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An interesting viewpoint from an analyst firm about why HP is doing
well, Dell is not; and why AMD is doing well, but Intel is not. It was
written in Barron's.
Technology Tilts to Upscale
Caris & Co.
1250 Broadway, 27th Floor
New York, N.Y. 10001
(Tel) (917) 464-1600
THERE IS A POWERFUL DYNAMIC in the technology business that is required
to explain many recent developments -- at times customers actively seek
out more-expensive and more-capable products while shunning lost-cost
products that are viewed as obsolete. In periods of rapid change, like
now, many people will spend more to buy "future" protection.
This preference for high-tech over cheap-tech is clearly evident in
today's PC and server markets -- to the advantage of Hewlett-Packard
and the detriment of Dell -- as well as in the television-set market to
the benefit of Sony and in the smartphone market benefiting many,
including Palm, Research in Motion, Motorola, Nokia, Sony-Ericsson and
Qualcomm.
This tilt toward high-tech is likely to stretch into 2007-2008 and
possibly beyond -- depending on the pace of the combined upgrade cycles
to Windows Vista, Virtual Computing, high-definition media and
smartphones. Each of these upgrades is massive on its own and arguably
without precedent in the respective markets. Taken together, this broad
upgrade cycle -- to support the global expansion of digital services --
is the most important change in technology in the past five to 10
years, in our opinion.
Recent reports of inventory buildups and potentially missed quarters in
PCs have been combined with wildly contradictory indications of
component shortages and rising final product average selling prices.
What's going on here? We believe the best explanation is that Advanced
Micro Devices' high-tech is beating Intel's cheap-tech in the market --
leading to misses for those dependent on Intel that have probably been
exaggerated by AMD's "sold-out" condition.
Another potential casualty of this high-tech tilt is Apple Computer.
Dependent on subsidies to maintain its Macintosh margins, Apple has
switched from IBM's subsidy to one from Intel. Unfortunately, Apple's
high-prices are exposed now that its 32-bit Intel products are
demonstrably inferior to competitors using 64-bit AMD microprocessors.
The ability to run Windows XP -- via the just introduced "Boot Camp" --
on a Mac is likely to lead to a series of unfavorable comparisons,
highlighting Apple's weakened competitive position as the PC world
moves past XP toward Vista.
We recognize that investors who have been trained to only expect steady
price declines and even price wars will find this shift towards
high-tech counterintuitive. As a result, many may be inclined to miss
opportunities and/or to exit strongly performing stocks too soon.
We suggest that H-P's aggressive use of high-tech AMD in both its PCs
and servers will be a continuing reason to prefer its stock to its
cheap-tech rival Dell.
well, Dell is not; and why AMD is doing well, but Intel is not. It was
written in Barron's.
Technology Tilts to Upscale
Caris & Co.
1250 Broadway, 27th Floor
New York, N.Y. 10001
(Tel) (917) 464-1600
THERE IS A POWERFUL DYNAMIC in the technology business that is required
to explain many recent developments -- at times customers actively seek
out more-expensive and more-capable products while shunning lost-cost
products that are viewed as obsolete. In periods of rapid change, like
now, many people will spend more to buy "future" protection.
This preference for high-tech over cheap-tech is clearly evident in
today's PC and server markets -- to the advantage of Hewlett-Packard
and the detriment of Dell -- as well as in the television-set market to
the benefit of Sony and in the smartphone market benefiting many,
including Palm, Research in Motion, Motorola, Nokia, Sony-Ericsson and
Qualcomm.
This tilt toward high-tech is likely to stretch into 2007-2008 and
possibly beyond -- depending on the pace of the combined upgrade cycles
to Windows Vista, Virtual Computing, high-definition media and
smartphones. Each of these upgrades is massive on its own and arguably
without precedent in the respective markets. Taken together, this broad
upgrade cycle -- to support the global expansion of digital services --
is the most important change in technology in the past five to 10
years, in our opinion.
Recent reports of inventory buildups and potentially missed quarters in
PCs have been combined with wildly contradictory indications of
component shortages and rising final product average selling prices.
What's going on here? We believe the best explanation is that Advanced
Micro Devices' high-tech is beating Intel's cheap-tech in the market --
leading to misses for those dependent on Intel that have probably been
exaggerated by AMD's "sold-out" condition.
Another potential casualty of this high-tech tilt is Apple Computer.
Dependent on subsidies to maintain its Macintosh margins, Apple has
switched from IBM's subsidy to one from Intel. Unfortunately, Apple's
high-prices are exposed now that its 32-bit Intel products are
demonstrably inferior to competitors using 64-bit AMD microprocessors.
The ability to run Windows XP -- via the just introduced "Boot Camp" --
on a Mac is likely to lead to a series of unfavorable comparisons,
highlighting Apple's weakened competitive position as the PC world
moves past XP toward Vista.
We recognize that investors who have been trained to only expect steady
price declines and even price wars will find this shift towards
high-tech counterintuitive. As a result, many may be inclined to miss
opportunities and/or to exit strongly performing stocks too soon.
We suggest that H-P's aggressive use of high-tech AMD in both its PCs
and servers will be a continuing reason to prefer its stock to its
cheap-tech rival Dell.
-- this is no better nor worse than the