Blackberry, Nokia, Kodak, that is, without innovation does not exist - Banker

In the electronics industry the “too big to fail” is not applicable. Motorola and Nokia, which a decade ago were giants, are now owned by Google and Microsoft, respectively. Following the disclosure of the loss of $ 1 billion. company went under the hammer Blackberry, which is still four years ago was one fifth of global phone market.

rule of survival in the new technologies are very simple. It’s like riding a bike – when you stop, you fall. The fate of Nokia and Motorola, which a decade ago concluded that the phone is only used for calling. Today, both companies are owned by larger players – Microsoft and Google.

It’s a little scary that companies that produce real goods, such as mobile phones, are absorbed by virtual corporations that cease to exist after pulling the plug. Several years ago, when Microsoft Windows was primarily a manufacturer, and Office, and Google search engine that has not yet earned himself such a state of affairs was difficult to imagine.

Innovation or Death

Unfortunately for technological dinosaurs, the trend is very clear. Market will acquire companies that are not afraid to innovate and own the patents and know-how, not the factories that make the device. Technology companies that do not keep up with the trends in the consumer market, they must – as HP, Dell and IBM – to specialize in corporate clients, or – as Eastman Kodak and Canadian Nortel – they will ask for protection from its creditors.

Even Microsoft, which has taken over Skype and Nokia, have to worry about competition, because the race is not at the forefront of innovation. It is symptomatic that the news of the resignation of Steve Balmer’s share price has increased significantly. The company actually has only one unrivaled, global product: Office. Last groundbreaking operating system that has achieved success, released in 2001 under the name of XP, and more views are only more or less successful allusions, accompanied by bells and whistles. The rest of the company derives revenues primarily from patents and Xbox.

Computer games best investment?

new edition of Microsoft’s console, however, met with criticism environment players, mainly due to the very restrictive approach to intellectual property rights and unfair restrictions on users. The turmoil have taken advantage of Sony, whose PlayStation 4 so far collected mostly positive reviews. Sony also is a dinosaur, but, unlike the Panasonic losing market under the leadership of new CEO Hirai Pledges trying to restructure. Asian corporate high hopes she sees in the electronic entertainment market.

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Video games are for Sony and Microsoft’s lifeline, because the market is growing fast. Already, the value of e-entertainment industry is comparable to the entire production of Hollywood. A few days ago, the world became news that sales of GTA V, the iconic title from Rockstar Games, in three days of release reached $ 1 billion, while the cost of production is only 256 million dollars. For comparison, during the first three days screening in cinemas last year’s blockbuster “The Avengers” grossed just over $ 200 million.

GTA V reached a record sales result in the history of the entertainment industry. Shares of each studio – Take-Two Interactive – increased at Tuesday’s session by 5 per cent., And in the last year rose by 60 per cent. Manufacturer hit World of Warcraft, Activision-Blizzard has given a year to earn 40 percent of shareholders., A giant Electronic Arts sports games at the same time as 97 percent.

Electronic bubble? Not this time

Change in% share price during the five years

Stock market valuation tech giants slowly approaching the valuations seen during dotcom bubble in 2001, when the Nasdaq reached a level of over five thousand. point., to the collapse fall to two thousand. point. Currently, of 3.75 thousand. point. and still growing rapidly.

But the difference is substantial. At the turn of the twentieth and twenty-first centuries of “technology” had more to do with science fiction than real business – just not yet earned serious money. Shareholders bought the future – as it turned out, distant more than a decade.

price to earnings ratio for the Nasdaq from the peak of the Internet bubble exceed 100 It is now 21, and taking into account the projected earnings for the next four quarters of 17.6. For comparison, the current PE ratios for DJIA and S & P500 is 16 and 18.5.

It seems that the premium for innovative technology companies is not detached from the foundations and we still have to deal with rational valuations. However, investors holding shares as leading technology companies can not use the strategy “buy and forget”. In such a dynamic market may turn out that for the next decade, Apple, Samsung and Facebook will be other relics of the past.

Jaroslaw Fish

Bankier.pl