3 tech titans

AppleOne of the major trends in the world today is the increasing use of technology, from computers and the internet to smart phones and tablets. These devices and technologies are becoming increasingly ubiquitous in markets around the world.

It makes a lot of sense to invest in companies which have a stake in this high-tech future of ours. Which are the best tech businesses to invest in? Well, here are my three picks.


These days, many people would say that Microsoft is a company in decline. After all, PCs are gradually being replaced by tablets. Plus Microsoft is currently precisely nowhere in the booming smart phone market. Who on earth would buy into this firm?

But take a closer look, and Microsoft is a far more attractive proposition than you'd think. It still dominates the computer industry, with Windows in a leading position in the computer operating system market, and Office virtually monopolizing the business software market. And, don't forget, the Xbox still has a strong position in the games console industry.

Earnings per share has been rising and rising in recent years, with a 30% increase in 2010 and a 28% increase in 2011. Pretty impressive for a company in decline!

What's more, you can expect Microsoft to have an impressive 2012. It doesn't seem that long ago that Windows 7 was released, but in 2012 we can look forward to the launch of Windows 8, which will, for the first time, integrate many of the features of Windows Mobile on a PC operating system. This will give a major boost to computer OS sales.

You might think that computers are in decline, but in fact the number of computers in the world is increasing, going from 1 billion in 2008 to a forecast 2 billion in 2015, driven by explosive growth in emerging markets. Microsoft stands to gain from this.

Plus the launch of Kinect has been incredibly successful, and it won't be long before we see the successor to the now long-in-the-tooth Xbox 360.

That's why I expect to see further increases in earnings per share for Microsoft in 2012 and 2013, and why the shares are a bargain. The business' shares, at the current price of $31.25, trade on a forward P/E ratio of just 11, with a dividend yield of 2.3%.


So computer sales are booming, and as they do the internet is also booming. What is the one company that really stands to benefit from an internet boom? In my mind, it is Google.

These days the words "Google" and "search" are pretty much interchangeable. The scale of this operation is incredible. Google runs over one million servers around the world, and processes over one billion search requests and 24 petabytes of user-generated data every day.

The considerable amount of cash that Google's search operations generate has been used to innovate, and the business now has a strong position in the smart phone market, and is venturing into areas ranging from social networking (with Google+) to driverless cars.

The firm continues to grow, with earnings per share rising 29% in 2010 and 13% in 2011. What's more, I think Google's business has a defendable moat which should ensure its growth for many years to come.

The company, at the current price of $604, is on a very reasonable forward P/E ratio of 14. For me this business is a good bet on the future of the internet.


Apple is truly the phenomenon of our times. The company has managed to combine the latest technology with world-class design and clever marketing in an incredibly impressive way.

The result is a firm which has grown to become the largest in the world by market capitalisation, worth a cool $468 billion. Now usually when a company reaches this size, it grows only slowly, if at all -- after all, elephants don't gallop, do they?

But the remarkable thing about Apple is that the world's largest company remains a growth company. Microsoft and Google may be growing quickly, but Apple is leaving them in the dust. In both 2010 and 2011 it nearly doubled its eps, and another sizeable increase is predicted for 2012. The current price of $502 puts the business on a forward P/E multiple of just 11.

Of course, much of the business' success is down to the temperamental genius that was Steve Jobs. But even after Jobs, the company has considerable momentum, as well as more stunning new products in preparation -- in 2012 we can look forward to the iPad 3 and perhaps the iPhone 5. That suggests Apple is still some way away from its peak.

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3 tech titans

Apple I (1976): Apple's first product was a computer for hobbyists and engineers, made in small numbers. Wozniak, left, designed it and Jobs dealt with the funding and marketing. The computer went on sale priced at $666.66

Apple II (1977): One of the first successful personal computers, the Apple II was designed as a mass-market product, retailing at $1,298, and was the first personal computer to feature colour graphics. Several upgrades for the model followed, and the product line continued until 1993. It was so popular that Jobs' fortune exceeded $100 million by the time he turned 25.

Lisa (1983): Following a visit to Xerox's research centre in Palo Alto, California, Jobs was inspired to build the first commercial computer with a graphical user interface, with icons, windows and a cursor controlled by a mouse. It was the foundation for today's computer interfaces, but the Lisa, which cost a whopping $9,995, was too expensive to be a commercial success.

Macintosh (1984): The Macintosh was heralded by an epic advert shown during the Super Bowl, directed by Ridley Scott, which referenced George Orwell's 1984. Like the Lisa, the Mac had a graphical user interface, but it was faster and at $2,495, a quarter of the price. People soon realised its potential for desktop publishing.

iMac G3 (1998): In 1985, Jobs and Apple's CEO, John Sculley clashed, leading to his and Wozniak's resignation from the company. When Jobs returned to Apple 11 years later, Apple was struggling. The radical iMac was the first step towards healing the ailing company. It was strikingly designed as a bubble of blue plastic that enclosed the monitor and computer. It went on sale priced at $1,299.

iPod (2001): In 2001, the game well and truly changed when the first iPods went on sale. The first generation of iPod cost $499 (£400), but as Apple updated and modified the winning formula, prices came down. Of course, it wasn't the first digital music player with a hard drive, but it was the first successful one. The iPod's success prepared the way for the iTunes music store and the iPhone.

iTunes (2001): Apple also introduced iTunes in 2001 - a media-playing computer programme, useful for playing and organising music and videos. The music store was added in 2003, with 200,000 songs at 99 cents, or 79p, each, giving people a convenient way to buy music legally online. iTunes is now an integral part of Apple software: the iPhone cannot be used without first 'synching' with the owner's personal iTunes.

iPhone (2007): If the iPod laid the foundations, then the touch-screen iPhone is Apple's towering glory. The world was introduced to 'apps', which made the phone a device not just for making calls but for managing money, storing photos, playing games and browsing the web. Apple is now the world's most profitable maker of phones, and the influence of the iPhone is evident in all smartphones. The current model, the iPhone 4, sells for $749 (£612), and the arrival of the iPhone 5 is eagerly anticipated.

iPad (2010): Dozens of companies, including Apple, had created tablet computers before the iPad, but none caught on. The iPad finally cracked the code, creating a whole new category of computer practically by itself. In the case of the iPad, Jobs, famed for identifying and creating the next big thing, seems to have created a market where none existed. The highest spec iPad currently retails at $699 (£659).


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