The main highlight – or should that be lowlight? – for shares this month was the dire performance of many of the biggest tech companies on NASDAQ. This led to a 4.5% decline in the index – although NASDAQ is still up 14.3% YTD. For the main reasons see Falling Apples later.
In the UK, the bright spot was the FTSE Hardware Index that rose 10.4%. This was mainly on the back of a 15.7% rise (recovery) in ARM shares due to some pretty good results this month. Telecomm shares fared less well with a 4.7% decline as BT fell 7.9% (although they have recovered some of that with a 5% rise this morning on the back of Q2 results) and a 4.3% decline at Vodafone.
UK SITS stocks recorded a minor 1.8% fall but are still 22.3% ahead YTD.
Falling Apples
It is very rare for me to report of a torrid month for Apple. It’s also unprecedented to record a company shedding over $100b in value in just six weeks. But Apple shares fell 11% this month to $595 – remember they had hit a $705 high in Sept. First we had the iPhone5 with the associated Maps debacle (See Smartphone woes). Then came the ‘disappointment’ of the high price and lower margins for the much anticipated iPad mini (see Apple mini – Maxi price), a second set of quarterly results that disappointed (see Apple and Amazon disappoint) and finally the firing of two senior executives (See Apple says Goodbye to Forstall and Browett). I was widely reported in The Times, Evening Standard and other media this week on the woes at Apple. The issues facing Apple are those that face other companies all the time – changing markets, growing competition, pressure on margins, succession planning, management growing pains, ultra high expectations etc. But Apple is ‘not just any company’ – it is Apple! Apple has got where it is today after ten years of ground-breaking innovation – iPod, iPhone, iPad. It has to produce another such game-changer next year – which we all suspect will be iTV – if it is to maintain its unique position. It is a big ask…
But Apple was not the only ‘Big Boy’ to suffer. Google surprised the market in more ways than one and saw its share price tank 10% writing some $24b off its value and Amazon also fell by 8.4% Amazon disappoint writing $10b from its value.
Of course, I ought to put HP in the ‘Big Boy’ league but with a market value of ‘just’ $27.2b they are 20x times smaller than Apple. None the less HP shares tanked by 19% this month as Meg paints a bleak picture. Unisys fell 18% (See Unisys hard hit in Q3) and Xerox was 12.3% off (See Xerox lowers guidance again). Even the once mighty Indian players had a bad month with Wipro down 13.7%, iGate down 11.7%, Patni and Infosys both down 10.5%.
UK tiddlers fly
In the UK and at the other end of the performance scales, Quindell shares rose 29%. See Quindell counts chickens. Actually, there are quite a few ‘news’ stories relating to Quindell this month. Their PR machine has been in overdrive. Blinkx shares were up 21% as Exceptional first half boosts Blinkx. But, put into context Blinkx is still down 10% on the year and exactly half the value they had just a year back in Nov 11. I’ve been a long term Blinkx shareholder and it had been one of my best performers. As usual, my mistake was not selling at the ‘right’ time. Maybe I will get another chance? I have long maintained they will be acquired – just as the mother ship Autonomy was.
Other double digit increases were recorded at 1Spatial (up 39%), Triad (up 18%) and Lombard Risk Management (up 16.5%). But, not meaning to be rude, these are all ‘tiddlers’ compared to an Apple.
On an international basis, the only rise of note was BPO pure play Firstsource - up 24% as RP prepared a bid. See Indian energy conglomerate seeks Firstsource buy.
So what do we read into all of this?
The players at the highest value end of the tech scales are facing a ‘make or break’ battle in the mobility sector. Whether you are Apple, Google, Facebook or Microsoft, or the players like HP and Dell that have seen their conventional desktop markets decimated, this really is a race to the death. The ‘problem’ is not even ‘who will win?’. It is rather whether even the winners will find a way of making money from it. Even Apple had to lower its profit margin guidance because its iPad mini faces such strong competition from suppliers like Amazon who are prepared to sell at a loss.
In the more conventional SITS scene, the economic realities continue to affect business and outlook. Maybe the ‘acute’ fiscal problem stage is coming to an end but the chronic pain will be felt in the main economies of the developed world for many years to come.
Tech has been on a pretty good roll for a year or so. Is this just a hiccup? Or are the good days over? If I knew the answer to that Holway would have liquidated his entire tech portfolio in mid Sept. The fact that he didn’t only proves that I’m best when I stick to the day job of ‘industry analyst’ rather than a stock pundit!!