Apple and Google are not sure-fire winners, tech fund manager warns
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Big tech names such as Apple and Google may not be guaranteed to triumph in the phase of “massive dislocation and innovation” being seen in the industry, GLG’s Philip Pearson says.
Pearson, who manages the £104.3m GLG Technology Equity fund with Anthony Burton, says the rise of mobile computing through devices such as smartphones and tablets represents a period of great change in the tech, telecoms and media sector.
“If you look back to history, [there have] only been two major dislocations in the computer architecture. The first was mainframe to PC [and] the second big change was the internet,” he adds.
The manager argues that the spread of mobile computing, and the reactions it demands from consumer and business behaviour, is “the fastest change in the computing landscape we’ve ever seen”.
Recent research by technology research consultancy Gartner shows worldwide smartphone sales to end-users reached 472m units in 2011 – a 58% increase on 2010 - and accounted for 31% of all mobile device sales.
Gartner attributes the bulk of the 47.3% increase in smartphone sales in the fourth quarter to record sales of Apple iPhones. Apple was the leading smartphone vendor of 2011, claiming a 19% market share for the whole year.
Apple is the GLG Technology Equity fund’s second-largest holding, accounting for 9.5% of the portfolio*. Despite being very long on the stock, Pearson says Apple “is not a guaranteed winner” as competitors such as Microsoft will increase their efforts to boost market share in the portables space. (article continues below)
Mobile carriers are likely to support Microsoft as the tech giant attempts to establish Windows 8 in the portables market, the manager predicts. The operating system could win favour with consumers as it would allow them to synch PCs with smartphones and create a rival to Apple’s iCloud environment.
However, he adds: “Apple has a very good shot of dominating to an extent we wouldn’t have predicted even 12 months ago.”
Gartner’s data also shows that Google’s Android is currently the most popular operating system, capturing a 50.9% market share in the fourth quarter of 2011 compared with the 23.8% secured by Apple’s iOS.
But Pearson says: “Google, which up until now has been Apple’s biggest competitor with Android, actually looks slightly worse positioned than you would think. They have nothing in PCs and very little support in tablets.”
Google will have to change its business model, which essentially explains to carriers how they can develop their own smartphones using Android, to support smaller enterprises which cannot afford the required research and development spend, he says.
“We’re more cautious about Google than we were”, Pearson adds.
The GLG Technology Equity fund returned 96% in the three years to January 31, against the IMA Technology & Telecoms peer group’s average of 80.8%.
The portfolio’s top three positions are chipmaker ARM Holdings, Apple and Russian internet firm Mail.ru Group.
* as of January 31
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Readers' comments (1)
Daniel Simmonds | 21 Feb 2012 1:15 pm
If you remove the Apple iPad from tablet sales figures there has been little, if any, growth at all in the market, despite one or two serious attempts from manufacturers such as Samsung to push Android.
Additionally, whilst Microsoft have a beautiful operating system in Windows Phone 7 'Mango', they have a long period of catching up to do combined with a future amalgamation of operating systems when Windows 8 is launched. Whilst bringing desktop and mobile operating systems together into one product may be a good idea in the long-term it causes other issues surrounding commonality and differentiation which Apple has handled much better through its key products.
With the iPad 3 due to be announced within the next fortnight and the forthcoming iPhone 5, I would say Apple is the most sure fire bet in the industry and will continue to be for a very long time to come.
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