Showing posts with label technology hardware. Show all posts
Showing posts with label technology hardware. Show all posts

Wednesday 20 July 2016

A Guided Tour of the Market 7

Hardware

The environment in the hardware sector makes it fiendishly difficult to build a sustainable competitive advantage because technological advances and price competition mean that the lion's share of hardware's benefits are passed to consumers, not the company creating the products.

In the hardware industry, network effects can arise because hardware often needs (1) to operate with other hardware and (2) to be maintained by people. The more a certain product becomes prevalent, the more other hardware needs to take heed of the product's characteristics and the more people (and time) are invested in learning to operate the product.

http://books.danielhofstetter.com/the-five-rules-for-successful-stock-investing/

Friday 22 June 2012

Investor's Checklist: Technology Hardware

Information technology is an increasingly important source of productivity in advanced economies.  In 2002, IT accounted for nearly 50 percent of total U.S. investment in capital equipment, up from 20 percent three decades ago.

Technology innovation means that hardware firms can offer more computing power at an increasingly cheap price; thus, IT can be applied to more and more task.


Because of rapid innovation, technology hardware companies tend to generate rapid revenue and earnings growth.

At the same time, competitive rivalry is often strong in tech hardware.  Moreover, demand for technology hardware is very cyclical.

Technology, by itself, does not constitute a sustainable competitive advantage.  hardware companies that develop economic moats are more likely to succeed over the long term than companies that rely on a lead in technology.

Examples of moats among technology hardware firms include low-cost producer (Dell), intangible assets (Linear and Maxim), switching costs (Nortel and Lucent), and network effect (Cisco).

A company with a sustainable competitive advantage should be able to effectively fend off its rivals and maintain significant market share and/or sustain above-average margins over an extended period of time.


Ref:  The Five Rules for Successful Stock Investing by Pat Dorsey



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Investor's Checklist: A Guided Tour of the Market...