In recent weeks, I've written that Microsoft (MSFT) will ultimately muscle out Apple (AAPL) as the leader in smartphones and tablets. It will be a long war of attrition, but Apple has no durable long-term advantages--what Warren Buffett calls "moats"--to keep most of its customers loyal. And Apple's insistence on controlling every aspect of both its software and hardware put it at a disadvantage to a more flexible Microsoft. With Nokia, Samsung, and other major manufacturers lining up to produce Windows phones, we will likely see a very different smartphone market a year from now.
What about Google's Android?
It may seem odd I rarely mention Google, as Android's operating system dwarfs both Apple and Microsoft in market share. Some estimate Android has over 75% of the market but this depends on what your threshold for "smartphone "is. I, myself, carry an Android phone.
The reason I rarely mention Google is because I don't take them seriously as a long-term competitor. Consider my recent experience with Google Play Music - an attempt to compete with Apple's iTunes.
Google Play Music Sounds Great
The service allows you to upload your entire music collection into the cloud, sync all of your mobile devices to one library and one set of playlists. You can stream the songs over the internet or keep copies locally on your phone...or so I thought.
This is where I start to curse Google under my breath. Google Play is incapable of syncing music to an SD card; it can only save your music to your phone's internal memory. That's a problem when you have 32 gigs available on your SD card and less than 2 gigs in the phone's internal storage.
This has been a "known issue" for over a year, and one that Google should seemingly be able to fix in a matter of hours. Yet in order to get Google Play Music to use my SD card, I had to hack my phone with a jury-rigged scripting file.
We don't have problems like this with Apple or Microsoft. Why? Because Apple and Microsoft are real companies with real business models. With a few exceptions, they actually charge for their products and offer some degree of support.
Although Google gives most of its products away for free, you have to question how seriously they take them. My experience with Play Music tells me, the answer is "not very."
Let me be clear, I am not forecasting an immediate collapse in Google's share price. I simply have no way to gauge the sustainability of their advertising model, so I find it more prudent to invest elsewhere.
Big Tech Takeaway
Among Big Tech, I recommend readers to take a look at the beaten-down shares of chipmaker Intel (INTC). Intel has taken an absolute beating of late, as fears abound of the "death of the PC" at the hands of tablets and smart phones. PC and laptop shipments are down this year, which should come as no surprise given the state of the economy. It is safe to assume that PCs are now a mature, slow-growth business. But dead? Hardly.
Most consumers--and particularly business consumers--still need the power that a full computer offers. In any event, Intel is pushing into the tablet and smartphone markets aggressively.
In the meantime, investors have the opportunity to buy one of the finest technology companies in American history at just 8 times earnings and with a dividend yield of 4.6%.
Disclosures: Sizemore Capital is long MSFT and INTC.