Cramer: Competition bruises tech
Jim Cramer | [email protected]
That's how I feel after interviewing Bill McDermott, the co-CEO of SAP, after the company issued disappointing results, in large part because of a slowdown in the Asia Pacific market but also because of the difficulty of switching to a more cloud-like model.
That's how I feel after hearing from Microsoft and Google. The competition has really stung those two stalwarts, and the disruption has bitten even the most disruptive company in the universe, Google, which disappointed on the mobile line.
I think this competitive thesis doesn't get talked about enough. If you go on the conference calls of SAP and Oracle, you hear about how dog-eat-dog things have become. These companies aren't collegial any more; they're just going after each other's throat. Oracle may have declared a truce with new partner Salesforce.com, but that's because the database giant simply didn't have enough of a cloud business, which undercuts its lucrative enterprise software.
We know that Intel has got problems after missing the mobile revolution, but I think that it may even be surprised by a resurgent Advanced Micro Devices.
Meanwhile, what's winning this market? Companies that have little competition, such as the health-care maintenance organizations. UnitedHealth isn't duking it out with anyone significant so far as I can tell. The rails? They don't seriously compete anywhere. The defense stocks? They've pretty much carved out their areas of expertise. The airlines? They used to go at it, but the government has sanctioned a host of mergers that remove competition pretty much for good.
When companies compete--I mean really compete, as they do in cellphones and tablets and personal computers--it can be brutal. And the brutality can hurt even the best, as we found out with Apple in the last few quarters and now with Google.
Strength in the worldwide economy can mask the problems that stem from competition for those that do compete globally, but not in this environment, where Europe, Asia, and Latin America are weak and can't be counted on for upside. Competition is the common thread of the losers, without the economy to bail them out.
Things can change, with new innovations and improving economies. But for the moment, the competition has gotten the better of the tech companies that have reported so far.
Disclosure: Cramer's charitable trust is long AAPL.