Photographer: Dmitry Beliakov/Bloomberg News.

Chief executives tend be optimistic about high they can lift their companies.

The value of a company, in theory, is the sum of the income it can be expected to deliver to shareholders in the future. Except for one thing: some of the most valuable and successful companies don’t really deliver much income at all.

Apple Inc. and Berkshire Hathaway Inc. are the two most prominent cases in point. Apple’s shareholder meeting Wednesday ended with no commitment to give some of the company’s $137 billion cash pile back to investors. Meanwhile, as Bloomberg’s Noah Buhayar reported yesterday, Warren Buffett, nearing retirement, now confronts speculation about how much longer Berkshire will continue its no-dividend policy. Google’s $49.6 billion cash holdings, it’s worth noting, are also nothing to sneeze at.

Investors can get back cash through dividends or share buybacks. Apple, which stopped paying a dividend in 1995, brought it back last year. Both Apple and Berkshire bought back shares last year last year, but they are still building up cash a lot faster than they are handing it back to investors.

The resistance to buybacks and dividends makes sense. Buhar notes that Buffett back in 1985 wrote that dividends only make sense when management can’t generate adequate returns by keeping money in the business. That sounds reasonable: why take back money from a manager who will make it multiply faster?

If only managers weren’t somewhat biased on this front. Many believe that they are the best stewards of investors’ money. Not all of them are. Over the long run, even insanely great companies slow down — and the long term aging process isn’t always pretty. Investors trusted Buffett to make better use of their money than anyone else. It’s not clear that they will have the same a priori faith in his successors. Giving back money to shareholders could be the sign of a manager who does not believe in his own abilities — or of one who is wary of believing in them too fervidly.

Photograph by Hans Neleman

Techno-utopians have long heralded a future industry that deals purely with intellectual property. We’re now a little bit closer.

Bloomberg’s Ian King yesterday wrote about the increasingly fierce challenges that ARM Holdings Plc, the Cambridge, England-based designer of computer chips that dominates the mobile market, poses to Intel Corp. It’s a timely take on the rise of ARM–an important story that’s been two decades in the making.

ARM marks the first really big success for a “chipless chip company,” an idea that sounds terrific in theory but has usually turned out to be difficult to execute. The unlikely sounding “chipless chip” model builds on the older “fabless chip” concept, in which companies would design semiconductors and then contract out the manufacturing to specialists. The ARM model goes one better: instead of contracting out manufacturing, ARM designs the core logic of the chip, and licenses the design for others to build and customize.

The company that was first prominently associated with this idea was Rambus Inc., a memory chip designer. Unfortunately, most of Rambus’s great hopes were punctured by the spears of endless litigation. ARM, too, sputtered for many years before gaining steam. Now virtually all the chips that power high-end tablets and smartphones are based on ARM designs. The iPhone and iPad use ARM cores. So does the Samsung Galaxy range. Nokia’s Lumia Windows 8 phones? ARM, too.

ARM has skyrocketed to a market capitalization of $20 billion. That’s still a fraction of some of the biggest tech companies; the difference is that ARM has a lot fewer employees–just 2,392 at the end of 2012. On a per-employee basis, ARM’s stock market value blows away many better know companies. Look at the chart here. ARM’s market capitalization is now almost $8.4 million per employee. Apple’s, by comparison, is less than $6 million. For Intel–which has 105,000 employees–the number is about $1 million.

All of this raises two questions. First, is ARM now a story of great success–or still one of great expectations? Though it’s solidly profitable, ARM’s profits aren’t nearly as outsized as its market capitalization. Last year the company earned about $67,000 per employee, still less than Intel’s $104,000 and less than one-eighth Apple’s $573,000.

Second question: is this a realistic model for the future of the technology industry? That’s really the big kahuna here. ARM represents a vision of innovation that is close the hearts of folks who see a future dominated by “knowledge workers,” creators of intellectual property in places like Silicon Valley and Cambridge, England implemented by less advanced companies around the world. This is a utopia for the folks lucky to work at a company like ARM, and potentially a nightmare for a lot more: Remember, ARM has just 2,400 employees.

We’re not as close to this as some techno-utopians (or dystopians: it’s hard to decide here) may imagine. There’s another piece to the ARM story: every company that licenses ARM’s intellectual property is a technological innovator in its own right. Consider Silicon Valley-based NVIDIA Corp., whose Tegra 3 processors put together ARM’s basic design with high speed graphics circuitry that is NVIDIA’s expertise.

