Content And Delivery Are Leaders In Current Tech Cycle

by: David Urban

Looking at the stock prices of the companies below what can we infer about the future of technology?

Investing in technology stocks used to be about finding the company dominating a particular category such as Microsoft (NASDAQ:MSFT) in OS and Office, Dell (NASDAQ:DELL) in PC sales, or Intel (NASDAQ:INTC) in microprocessors.

But this cycle in tech is less about controlling a particular area and more about delivering content.

Looking at the closing prices of six tech leaders over the past two years we can glean a lot about who is winning and losing the content delivery battle.

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The two leaders, Apple (NASDAQ:AAPL) and (NASDAQ:AMZN), both have significant amounts of content and devices through which they can deliver their content to end users.

Apple utilizes the iPhone, iPad and iPod to deliver content from the iTunes store to users while Amazon utilizes the Kindle. In both cases the devices are sold at a small loss in order to capture purchases and customer loyalty.

Both stocks have done exceptionally well the past two years as the forces shaping this round - content and delivery - work in their favor.

Yahoo (NASDAQ:YHOO) remains a complete mystery. They have areas were they excel like news, sports, and email yet have difficulties putting together a complete social package. Content pieces are in place yet delivery remains a significant hurdle to overcome and this has been reflected in the stock price. Investors in Yahoo have to ask themselves if the multiple management misfires have significantly damaged the company. Going private at this point in time may be the best solution to rebuild and refocus the brand.

The stock price of Hewlett-Packard (NYSE:HPQ) continues to fall as they miss the product shift away from desktops and laptop toward smart phones and tablets. The tablet only found traction when sold at liquidation prices and without the content to subsidize the low prices. It is unlikely Hewlett-Packard will continue making the tablet. Management missteps have not helped the stock price as investors take a wait and see attitude toward the new strategy.

The stock price of Google (NASDAQ:GOOG) has gone sideways over the past two years as the company struggled to meet the challenges posed by Twitter and Facebook in the social space.

Google is dominant in the search space but previous to the release of Google+ it struggled to create a social offering.

Now with the launch of Google+ and the impending combination of Google's services within one web portal the chart appears to be putting in a base. The next move will likely be up as they maximize the potential of Android and Motorola Mobility (NYSE:MMI) as devices to deliver Google’s myriad of content to end users.

Finally, Microsoft remains the definition of a value trap: A high dividend yield, solid fundamentals and decent growth story overshadowed by a changing market away from Windows.

When I look at the charts of these six tech companies it is apparent that the winners are those companies which hold content and devices to deliver content to end users.

In this new era of technology, firms like Apple and Amazon will dominate with Google ready to join the party. The question for the others is how they combine rich content with delivery to end users. Those that have difficulty answering that question may find themselves relegated to the dustbin.

Disclosure: I am long AAPL.