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Tech's Time To Turn?

|Includes: Intel Corporation (INTC)


One of the brightest spots, both in the market, as well as in the economy has been the tech sector. Even with the dismal outlook for jobs, the continued emphasis on cost control and “right sizing” by the corporate sector has meant a stronger outlook for the mainline tech firms like Intel, Cisco, etc., as companies increased their spending in that area.


But a recent article by John Dvorak, a tech analyst for Market Watch suggests the glory days for the old line firms may be coming to an end. I don’t know enough about Dvorak to comment on his veracity, but he raises some interesting and thought provoking points.


Basically, he suggests that as computer hardware becomes more of a “commodity” type item…..sort of a “dumb box”, with the improvements being driven on the software side, and with the increasing durability of hardware, there’s a real risk of a disruption in what has come to be viewed as the traditional computer upgrade cycle. If what he suggests is, in fact, true, firms such as Intel will face increasing pressures, both to their top line, as well as to their bottom line.


Perhaps Intel also is aware of such a possibility, which would explain Intel’s recent purchase of Infineon’s wireless unit, increasing their exposure and clout in an area where they’ve been somewhat of a minor player, to date. Certainly, there’s ample room for growth in the wireless segment, and its not unreasonable to suspect that Intel, with a shift in focus, might not be able to develop the same overwhelming advantage in cell phone chips, that they’ve developed, over the years, in computer chips.


One point that argues against his suppositions is the difference between conditions in the developing markets, as opposed to the developed markets. Certainly, there’s much more room for growth in the hardware segment in the developing world, as compared to the developed economies. Of course, I would suspect that the growth in EMs might be more heavily tilted towards computers more like Netbooks, than to pricier, more sophisticated hardware.



In fact, as technologies converge, I wonder if what may eventually end up as the “next big thing” might not end up being something like a slightly “dumb-downed” smart phone, allowing Chinese and Indian farmers, and African goat herders access both to a telephone, as well as to the internet.

Source: Market Watch


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