Daily commentary: Tech sector
OK. So this is the last links post for today. The headline is on the tech sector but I am putting the remaining links in here as well. The great thing about micro is that when you step away from the scary macro headlines, there is a fair bit of competition and innovation going on in the world. The technology sector is a big part about that. What are the negatives there? Valuation for some of the high flyers like Amazon or Facebook. I also see the acceptability of patent trolling by big tech companies as an anti-competitive sign that could wreck the sector’s innovation. But on the whole, tech looks good. Valuations are relatively low, more in line with the market than at any point in the last two decades. And slower growth tech like Microsoft and Cisco are paying dividends. Even Apple is distributing money to shareholders. That’s a sign that there could be fewer value-destroying takeovers like the one that Microsoft has just written off.
For me, the worry has to be macro because on the micro level, there are still a lot of good storylines in tech.
On Apple specifically, my call has been that Apple will eventually face a point where it will be forced to go for share or maintain margins. When it decided to maintain margins in the PC business two decades ago, it was disastrous. But, now Apple has a market leader status in mobile, so maintaining margins rather than share won’t be fatal. It will, however, negatively impact growth.
Mobile users with cheapie phones will switch to Android. Apple is not going to chase share in that market. But in the tablet market it could do. While Amazon is creating problems for Google by customizing Android and forking it into a non-Google dominated platform, Amazon powered hardware still requires Android software and apps and that gives Android economies of scale and network effects which will erode Apple’s dominance (see my comments from last year). Google’s entering the tablet market itself increases this more directly. The reason that Apple is suing the pants off of Samsung is because they want to stop the Android menace, not just because Apple thinks Samsung has infringed. I see Apple going down-market in tablets and we’ll have to see how well they execute and whether it cannibalises sales.
P.S. – this has nothing to do with the passing of Steve Jobs. Apple was always going to face a margin/share quandary.
- Patent ‘Troll’ Tactics Spread – WSJ.com
- Apple faces big dilemma on mini-iPad – FT.com
- Galaxy Nexus to go back on sale next week, says Google
- Amazon Said to Plan Smartphone to Vie With Apple IPhone – Bloomberg
- Microsoft stumbles into crucial financial year | Reuters
- Samsung’s Galaxy powers record $5.9 billion profit; euro a worry | Reuters
- Samsung’s Galaxy phone drives record $5.9bn quarterly profit – Telegraph
- Judge who shelved Apple trial says patent system out of sync | Reuters
That’s it. Here are the other links.
Links Commentary: Libor Scandal
I think this Libor Scandal has the potential to be the nail in the banks’ coffin as far as public opinion is concerned given other bank shenanigans.
- I too fell for the Diamond myth – FT.com
- Whistleblower: ‘The culture ultimately comes from the top’ – Business News – Business – The Independent
- The Consumerist » Bank Of America Tries To Undo Foreclosure On Home It Didn’t Hold Mortgage For, Fails
- Libor scandal: Serious Fraud Office opens investigation – Telegraph
- The Real Testosterone Junkies | ZeroHedge
- Yes, Virginia, the Real Action in the Libor Scandal Was in the Derivatives « naked capitalism
- The Consumerist » Report: Bankruptcies Dropping Toward Pre-Crash Levels
- Most fraud is committed by bosses | Business | guardian.co.uk
- Surveillance State evils – Salon.com