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The End of the Road for Technology Sector Profits

Written by Gary North on November 21, 2011

I have read John C. Dvorak for about 28 years. He is perhaps the best-known commentator on all things PC — personal computers. He is always controversial, but he is very well-informed.

In his latest essay, he warns that the era of the PC is coming to a geriatric phase. This has been predicted since 1990, but it really is here. The market will not be there. The PC has become a commodity: very low profit margins.

People want to buy tablets. Apple changed people’s minds with the iPad.

In the good old days — pre-2010 — replacement sales were the source of a flow of income for the PC industry. Now there are fewer buyers.

Yes, I still love the good old PC. I can use my 1984 PC-AT keyboards. But I am a dinosaur.

He points out that the entire decade has been tough on the tech sector. Google did well. So did Facebook. But they sell digits, not stuff. He asks: “So how can this change?” His answer is short: “It cannot and it will not.”
Opportunities in tech aren’t going to come from the sector itself but from inventive companies that do what tech has traditionally done best: invest cool new products that set the world on fire.

This is exactly what Apple did that set it apart. It invented two such products — the iPhone and the iPad. Before that it had the iPod and iTunes store, which set the stage.

What cool new product that set the world on fire did Microsoft invent lately? Vista? Windows 7? You tell me.

The Kinect game controller has some potential, but nobody is waiting in line for it.

So where does this leave the beloved PC? It leaves it back in the 1990s as a replacement-market business.

This leaves the market to Asian manufacturers. The American firms must sell services, not stuff.

He calls the tech world “a moribund sector.” His conclusion:  “My advice to investors: Stay out of the tech sector or get out while you can.”

 

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