To save themselves from quick deaths caused by obsolescence, tech giants have mimicked one another's moves to the point that the biggest difference between the companies centers on whether their tablet's power button is on the top or bottom. Add app stores, word-processing suites, cloud services, cell phones, and enterprise services to the mix, and an investor can easily think that any one of these companies is an easy portfolio substitute for another. However, you should be careful when selecting a tech giant for your portfolio, because fundamental differences remain in each company – even if the product portfolio looks the same.
A tableau of tablets
Take the current tablet industry, for example. Amazon.com (Nasdaq: AMZN), Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG), and Microsoft (Nasdaq: MSFT) all have (or soon will have) their respective version of a tablet: the Kindle, the iPad, the Nexus 7, and the Surface. Somehow, Research In Motion (Nasdaq: RIMM) is still selling its BlackBerry PlayBook. Not all these tablets will exist in a decade, or even in five years (the PlayBook will be lucky to make it through 2013). And there's a reason some tablets will fare better than others.
What is that reason? A company's core competency. With the multitude of product and service offerings that often mirror each other, investors can forget that each tech company once had distinct advantages that are still ingrained at the base of a company's culture. These specific traits that cause each company to outperform are what make each company unique, and what makes some companies better long-term investments than others.
By looking at the basic differences in each company, not only can we guess where a company will succeed in the future, but we can also simplify the argument for one tech investment over another.
The simple picture
This is where it gets fun, a little subjective, and emotional. The important thing is to have facts to back up your choice of core competency. Again, remember, these are my reads on what each respective titan does best.
|
Company |
Core competency |
|---|---|
| Amazon.com | Customer service |
| Apple | Customer-centric design |
| Innovation | |
| Microsoft | Momentum |
Amazon's customers love the online shopping service so much, they pay a yearly fee through Amazon Prime to shop more. Pushing logistics to the bleeding edge, warehouses are being staffed by robots to ship products faster and make customers even happier. Whether it must charge sales tax or not, Amazon knows how to appease customers, especially with physical goods.
Apple's computing interfaces are so intuitive that both babies and the elderly can pick up an iPad and become hooked on Angry Birds within seconds. Pioneering digital-goods marketplaces through iTunes and the App Store, design has allowed Apple's iOS to be very lucrative for both developers and the company.
Google began with search and has moved on to self-driving cars and glasses with computers built-in. While not the most elegant software, when Google's technology proves more enjoyable for consumers, like Gmail or Google Chrome, it can easily displace industry standards.
Microsoft shackled computing early on and has provided products that have been decent enough to make transitioning from the previous version less of a hassle than retraining users for a completely new system. It can easily acquire technologies and businesses that it sees as important for a continued stranglehold.
Future outcomes
With this broad, high-level view of each company, how will the future shake out for something like the tablet industry? It seems that Microsoft is losing its momentum, with a very small percentage of mobile users, and PC shipments in the U.S. falling 6% in the latest quarter compared with Apple shipments rising 4%. This number doesn't even count iPads. As Microsoft looses its lead in desktops and laptops, consumers will feel freer to step outside the traditional Microsoft-based path.
While Amazon's original Kindle allowed users to carry all of their books in one device, this was really capitalizing on its edge of superb customer service. Amazon sees the tablet as a means of content consumption, whereas Apple has recently stressed the content-creation aspect of its iPad. With tablets substituting for laptops, content creation will be an important aspect for future tablets, and Amazon's core competency may not help deliver results for this trend.
Google's innovation may be able to produce features that entice customers, but success also depends on how it handles customer service. Google must convince customers to purchase its tablet without the customer service track record of its competitors. However, Google seems to be one of the most likely to begin the next computer revolution with Project Glass.
Apple's core competency of design seems to reign for the immediate future, especially in a segment like tablets. Some say the fashionable Apple could lose its popularity as consumer preferences change. The great thing about Apple, however, is that it dictates design to customers, instead of designing to customers' wants.
And beyond tablets
You can come up with whatever core competencies you believe embody a company against competitors and use it across industries to help you further sort out potential investments. In this exercise, while it seems Apple and Google come out on top of the tablet segment, don't forget that there are plenty of other segments that these companies are involved in, and take those into account for a more holistic picture of potential outcomes.
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