There was discussion here a while back about the divergence between the national economy and national stock markets, as companies represented in the latter become increasingly international in their revenues, expenses, and capital sources. There was some discussion as well about the impact that such a disparity would have on the relationship between corporate shareholders and (actual or prospective) corporate employees, or, if you will, “Wall Street” and “Main Street.” The quarterly results posted by Intel (INTC), which were interpreted by Wall Street to be wildly positive and which likely presage similar results from Apple (AAPL), Dell (DELL), and other vendors of computing and entertainment technology, may be an indication of another divergence in the making: the importance we assign to household hardware, and the impact of such prioritization on a global scale.
On one hand, there is the refrigerator, the microwave, the television set, the car, and on the other there is the intelligent device – the desktop or laptop or tablet computer, the smartphone, and, in support of these and other information receiving and transmission assets, the server farm and its growing “cloud.” Despite – or maybe because of – a soft economic environment, consumers and businesses seem increasingly willing, even anxious, to upgrade their modes of information management; and the latest digital communication tools are increasingly becoming a “necessary” rather than “discretionary” expenditure.
Granted, it is far cheaper to purchase the new iPhone than a new refrigerator, and there is no need to upgrade a refrigerator with frequency. But is there really a “need” to upgrade one’s smartphone or desktop unit often? And is the “need” for interactive information really as profound as that of preserving the edibility of food? We have not yet seen GE’s (GE) numbers, but based on Apple’s sales results and Intel’s quarterly release, the answer seems resoundingly affirmative. Based on the news conference that Apple considers necessary to address a minor iPhone antenna imperfection, this device is being taken by popular culture very seriously, much more so than a toy, and any real or perceived flaws are not to be dismissed as marginal.
In short, the importance of such devices and their related tools and applications to consumers and businesses have begun to – perhaps “dominate” is too strong a word – certainly escalate in the order of spending priority, to a point where these are now as non-discretionary as the television set or cable service. As this occurs, and as the strength of what used to be a specialized segment expands to mass market status worldwide, the boost to information technology could be significant. At the national level, the depicted trends could further the growth of media and associated innovation segments that, for a long time, have been for the United States areas of global leadership. Here we have been consistent exporters, and the continuation of popular and business trends exemplified by Intel and Apple could solidify this position or even extend it on the global stage.
And so, as we look internally to the possible divergence between Wall and Main, as noted, there may be another sort of divergence taking place on an external, international, level: that between the growing value of popular technology on one hand, (which is beginning to include alternative energy), and the commoditization or, in some cases, obsolescence of lower tech items. In this also, the consequences of divergence may not yet be fully understood.
Disclosure: No positions.