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A Salesforce revival meeting. Photo: Tuca.Orlandi via flickr
The U.S., to no one’s surprise, once again dominates the list of the world’s 100 most innovative companies with 48 names. Europe has 31 companies on the list and Asia-Pacific has 21. America has a perennial edge (all of the top four firms and six of the top ten) thanks to three big factors: the fertile tech hub of Northern California, strong patent laws that keep drug firms on these shores and a vibrantly competitive market of wealthy consumers for packaged goods. Most of the companies on our list are in software, the Internet, pharma, branded food and consumer goods.
Of the many creative U.S. firms missing from the rankings for one reason or another (see our methodology here), Facebook FB -0.26% is a notable standout. It would make the global top 5 with an innovation premium above 70% if we were looking only at 2012 data, but in order to produce a list that ignores fads or short-lasting bursts of growth, we take into account only companies with at least five years of stock market trading and audited financials, as well a market capitalization above $10 billion. Apple AAPL -0.14% has not fared well in the rankings. Due to its sharp stock price decline from a year ago, it slipped from #26 to #79.
Video: Where Innovative Leaders Get Their Ideas
A company’s innovation premium measures how much the stock market, in its imperfect wisdom, credits a company for its ability to come up with profitable growth over the next several years. This is no stockpicker’s list, because many of these firms are fairly valued, but it is a predictor of which companies have the best chance to live up to their growth potential. You want to find companies that are destined to make the 100 Innovators list someday soon.
#1: Salesforce.com
Innovation Premium: 72.8%
World Rank: 1
The cloud computing pioneer in sales software has been using its richly valued shares to snap up startups that do the same thing for marketing teams. In June CEO Marc Benioff made his biggest buy to date, paying $2.5 billion for ExactTarget. “We’ll take innovation any way you can give it to us,” says Benioff. Its latest 12-month sales are $3.2 billion. Its projected earnings growth over the next 3 to 5 years is 27%.
The 10 Most Innovative Companies In America
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Industry: Software
Innovation premium: 72.8
Sales growth: 32.1%
Return: 21.6%
1. Salesforce.com (U.S.)
World rank: 1Industry: Software
Innovation premium: 72.8
Sales growth: 32.1%
Return: 21.6%
Innovation Premium: 72.3%
World Rank: 2
Other companies imitate Alexion’s focus on the rarest of rare diseases, but its shares are up only 10% this year after quadrupling over the previous four. Investors worry that governments and insurers are starting to resist paying for its $440,000 drug, Soliris. Rumors have swirled over a takeover by Roche. Big hope: a drug for children born without bones. Latest 12-month sales: $1.3 billion. Long-term earnings growth: 25%.
#3: VMWare
Innovation Premium: 63.7%
World Rank: 3
Debuting on the list is the king of virtualization, a software trick that copies applications and hard drives across many computers so they run faster and more reliably. It’s now deep into mobile. Latest 12-month sales: $4.9 billion. Long-term earnings growth: 19%.
#4: Regeneron Pharmaceuticals
Innovation Premium: 63.1%
World Rank: 4
Wall Street is convinced the drug industry is out of blockbusters, but Regeneron has found ways to create them and on a budget. Its adult blindness drug, Eylea, generated $850 million in its first full year, and sales are expected to jump 50% this year to $1.3 billion. Its R&D cost per drug is a mere $736 million, compared to $7 billion for Pfizer. (See story.) Long-term earnings growth: 29%.
#5: Amazon.com
Innovation Premium: 60.2%
World Rank: 7
Founder Jeff Bezos is hiring but seeks only the inventive type. “Their invention can be on a small scale, say, a new product feature or a process that improves the customer experience, but I want to know that they will try new things,” Bezos tells FORBES. Latest 12-month sales: $66.8 billion. Long-term earnings growth: 35%
#6: Intuitive Surgical
Innovation Premium: 53.9%
World Rank: 8
Its da Vinci robotic surgical system translates a surgeon’s hand movements into more precise maneuvers inside the human body. It slipped from No. 3 last year as the U.S. market proves a struggle, with hospitals cutting back on expensive new equipment. Regulators are also surveying doctors amid accusations that Intuitive’s robots are linked to patient deaths. Investors have pushed shares down 20% since 2012. Latest 12-month sales: $2.3 billion. Long-term earnings growth: 15%
Rounding out the top ten innovators in America are: #13: Cerner, the health-care software maker, down from #8 last year, #15: Estee Lauder, the beauty palace, up nicely from #23 last year, #17: FMC Technologies, the oil-drilling equipment maker, down from #13 last year but holding steady with roughly the same innovation premium, and #19: Starbucks, which gained a couple of spots thanks to a higher premium. Other U.S. companies renowned for their innovation prowess come in further down the list: Google is ranked #47 and Procter & Gamble #30.
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Click here for complete coverage of FORBES list of the World’s Most Innovative Companies, including a spotlight on some rising-star executives at the companies on the list.
