If you blinked over the past couple of quarters, you likely missed some very significant changes within the tech sector. But it should have come as no surprise as the market has been hinting at this shift for the past couple of years.
It started with the proclaimed “death of the PC.” While the PC is still broadly viable, it is fair to say that its once ubiquitous nature is on the decline.
While it has taken 10 years to fully become a reality, there are a few companies that stand to benefit quite a bit from this ongoing shift, some more than others. Here are four of them.
It goes without saying that Apple, which has contributed to the demise of the PC and sending names such as Hewlett-Packard and Dell to the bin of the irrelevant, has to be at the top of the list.
Its iPhones and iPads continue to lead a new wave of smartphone and mobile device proliferation that now includes Microsoft, Google, and presumably Amazon.com.
However, Apple’s most impressive accomplishment continues to be in markets it has yet to dominate. The company understands the only guarantee on Wall Street for market leaders is they don’t remain market leaders forever. For this reason, Apple continues to push the envelope while seeking to produce products that consumers have not yet realized that they can’t live without.
The result is what we are now witnessing where its rivals want nothing more than to put Apple out of business. The irony in all of this is that it means its rivals are also worthy investments.
Take, for example, Microsoft , which has adopted a new business model where it has essentially said to its partners in HP and Dell it’s every man for himself.
What this means is the company is not only willing to change with the times, but it is willing to grow even if it means risking is current relationships.
What this says to investors is that Microsoft has a considerable amount of confidence in its ability to enter new markets while preserving its existing market share in areas such as the enterprise and the home consumer markets.
Microsoft, like Google and Amazon , has adopted the idea that “if you can’t beat them, join them.” This was the mantra when it decided to enter the tablet war by announcing Surface.
Apart from Amazon and its Kindle Fire, nobody has been able to make a dent in Apple’s tablet dominance except for maybe Samsung’s Galaxy tablet, which relies heavily on Google’s Android OS.
Microsoft saw the impact that Amazon was able to make in such a short period of time and figured a unified platform was the way to go.
Also, though Microsoft rarely gets the mention the other three enjoy, the fact remains that Microsoft still has a business with very good returns on capital and excellent cash flow. What’s more, it pays an excellent dividend.
Google, on the other hand, has very little to worry about in terms of ink. Very few companies are in the news more than Google and, in fact, there aren’t that many from which investors have come to expect more.
But what Google does better than most is deliver on its promises, including an average of more than 30 percent revenue growth over the past five quarters.
In its most recent quarter, the company generated a net income of $2.79 billion, or $8.42 per share, on revenue of $12.21 billion — topping analysts’ estimates of $8.41 billion.
Though its earnings per share fell slightly short of expectations, the number represented an increase of almost 10 percent from the previous year while its net income climbed more than 11 percent annually.
Like Apple and Amazon, Google continues to demonstrate what is possible when innovation meets sound execution. Its challenge is to continue adhering to its mission of “velocity, execution and focusing on the future.”
As I’ve said previously, if it can do that, the company will remain a force to be reckoned with for many years to come as it has yet to reach its full potential.
The same thing can be said about Amazon, a company I think investors should start appreciating for how hard it has worked to reach bellwether status in both technology and retail. Not many companies have been able to do that in one sector, let alone two.
Amazon seems to get moved to the back burner when discussing Apple and Google. But that is not because it is not dominant in its own right. The company is without question one of the best tech stories today. Not only is it a wonderful company but, in my opinion, it has one of the top three visionary CEOs in Jeff Bezos.
The company has always demonstrated a commitment to tackle new markets and to seek growth opportunities. The only concern for investors has been with its stock price, one that has been expensive now for quite some time.
However, the company has shown an ability to overcome the pressures of expectations and has not only met them but continues to exceed them. So an argument can be made that perhaps the stock has not been that expensive after all.
As perfect as it must be to maintain its lofty valuation, it seems the company is executing to perfection. In terms of reported sales, there aren’t many companies the size of Amazon producing the level of growth it has demonstrated. I don’t see this suddenly changing, especially as it seeking to launch a bigger Kindle tablet along with a smartphone.
As with Apple, Google, and Microsoft, Amazon continues to push the envelope to seek new markets and maintain its growth trajectory to return value to its investors.
The next four years will be a critical time for each of these companies, a time of getting through a possibly saturated mobile device market and furthering their respective cloud strategies.
What is clear is they will be four of the most dominant names within not only the tech sector, but in the entire market. Investors would be wise to make certain that they are anchors within their portfolios.
—By TheStreet.com Contributor Richard Saintvilus
Additional Views: Apple-Google War Escalates: Analyst
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Disclosures:
At the time of publication, Richard Saintvilus was long Apple and held no position in any of the other tocks mentioned.