R&D Market Pulse: New Technologies Posing Problems for IBM

R&D Market Pulse Index for the week ending July 21, 2017 closed at 3,554.73 for the 25 companies in the R&D Index. The Index was up 0.92% (or 32.57 basis points) over the week ending July 14, 2017. Fourteen R&D Index companies gained value last week from 0.15% (Pfizer) to 2.38% (Amazon). Eleven R&D Index companies lost value last week from -0.21% (GlaxoSmithKline) to -5.23% (Qualcomm).

R&D Index members IBM and Qualcomm had an unusually bad week with IBM reporting its 21^st consecutive quarter of year-on-year sales declines (back to 2Q 2012). IBM’s important (for future growth) cloud platforms dropped 5.1% in revenues while its legacy computing systems fell 10.4%. IBM (with 3% market share) continues to trail cloud market leaders Amazon, Microsoft and Google. R&D Index member Microsoft last week reported that its cloud computing product, Azure, rose 11% in the latest quarter, beating analysts expectations. Earlier in the week, IBM announced its new line of mainframe computers, IBM Z, which have faster processors and increased encryption. IBM hopes that the new mainframe computers will increase the company’s profits in the second half of 2017.

Qualcomm’s stock decline (-5.23%) was associated with its 40% profit drop in 2Q which was attributed to the lack of patent royalties on devices from Apple, in which it is engaged in a legal battle concerning overpricing of chips in its iPhone cell phones. Qualcomm’s revenue was down 11% in 2Q from 2Q 2016. On Tuesday, four other smartphone Taiwan-based firms also filed lawsuits against Qualcomm.

Each of the R&D Index’s automotive sector members (Toyota, GM, Honda, Daimler and Volkswagen) dropped in value last week reflecting the overall decline in automotive sales this year and the shift from sedan vehicles to small trucks and SUVs which the manufacturers are attempting to adjust to by dropping some sedan-based models.

Elon Musk, CEO of Tesla and SpaceX, commented in a meeting last week of state governors that a regulatory agency needs to be formed to control and guide the development of artificial intelligence (AI) technologies before they become a threat to the U.S. economy.

Lyft Inc. announced last week that it was forming its own autonomous car development division to be staffed by hundreds of engineers and researchers at a new office in Silicon Valley. The company stated that it would develop its own software and hardware to create autonomous vehicles. This approach changes Lyft’s previous strategy of creating partnerships with self-driving vehicle developers that included Alphabet’s Waymo, GM and Tata Motors.

R&D Index Week Ending July 21, 2017

		Ticker	Exchange	2017 R&D billions$	07/14/17	07/21/17	7/21/17 to 7/14/17	7/21/17 to 1/1/17
1	Amazon	AMZN	NASDAQ	17,774	1,001.81	1,025.67	2.38%	36.78%
2	Alphabet/Google	GOOGL	NASDAQ	15,845	976.91	993.84	1.73%	25.41%
3	Microsoft	MSFT	NASDAQ	13,987	72.78	73.79	1.39%	18.75%
4	Intel	INTC	NASDAQ	13,499	34.68	34.73	0.14%	-4.25%
5	Apple	AAPL	NASDAQ	11,506	149.04	150.27	0.83%	29.74%
6	Volkswagen AG	VLKAY	OTC	11,260	33.62	32.98	-1.90%	15.00%
7	Roche Pharm	RHHBY	OTC	10,174	31.94	32.27	1.03%	13.11%
8	Toyota	TM	NYSE	9,170	110.20	109.31	-0.81%	-6.73%
9	Johnson & Johnson	JNJ	NYSE	9,060	132.60	135.31	2.04%	17.45%
10	Novartis	NVS	NYSE	7,870	83.16	84.99	2.20%	16.68%
11	General Motors	GM	NYSE	7,468	36.35	36.07	-0.77%	3.53%
12	Pfizer	PFE	NYSE	7,288	33.43	33.48	0.15%	3.08%
13	Bristol-Myers Squibb	BMY	NYSE	6,942	55.15	55.65	0.91%	-4.77%
14	Cisco	CSCO	NASDAQ	6,827	31.42	31.84	1.34%	5.36%
15	Qualcomm	QCOM	NASDAQ	6,723	56.81	53.84	-5.23%	-17.42%
16	Oracle	ORCL	NYSE	6,702	50.56	50.80	0.47%	32.12%
17	Honda	HMC	NYSE	6,519	27.63	27.52	-0.40%	-5.72%
18	Astra Zeneca PLC	AZN	NYSE	6,363	33.87	34.05	0.53%	24.63%
19	Merck & Co.	MRK	NYSE	5,759	63.06	62.63	-0.68%	6.39%
20	Daimler	DDAIY	OTC	5,084	64.87	62.58	-3.53%	-11.51%
21	Bayer AG	BAYN	XETRA	4,880	112.75	111.00	-1.55%	11.97%
22	Sanofi SA	SNY	NYSE	4,755	48.18	47.71	-0.98%	17.98%
23	IBM	IBM	NYSE	4,628	154.24	147.08	-4.64%	-11.39%
24	GlaxoSmithKline	GSK	NYSE	4,508	42.75	42.66	-0.21%	10.78%
25	Eli Lilly Co	LLY	NYSE	4,489	84.35	84.66	0.37%	15.11%
	Total			209,080	3,522.16	3,554.73	0.92%	19.19%
			Biopharmaceutical		721.24	724.41	0.44%	12.26%
			Automotive		272.67	268.46	-1.54%	-4.34%
			ICT		1,526.44	1,536.19	0.64%	17.58%

About R&D Market Pulse 

R&D Magazine’s R&D Market Pulse is a weekly stock market summary of the top international companies involved in research and development. The top 25 industrial spenders of R&D in 2017 were selected based on the latest listings from Schonfeld & Associates’ June 2017 R&D Ratios & Budgets. These 25 companies include pharmaceutical (11 companies), automotive (5), ICT  (8) and conglomerate (1) organizations who invested a cumulative total of more than $209 billion in R&D in 2017, or approximately 10% of all the R&D spent in the world by government, industries and academia combined, according to R&D Magazine’s 2017 Global R&D Funding Forecast. The stock prices used in the R&D Index are tabulated from NASDAQ, NYSE, XETRA and OTC common stock prices (in U.S. dollars) for the companies selected at the close of stock trading business on the Friday preceding the publication of the R&D Index in R&D Magazine’s R&D Daily eNewsletter.

The companies used in the R&D Index include Amazon, Alphabet/Google, Microsoft, Intel, Apple, Volkswagen AG, Roche Pharma, Toyota, Johnson & Johnson, Novartis, General Motors, Pfizer, Bristol-Myers Squibb, Cisco, Qualcomm, Oracle, Honda Motor Company, Astra Zeneca plc, Merck & Company, Daimler, Bayer AG, Sanofi SA, IBM, GlaxoSmithKline and Eli Lilly Co. Stock prices are based on those stocks traded on the U.S. exchanges. R&D Index trends (in the stock prices) are just one indicator of the amount of capital available to these high-technology companies to invest in R&D and should not be implied to indicate the absolute value of R&D investments made by these organizations. The companies chosen for the R&D Index have very large sophisticated internal and global R&D organizations with each company investing between $4.5 and $17 billion annually on their