Doesn't this bother anyone? It seems every consumer technology business is suddenly focusing on areas it didn't used to. Nokia
Each is focused on capturing a significant portion of these new segments, though, it's not as if any of these segments were simply laying fallow. Sony
And it seems that every single one of these devices offers some form of camera functionality on them. Kyocera
It's consumer electronic soup
Oh, sure, you have the occasional unadulterated success. Apple's
All of this comes to mind after Nokia's warning sent it skidding more than 18% yesterday. Some pundits said that the company's fumble gives its rivals an opportunity. One analyst noted immediately that Nokia's claimed overdependence on lower-end models opens the door for Motorola
Good business screams diversity?
Which brings me back to the Dells, Hewlett-Packards, and Gateways of the world. They're fighting middle age in the PC business -- the overwhelming majority of households in the developed world that would want a PC already have one. Where Dell once had a negative cash conversion cycle for its products, it's now running larger receivables and inventories. And yet the company trades at a price-to-reported earnings (which ignore options grants) of 34, a price-to-free cash flow of 32.
That's a price that suggests very good things, but corporate actions at Dell and its biggest competitors -- including price competition, huge rebates, and kind financing terms -- suggest that their core PC businesses are not exactly hopping. This at a time when money supply is priced at what James Grant calls "an emergency rate." I look at the drive by these companies to diversify out of their core businesses into already extremely competitive arenas, and the whole thing screams "overcapacity" to me. And yet Dell, Motorola, and other companies have high P/E's, which means that investors expect them to turn in exceptional growth levels.
I just don't see where it will come from. This doesn't mean that it isn't out there, but I just don't see it. What I do see is enormous overcapacity, even without considering that rumbling we all hear as the Chinese consumer electronics manufacturers continue to increase their exports overseas.
"I'm not dead yet"
By the way, this past week, in discussing the most recently announced changes in the Dow Jones Industrial Average, I noted (with no small amount of bemusement) that, had the index not rather regularly made adjustments, we might still be tracking Laclede Gas, one of the first component companies.
Well, we should let no undignified jape go unpunished, for it should be pointed out that, though Laclede is not currently a candidate as a dominant American company, it hasn't been assigned to the ash heap of history, either. To wit, Laclede Group
Want to see what income-producing company Mathew Emmert unearths next? Take a free trial to Motley Fool Income Investor.
Bill Mann owns none of the companies mentioned here. He wonders whether the folks who decided how to spell stuff made "dyslexia" so hard to spell just to mess with dyslexics. The Motley Fool is investors writing for investors.