year, the title of the annual strategy report of the brokerage computer industry is like a sci-fi drama, which directly pushes us to the world of “Avatar”, “Interstellar” and “Number One Player”:
“Entering the Internet of X era: Internet of Things, Internet of Vehicles, Internet of Home Furnishings, until reaching brain-computer interconnection”;
“The import substitution of basic software is complete, and the localization of operating systems and databases is just around the corner”;
“A shares will give birth to a batch of world-class public cloud SaaS companies”;
“Information security will surely generate a software company with a market value of 100 billion yuan”;
“The U.S. software industry is declining, and the rising A-share software giant”…
In these research reports, Microsoft, IBM, Oracle, EMC, and SAP have been eliminated countless times, and the specific elimination depends on the market hotspots of the year. A technical layman like me, when reading these reports, often can’t help but raise a question: Why are these overseas software companies always wiped out?
They were wiped out in 2010, they were wiped out again in 2011, they were wiped out again in 2012, and they were wiped out again in 2013…
In 2017, I really have no interest in participating in this drama. I went to look at the consumer Internet, which is the most despised companies in the A-share software industry and lack of technology such as Tencent, Ali, and Baidu. At least I understand the logic of these companies. Their annual reports make me feel that I live on the real earth, not an alien planet in a science fiction movie; I can use the products of these companies every day, not just in the secretaries of the board of directors. See it on the PPT.
I met an old friend the other day, and he still looks at the software industry. After two cups of coffee, I asked him: “What are the most popular concepts in the A-share software industry now?”
He replied: “Nuclear high base, information security, cloud computing and big data.”
I asked: “What is the basic logic of industry growth?”
He replied: “The localization of basic software is independent, safe and controllable, and the next generation of technical standards is formulated.”
I asked again: “What kind of high valuations does the market give?”
He replied: “If you have hard technology, not only will you not get stuck, but you can also wipe out the companies of Microsoft, IBM, and Oracle.”
Looking at my puzzled face, he added: “We privately call this kind of company PPT company.”
My doubts did not disappear. I looked at the calendar on my phone and the TV on the wall of the cafe. I couldn’t help but ask, “Is it 2021 or 2009?”
He smiled bitterly: “I don’t know too!”
I thought the software industry that I had studied for eight years was a tragedy, but I didn’t expect it to be a complete comedy.
Of course, whether the consumer Internet industry I am studying is a tragedy or a comedy, that is another question.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/i-thought-this-industry-was-a-tragedy-but-i-didnt-expect-it-to-be-a-complete-comedy/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.