The switch from the PC to the device era is happening faster than even optimists expected.
Devices are being adopted 10 times faster than PCs were in the early 1980s, when if you (or your dad) recalls the PC was voted Time "Man of the Year." An analyst company called Flurry also estimates take-up to be at double the rate of Internet adoption at its height, and three times the rate of social network adoption.
Why? Partly because we're familiar with the computer-Internet metaphor now. Partly because devices are much more rugged than PCs ever were. And partly because of price -- in the 1980s PCs usually cost more than $2,000 in 1980s dollars while even high-end devices (like an iPad with extra memory) cost less than $700 at retail.
The U.S. and China remain the largest market for devices, but demand is also growing at more than 200% per year in Latin American countries, and at nearly that rate in places like Vietnam, Iran and Mexico. In other words, this is a global phenomenon, and just because we may be approaching saturation in the U.S. doesn't mean the game is over.
This isn't sales we're talking about. This is activations, connections to mobile networks.
On the other side Sterne Agee is taking down its estimates on both Intel (INTC) and AMD (AMD), citing weak PC demand. That doesn't mean the industry is dead - it means PC sales will be flat year-over-year. Analyst Vikay Rakesh says Intel's stock price is being held up by buy-backs, which can't continue absent earnings momentum, and with iPad prices approaching $400 and headed down from there, AMD is in a world of hurt.
This rapid ramp-up in demand may help explain the recent gains at such companies as Sprint (S), AT&T (T) and Verizon (VZ), which are all booking new sales without having to buy a lot of new gear to meet demand. That will come later, and I still see those stocks as having unsustainable business models.
The question investors have to ask is when might this market reach saturation? At what point do buyers move from demanding features to demanding value? The answer, right now, is not yet.
As to specific recommendations, I think GOOG would have fallen farther in the wake of the Samsung verdict without this demand increase, and that AAPL may have even further to run in the next year.
At some point, however, product momentum will slow, and investors need to be on the look-out for that point, looking closely at revenues from services and content for hints of where to go.
Of all the companies mentioned, I'm currently strongest on GOOG. Tell me why I'm wrong in the comments.