You can make a similar case using many of ARM’s other licensees. Building a new mobile phone? NVIDIA Inc. and Qualcomm Corp. will each be happy to give you a rundown on why their flavors of ARM chips are the best. Measured by profit per employee, for now both of those companies are ahead of ARM. That may not remain the case forever. ARM’s gotten to the point where it has proven that a relatively small company purely focused on creating intellectual property can have a become a serious contender in key technologies and get a meaningful slice of the profits. Fortunately, that slice comes from a big pie.

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Photographer: Adriano Machado/Bloomberg News

No matter how fast Tim Cook paddles, he can’t match the ease with which Jeff Bezos floats down the Amazon.

Apple Inc. today reported $13.1 billion in profit for the last quarter of 2012, putting it at over $40 billion for the year — a number only one other company, Exxon Mobil Corp., has ever exceeded. Apple beat profit estimates, though (yes, this is the key part) growth slowed. So naturally Apple shares got clobbered.

You can debate whether investors who are selling are right to turn from Apple. Growth is indeed a question mark: the bigger the profit numbers get, the harder it is to raise them. To really make sense of the market’s view of Apple, however, it helps to set Apple next to Amazon.com Inc.

On today’s Bloomberg Billionaires list, Amazon founder Jeff Bezos comes in at no. 19, with a net worth of $25.3 billion. That fortune has skyrocketed as Amazon has gone to its current $267 share price and $121 billion market cap.

Comparing Bezos’s fortune to Amazon’s earnings highlights how deeply puzzling that increase has been. Since 2003, the first year in which Amazon earned a profit, through the end of 2011, Amazon has reported a total of $5 billion in earnings. Amazon has not yet reported results for this year; it lost money in the last quarter, but is expected to turn a profit for the year.

Think of it this way: if Bezos had started the company himself, still owned all of it, and had taken out every penny in profit, his bank balance would be less than one-quarter of what his shares are worth. Or think of it another way: Apple’s profit for the last quarter alone is well over twice Amazon’s profit over its entire entire existence.

By conventional metrics, Amazon’s earning are so low that it’s almost senseless to talk about them. Amazon’s price/earings ratio? 505. Unable to explain this in any traditional way, commentators tend to descend into the mysticism of the far-off future, talking about Bezos’s “long term” view. That long-term might parallel a human lifespan; Amazon has been a public company since 1997, and seems to be just entering adolescence.

Apple makes so much money that investors are leery of whether it can continue growing. In stark contrast, Amazon has made so little that, paradoxically, it continues to hold out the prospect of limitless growth. The magic of Steve Jobs’s recent years of Apple presentations was that you could rely on Apple to introduce perfectly, gloriously finished products. Bezos has done the opposite: whether it’s cloud computing services or the Kindle, Bezos keeps giving investors works in progress.

Amazon was part of the first cadre of companies to go public before turning a profit. That marked a dramatic break with the past history of the stock market. Since the late 90s, it has made less and less sense to talk about the intrinsic value of a company to predict the movement of its shares. No chief executive has understood that transformation better than Bezos — or benefited from it more.

* Correction: An earlier version of this post said that Amazon had earned $5.4 billion.

Photographer: David Paul Morris/Bloomberg

Jim Hedrick, an advanced organic materials scientist for IBM Research at Almaden, a major IBM research centers.

International Business Machines Corp. for the 20th straight year was granted more U.S. patents than any other company, with 6,478. That’s heart-warming news for IBM. The rest of the list will provide plenty of fodder for discussions of the nation’s place in the world, of the “Is the U.S. falling behind?” variety.

What, though, do the patent rankings mean? One company you don’t see on the top 10 patent list is Apple Inc. Apple does have a fair number of patents. It has been quickly climbing the ranks in recent years, going from No. 46 in 2010 (with 563 patents) to No. 39 in 2011 (676 patents) to No. 22 (1,136 patents) last year. The top 10 chart is below; you can see a top 50 chart here.

Nonetheless, Apple is still not on the top 10 list, and it’s even behind Hewlett-Packard Corp., No. 15 on this year’s list. That likely says more about patents than about Apple. After all of HP’s management mistakes you’re not likely to find many folks who would rather be in HP’s shoes than Apple’s. Patent counts may be a rough gauge of how much attention companies devote to research or research and development; they don’t seem to be that great a gauge of how well that research translates into products.

That’s an irony, since the idea of patent protection was to protect innovators’ position in the market. If you can’t translate your innovation to marketable products, you have no market to protect. You can rise on the patent charts by accumulating patents as a byproduct of building products, or by building products as a byproduct of accumulating patents. The first is the more sustainable plan.

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