Wonderful Wednesday, page-166

Many things tend to naturally increase with a "growth curve" like the one shown by the blue line. They start off with exponential growth, but exponential growth is really hard to sustain for an extended period because of environmental constraints. (Think of a new population of rabbits ... The population will grow exponentially to start with - 2 then 4 then 8 then 16, etc but will eventually saturate when there is no longer enough food left to support a larger population).

Revenue growth for a product like world phone can grow in a similar fashion. Initial exponential growth as awareness of the product grows, but leveling off when market saturation is reached.

I've just used an algorithm to find the growth curve that best fits the historic revenue figures (using data from the graphs in the latest announcements). So the algorithm "decided" that the best fit has the graph leveling off at $15M per year. According to the algorithm, the current growth rate doesn't look like exponential growth will be sustained after half a year or so.

I'll be the first to agree that extrapolating a long way into the future is unreliable. As new revenue figures are available in the coming weeks or months it may become evident that exponential growth will continue for longer, which could dramatically change the "saturation" level. Any analysis has uncertainties, and some people may find that this sort of objective analysis gives a useful perspective.

Exee