While many tech pundits turned their attentions to the social media initial public offerings (IPOs) like Yelp! (NYSE:YELP), the various large-cap tech stalwarts were proving that they are still in charge. New product launches, big deals, dividends and surging stock prices helped large-cap tech regain its crown in 2012.
Overall, the sector was a great place to put money this year with the broad sector measure the Technology Select SPDR (ARCA:XLK) returning approximately 12% year to date. With 2013 just around the corner, it's time to look back and see exactly why large-cap tech was king this year.
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A Host of Activity
The previous year was marked by a smattering of gotta-have gadgets from the large-cap tech firms. The biggest of which could have been Apple's (Nasdaq:AAPL) iPhone 5 launch. The innovative giant sold a record 5 million of the new phones in its opening weekend. At the same time, Apple reported that more than 100 million iPhone users had updated to the new version of its operating software. Following that success, the launch of its new iPad and iPad Mini as well as the redesign of its iTunes software suite came.
Apple's success also marked the real start of the mobile patent wars. Throughout the year, litigation between Apple and some of Google's (Nasdaq:GOOG) Android operating systems biggest players had intensified. Overall, dozens of lawsuits and countersuits have been filed in courtrooms around the world, and recently Apple won a $1 billion verdict versus Samsung. The verdict is just one of many to be handed down across the various global mobile markets.
SEE: 3 Ways To Indirectly Invest In Apple
Microsoft (Nasdaq:MSFT) hopes that its new products and software will give consumers another choice besides iOS and Android. In a radical redesign of its popular operating system software, Microsoft's new Windows 8 platform has completely replaced the familiar desktop user interface - a PC staple for nearly two decades - with a mosaic of bright colored tiles for software programs and icons. Already, several makers across the entire device spectrum including Nokia (NYSE:NOK) and Dell (Nasdaq:DELL) have jumped on the operating system's bandwagon, and Windows 8 is featured prominently on Microsoft's own Surface Tablet.
Products aside, M&A activity kicked into high gear this past year as large-cap tech went shopping. Back in February, Oracle (Nasdaq:ORCL) took to the cloud and paid $1.9 billion of HR software firm Taleo. Microsoft also got the buyout fever and purchased social media firm Yammer for $1.2 billion. These are just a few examples of how large-cap tech spent their record cash piles.
The other way they spent their money - rewarding shareholders via dividends. The past year could be known as the year that tech's dividend payment came into its own. Moody's projects that the tech sector will have paid out roughly $26 billion in dividends this year. That is an increase of 14.3% from 2011 and higher than the 10.9% average annual dividend growth rate of the prior four years. All in all, large-cap tech continues to mature.
SEE: Why Dividends Matter
Finally, no large-cap tech recap would be complete without mentioning the most overhyped and disappointing IPO in social media stock Facebook (Nasdaq:FB). After a series of missteps during the IPO process, shares of the firm fell hard. The company has bounced back from its all-time lows, but as insider selling continues to increase, shares are still a long way away from their 52-week high. For the IPO market, the poor performance of Facebook set the tone for the rest of the year.
The Bottom Line
Throughout 2012, the large-cap players proved why they are dominate forces in technology. While there were some mishaps, the prevailing vibe was one of innovation and growth. That should carry into the new year as many continue to launch groundbreaking products, conduct M&A and pay healthy sized dividends. For investors, betting on large-cap tech could be where it's at in 2013.
At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.