Some Tech Rivalries Are Win-Win

 | Oct 26, 2011 | 10:48 AM EDT  | Comments
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This economy is not a Wild West town. There is room for more than one player. I am thinking of Intel (INTC) vs. Arm Holdings (ARMH), and Amazon (AMZN) vs. Apple (AAPL), and Google (GOOG) vs. Apple -- three rivalries that may very well not produce any losers at all.

It is tempting to believe, and I know I have at times wavered on this, that Arm Holdings, with its Apple relationship and its intellectual-property licensing model, is going to stop Intel's made-it-and-build-it strategy. I have been tempted, because Intel is linked to the personal computer and to Microsoft (MSFT)-based software (even though it has an Apple model for desktops), while Arm Holdings' chips use little battery power, courtesy of its decision long ago to concentrate on the smaller cellphone form factor, not the larger PC-based form factor.

But you know what? While the Intel market is slower, it is gigantic, and it is moving into smaller form factors -- witness the Ultra discussion on the conference call. Intel is cheap. It generates a monster amount of cash flow, and that dividend is going to keep going higher.

Arm Holdings has a ton of share to take and a terrific model, but it is pricey. My take: You want income and consistent growth? Intel is for you. You want high growth with all the high risk that comes with it? Go with Arm.

People are disappointed this morning with Amazon. I am not. I see what Amazon has to do. It has to destroy brick-and-mortar retailers worldwide, not just in the U.S., and for that, it must hire like mad and build fulfillment houses at a blistering pace.

It also has to stay ahead of the game against Apple with the tablet, and yes, Barnes & Noble (BKS) with the Nook, and I think the Kindle Fire will do just that. With a price point below the cost of production, it will sell extremely well. Amazon is going with the razor-and-razor-blades model of Gillette, and I say "brilliant" -- that's what is needed.

So I am not concerned about short-term margins or profitability. This is one of those dips you have to accept if you own the stock.

Meanwhile, I see Apple doing everything right going forward, even as I did not like this quarter, and when it comes to numbers -- not product line --  I am a little concerned. But that's why the stock sells at a ridiculously low multiple. Many people have misread me on Apple, including the Twitter-rati. I had a model for Apple. It said that the company could earn more than $45 in the 2012 fiscal year. It now appears that the company doesn't have that earnings power. That's what is disconcerting to me. But I am not worried about competition from Amazon.

I would normally be worried about Google and Apple, because I think Android remains a winner, and I think it can battle the iPhone in the smartphone wars. However, as with Amazon vs. Apple, there is plenty of room for both. The smartphone share-take is the biggest story globally, and Android and the iPhone have plenty of room to crush others and move to a duopoly of world domination.

In sum, there's room for all because the rest of the competition is being crushed, not these three players. They can all be bought when they go down. They are the future.

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