Morningstar Advisor - February/March 2011 - (Page 34)
Sector Rap
Tech Loosens the Purse Strings (a Bit)
By Haywood Kelly
Notorious for hoarding cash, tech companies are looking to mergers and acquisitions for growth and expansion.
With the economy expanding again, profits in the technology sector are rising. The big question for many tech firms is what to do with all their cash. To see what these firms are planning and to identify the major trends in the sector, we sat down with three equity analysts who are members of our technology team: associate directors Toan Tran and Michael Hodel, and senior analyst Sunit Gogia.
Q: Toan, your team has been looking at some trends across tech and telecom. What themes have you found?
Toan Tran: One big theme is a lot of M&A
activity. We saw that with the bidding war between Hewlett-Packard HPQ and Dell DELL for 3PAR. HP also bought another company called ArcSight. IBM IBM bought Netezza. One driving force behind these deals is that as IT growth and IT adoption slow in the developed world—which has been a trend over the past 50 years—a lot of the big tech companies such as Cisco CSCO, HP, and IBM are looking to grow into adjacent markets.
Tech has traditionally been partitioned off. Cisco stayed in networking; IBM and HP were in servers; Oracle ORCL was in software and databases; and everyone for the most part played nice. That’s definitely not the case anymore. As these tech giants want to compete more and more against each other, they need to fill holes in their product portfolio. That’s why we’ve seen Oracle buy Sun, because they needed a hardware play. HP has been moving into storage and software.
34 Morningstar Advisor February/March 2011
Table of Contents for the Digital Edition of Morningstar Advisor - February/March 2011
Morningstar Advisor - February/March 2011
Contents
Contributors
Letter From the Editor
First, Do No Harm
Do You Use Active or Passive Investment Strategies?
Best of Both Worlds
How to Build an Index
Accountable Investor
Nice Guys Finish First
Four Picks for the Present
Investment Briefs
A New Guardrail Against Risk
Tech Loosens the Purse Strings (a Bit)
It’s More About Costs Than Active or Passive
Play Your Stars
In Between Active and Passive
Selling Beta as Alpha
The Weighting Game, and Other Puzzles of Indexing
Leaving the Nest
Redefining Credit Risk
Another Vote for Market-Based Credit-Risk Measures
Big Opportunities in Small-Cap Stocks
Benchmarks? What Benchmarks?
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
VA Sales Slide, but Assets on the Rise
Indexing’s Lunatic Fringe
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