Saturday, May 14, 2011

Get switched on

Hello again!

I have been keeping a low profile, letting my investments look after themselves. It is now time to do a health check on a couple of my stocks, checking that they are still as attractive as when I first bought them.

Here are my thoughts:

Apple - ridiculously cheap. Maybe people think it is too big to grow but it has an enormous PC market to eat up and enormous populations like India and China to sell phones to. Once people get used to the iOs platform it will be inconvenient for them to switch to Android or Phone 7. This means hundreds of millions of people will be buying Apple products as long as Apple keeps on making them desirable. That is the risk - what if a competitor releases a hit product? Well the Android smartphone is that product but this world is big enough for both of them. Blackberry and Nokia will have to feed off the remaining scraps.

Google - cheap and plenty of growth left. If you think that Google is too big to grow then you are wrong. Google has an ability to innovate that Microsoft can only dream of. Take the upcoming Chromebook. This is a cheap netbook that stores all your data online (in the cloud) rather than locally. Most of us have had an experience of losing data because of a hard disk failure or accidental deletion. With the Chromebook this will become a thing of the past. What about when you cannot access the internet? I suspect that there will be a way of caching your work locally and working offline for a time. However if you get a 3G Chromebook it is unlikely that both your broadband and mobile operator will be unavailable at the same time.

How hard would it have been for Microsoft to produce a product like this? Not very hard actually but Microsoft seems to be stuck in an eternal cycle of endless iterations and incremental improvements rather than innovation. The world is changing and Microsoft is being left behind. Unless it accepts that it needs to get involved in the hardware side and produce products that look and feel good as well as having good software it is going to get beaten by Apple and Google.

Microsoft has finally realised this with its Phone 7 product and so is collaborating with Nokia. It had better do the same with PCs or it will be toast.

One other big advantage of the Chromebook is that it updates itself. Can you remember giving up a weekend to re-install the latest version of Windows? This will also be a thing of the past as the Chromebook quietly updates itself in the background.

Google seem to realise that people don't want to think about the operating system - they just want it to work and quietly let them get on with surfing the Web or listening to music.

Google realise this with their Chrome browser. People don't want to think about a browser, they just want to surf the Net as fast as possible with as much screen real estate as possible. People don't want to spend an hour upgrading to the latest browser version so Chrome quietly does this for you in the background. And the better people's internet experience the more time they will spend online potentially clicking on Google's sponsored links.

There will come a time when Google and Apple are the giants of the consumer PC world and Microsoft will be able to play the role of innovative competitor. The path to that situation should be a fun one for Google and Apple investors.

So there you have it. Leave your boring, low-yielding savings accounts behind and invest in the future!