I would say that these companies are good right now for investment, Microsoft for one seems to be moving in the right direction with their recent pick up of Skype.
Though i think going forward new, cutting edge tech will come from newer companies i think many of these big companies have a solid place in the market of "right now" and will do good for investors.
Re : Inside the Big Uglies
yalanand
6/13/2011 3:32:31 PM
So are these all value traps?
I dont think all of them are Value traps. For example Microsoft and Nokia can be good longterm bet. In my opinion Windows + NOKIA + Skype combination gives these companies a unique oppurtunity to compete with android/iOS smartphones.
Cisco
ProfR
6/13/2011 3:48:53 PM
Cisco has often moved into new markets by buying companies who are more innovative than they are. So if innovation comes from the smaller companies - that does not mean that cisco and others will not participate in this growth.
at the same time, Cisco has tanked some products that it has snached up over the years, the SA deal comes to mind, Cisco is currently not doing well at all in the set top box market. and they just closed the doors on Flip.
Every stock can be a good investment ONLY AT
Value Hiker
6/13/2011 4:36:03 PM
the right price. All these big uglies face the uncertainty in their core business. Microsoft Office faces competition from free Google docs. Nokia on its smart phone, and Dell- who needs a pc if you can have a tablet? Cisco - you can get the same router/switch at half price from Netgear, Huawei, or Juniper.
Investors hate uncertainty. The only counter-measurement of uncertainty is a high margin of safety. That is the main reason these tech stocks keep dropping. But there shall be a price point that investors started to buy again.
Be patient and wait for even better entry point.
the bigger picture
Scott
6/13/2011 8:33:49 PM
Call it a naive question, but how much of this slump is due to the larger economic conditions? When businesses aren't hiring, they probably aren't buying software and hardware to support new employees, and people who are out of work or fearing losing their jobs are not buying stuff eBay.
Scott: It has little to do with the economic picture because many speculative stocks such as NFLX have growh immensely, representing 10X returns since the market bottom. Also, these companies have all underperformed the S&P 500 index.
Re: the bigger picture
Scott
6/13/2011 10:27:01 PM
Netflix is an inexpensive consumer service with little competition. It's replacing the role that eating dinner out or going to the movies has played in better times. A lot of these other companies rely heavily on the supply side of the economy -- the employers, the retailers, etc. I defer to your expertise, but it seems like when the economy is foundering for a long time, these mega-techs are gonna take it in the pants. That's not to say there probably aren't other issues at play as well.
PE doesn't mean much
tokyogai
6/15/2011 7:39:46 AM
These companies all depend on innovation to generate growth and future earnings. The PE ratio really reflects the past and a guess at the future. The only way to really gauge their value is to understand what they have in the pipeline and couple it with what you think will be successful.
RIMM shows us how ugly it can be
Value Hiker
6/17/2011 1:51:48 PM
RIMM reported yesterday, and the price drops another 20% today. The whole story shows once the core business of a big company is under attack, how ugly the whole thing can be. If we just crunched the number, RIMM is a super buy:
- P/E of 4.3
- more than 2B in cash without any debt
- still has a 3% growth
- Gross Margin of 39%
How can it be wrong to buy at current price of $27 ?
Unfortunately, it can still be wrong to buy even at today's price, because once the core business fall further, it will wipe out all the profit and suck in all the cash reserve.
That is how ugly these big uglies can be;
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