Monday, July 13, 2015

Stock Talk - New Tech vs Old Tech

One of the more interesting competitions going on these days is the battle being waged for investors' dollars by old-tech companies (Microsoft, Intel, Texas Instruments, etc) and new-tech shooting stars (GoPro, Facebook, Fitbit, etc). It should be obvious that the new companies are almost all in the software or social media area, while "old tech" patrols the corridors of semiconductors and the "things" of technology. There are exceptions, of course, but that will do for a start.

This may be a false competition. If you talk about hardware, you have to talk about China. The other day I had a close-up look at a drone made by a Chinese company, DJI. Considering the technology and (especially) the price, it's hard to see how any U.S. company could compete. But in software, where facility with the English language is often important, U.S. companies are the leaders. Companies that combine hardware and software skills (Apple) are especially powerful.

There was a time when U.S. companies like Digital Equipment, IBM, and Hewlett-Packard were supreme, but those days are gone. Books could be written (and have been) about the causes of their collapse, but where is it written that the U.S., with 4% of the world's population, must have the lion's share of technology?

Back to the old-tech/new-tech competition. It is up to old-tech companies to adapt; that's obvious. Those that pull it off (the new CEO at Microsoft looks promising) will do well. H-P, on the other hand, has not found its way. Certainly the hiring of outsiders as CEOs at H-P is dispiriting.

Semiconductors, the heart of all the gadgets we know and love so well, are a question mark. If one were a betting man, one would say that the equipment to make semiconductors and the chips themselves themselves will move to Asia, and the best the U.S. leaders (Applied Materials, KLA-Tencor, etc) can hope for are partnerships with Asian forms. Of course, that takes political leadership, and if the Washington gurus insist on taking a "muscular" line with both China and Russia, all bets are off.

I will say more about the high-tech market in future posts.