When you're in an industry where the success of your efforts depends on the talent, intelligence, and effort of key people, you better have the money or resources needed to attract and retain those people. With a publicly traded company, money or resources to attract and retain key people generally come from a rising stock price or a profitable business. When a company can make predictable, consistent sales of its product with little significant product innovation -- think Coca-Cola or Altria -- talent attraction and retention is probably less critical because new product innovation isn't as important. Companies like Coca-Cola and Altria have well-established and slow-changing resources, processes, and priorities, and process execution is the focus. See Concepts page and discussion of Clayton Christensen.
For companies in the tech industry, however, talent attraction and retention are critical, and that requires either a rising stock price (to create effective stock incentives) or the profitability needed to attract and pay the most talented designers and computer engineers. Because in tech, the company with the most talented key people often has the best chance of creating new product innovations that consumers will value.
So over the long haul, which tech-related companies are best positioned to attract the most talented people? The ideal combination is probably strong and rising earnings combined with a rising stock price. That way if a company's stock price drops -- often due to slower earnings growth, or due to previously unrealistic expectations of future growth -- then strong underlying profits should still allow the company to attract and retain talented people.
A rising stock price unsupported by growing earnings -- and supported only by expectations of future earnings growth which may not materialize -- is fine up until expectations change and a market correction occurs. When this type of correction occurs, stock options, stock awards, or delayed stock vesting may not be enough to attract and retain the most talented people (especially in the hyper-competitive tech industry). And without strong underlying profitability, a company in this situation has no other way to attract and pay for top talent (other than the intangible, psychic benefits of the work itself).
Based on this discussion, which of the following tech companies look most attractive? The reader will ultimately have to make this assessment.
PE (trailing 12 months, diluted and continuing, as of January 31, 2014 closing)
The author owns stock shares of Apple.