2012 Tech Halftime Report

This article is part of the Fool's Halfway Through 2012 series, in which we review how sectors have done since January and see what's coming for the rest of the year. Click here to read all of the articles.

It was a wild first half of 2012 for the technology sector, and the second half of the year promises to be even more intense.

New gadgets, software, and developments will keep tech-stock investors on their toes in the coming months, and it's not as if they had much of a chance to sit down during the first few months of the year.

A look back
It was a tale of two quarters during the first half of 2012. After closing out 2011 in strong fashion, tech stocks led the market higher through the first three months of the year. The tech-laden Nasdaq Composite cranked out a whopping 18.7% gain during this year's freshman quarter, and Apple (Nasdaq: AAPL  ) played a starring role.

The country's most valuable company in terms of market cap saw its stock soar 44% during the first three months of the year, fueled by robust iPhone 4S sales and the introduction of the new iPad in March. By the time Apple peaked in April at $644 -- a hearty 59% higher year to date -- investors began to rotate out of technology companies. After posting back-to-back quarters of double-digit gains during last year's holiday quarter and this year's buoyant first quarter, the Nasdaq Composite retreated 5.1% during the second quarter of 2012.

The scapegoat has a fan page
Facebook's (Nasdaq: FB  ) poorly received IPO didn't help. The mid-May debut of the world's largest social-networking website as a public company was supposed to be a crowning achievement of the Web 2.0 revolution, where interactivity and visitor-generated content were celebrated.

Unfortunately, investors were more concerned about Facebook's beefy $104 billion IPO valuation than they were tantalized by the site's 900 million-plus active users.

As Facebook crashed below its $38 IPO price, the market soured on both IPOs and technology companies. Several weeks went by before any company dared to go public. Temperatures outside were heating up, but the same couldn't be said for tech stocks.

July is already off and running
There's no such thing as summer doldrums when it come to tech. We're just weeks into the second half of the year, but we've already seen landscape-altering news take place.

Let's start with Google's (Nasdaq: GOOG  ) Nexus 7. The Android tablet is smaller than the iPad, but it also costs less than half as much.

Another big move was Yahoo!'s (Nasdaq: YHOO  ) decision to bring on Google's Marissa Mayer to serve as its CEO. The market generally likes the move, even though Mayer becomes the meandering dot-com pioneer's fifth CEO in as many years.

Two things that will shape the second half of the year
The market has learned to look beyond Facebook's valuation challenges. A few recent tech IPOs are even off to encouraging starts. The July events are also gradually fading in the distance.

There are a couple of major events from tech bellwethers that will dictate the direction of tech stocks during the balance of 2012. Let's check them out.

  • Windows 8: Microsoft's (Nasdaq: MSFT  ) new operating system is already turning heads. It helps that it doesn't have to restore the credibility of the Windows platform as a viable operating system. Windows 7 did that after updating the critically reviewed Vista. However, Microsoft is still raising the bar here with a new operating system that plays nice with both PCs and tablets. Windows 8 will ship to Microsoft's partners in a few weeks, and the retail packaged version will hit stores by October. The software giant's offering dirt cheap upgrade pricing to assure that Windows users will move up early and often. If the buzz builds, we may even experience an uptick in PC and laptop sales after sluggish global demand. It's obviously not just Microsoft hoping for Windows 8 to be a big hit.
  • The iPhone 5: We don't have a firm date on Apple's next smartphone update, but the class act of Cupertino knows that investors will get antsy if it's not out by October. Apple now has the two largest wireless carriers in this country on the speedier 4G standard, and some of Apple's iOS 6 features go from being merely evolutionary to possibly revolutionary.  

The next few months will be huge for tech. Pay attention.

Out with the old and in with the new
Facebook's IPO was an early disappointment, but there have been big winners out of the debutante pool. A new report details one of last year's hottest IPOs. The report is free, but it won't be around forever, so check it out now.

This article is part of the Fool's Halfway Through 2012 series, in which we review how sectors have done since January and see what's coming for the rest of the year. Click here to read all of the articles.

The Motley Fool owns shares of Facebook, Apple, Microsoft, and Google. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Microsoft and creating bull call spread positions in Microsoft and Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.


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