Question: Who will be the biggest gainers and losers in the tech sector for 2013?
Even if some of the gains have evaporated in the second half of the year, 2012 has still been a pretty solid year for tech stocks. On Wall Street, though, no good deeds go unpunished for long, and there will certainly be some losers in 2013. While crystal balls are still in short supply, these are some stories that investors might want to approach with some caution in 2013.
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WinTel (Microsoft (Nasdaq:MSFT) / Intel (Nasdaq:INTC)
Although I don't necessarily believe that Microsoft and Intel are going to rack up big losses for 2013 (and the stocks have underperformed in 2012), I do believe 2013 may mark the Waterloo for those who believe that the WinTel PC concept still has legs. The ultrabook concept has yet to catch on and Win8 could be setting up for a disappointment. While I think Lenovo (Nasdaq:LNVGY) still has room to grow its PC business (and that neither the desktop or notebook computer are going away), I think 2013 will confirm that whatever future growth Microsoft and Intel may have, it's not in the PC business anymore.
What should help both companies, though, is that they have other options. Microsoft is underrated in its non-Windows businesses, and I believe Intel may have opportunities to farm out unused fab capacity and become a "mini-Taiwan Semiconductor."
Putting HP on a list of losers for 2013 may seem like piling on given that the stock has dropped more than 40% in 2012. As investors in stocks like Alcatel-Lucent (NYSE:ALU) know all too well, though, there's always room for things to get worse. I believe HP is going to continue to lose share in PCs, and that the company's efforts in storage, networking and software will look still more misguided and noncompetitive. With more and more anger and frustration in the shareholder base, HP may face pressure for yet another CEO change.
SEE: A Primer On Investing In The Tech Industry
Marvell Technology (Nasdaq:MRVL)
Marvell, too, is an example of a company that has already had a terrible 2012 (down about 40%) continuing that suffering into another year. The bear case on Marvell revolves around ongoing struggles in the PC business, coupled with increasing competition in the mobile space. If I put my bear cap on, I see Marvell struggling to gain any traction against rivals like Broadcom (Nasdaq:BRCM) or Qualcomm (Nasdaq:QCOM) in higher-end phones, while a slew of Asian rivals will overtake them in lower-end phones.
Research In Motion (Nasdaq:RIMM)
Continuing the "kick them while their down" theme, RIM is facing some serious existential problems. It increasingly appears that success in mobile demands, either a strong command of the high-end of the market or an ability to produce mass-market phones at the lowest possible prices, RIM can't do either. And I believe the company's position will become increasingly untenable in 2013. I still believe Lenovo may acquire this company (mostly to acquire a known brand in North America) as part of its own mobile strategy, but I believe the success of Apple (Nasdaq:AAPL) and Samsung has squeezed so much oxygen out of the room that RIM doesn't have the room to mount a recovery.
SEE: Can Research In Motion Be Saved?
Advanced Micro Devices (NYSE:AMD)
With AMD already down more than 50% in 2012 and trading at an enterprise value of $2.5 billion, it may be fair to argue that it can't get much worse for this one-time rival to Intel. Unfortunately, if my earlier predictions on ultrabooks, North American PC makers and Win8 come true, I'm not sure where AMD can hide. The company arguably has even worse prospects for success outside of PCs, and the company's capital position may severely limit its options for restructuring and self-reinvention.
The Bottom Line
Investors should realize that these predictions are more thought exercises than actual expectations for 2013 performance. If companies like Marvell and HP can craft credible restructuring programs and identify legitimate market opportunities in which they can succeed, 2013 could be relatively promising years. Nevertheless, investors considering a long position always do well to consider the bear case and just what could go wrong with a story.
At the time of writing, Stephen D. Simpson did not own any shares in any company mentioned in this article.
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