TMT in 3Q12

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SEE LAST PAGE OF THIS REPORT Paul Sagawa / Artur Pylak


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November 15, 2012

TMT in 3Q12:

  • Since our last portfolio update, Apple has taken a steep turn downward, erasing $100B+ in cap and raising alarm bells in the investment community. Other tech stocks have followed suit in what has been a bloody quarter. Each of our three favored platforms missed on earnings with Apple and Microsoft misses driven by mature product-cycle quarters and Google missing on currency. We continue to view the big three along with Amazon as primary beneficiaries of the paradigm shift currently underway in TMT and made only modest changes to our model portfolios.
  • We still see platform owners as the primary beneficiaries of the paradigm shift underway in the TMT landscape. With Apple, Google, and Microsoft all down since the last update after earnings misses, their underlying businesses show strength. Apple earnings reflect only 9 days of iPhone 5 sales in the face of shortages. Microsoft’s Windows and Office sales were down
  • The opportunities created by the shift will grow to be worth trillions of dollars in annual revenues over the next two decades.
  • Microsoft, Apple and Google are attacking the market with very different business models, adding to the likelihood that all three will be successful in sustaining their platforms
  • We have bet on all three platform players in our Large Cap Model Portfolio, which continues to outperform the broader market.
  • Our thesis is challenging for small cap companies competing with platform players – our Small Cap Model Portfolio focuses on components and differentiated services.


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