Forgot the news about the increase in retail earnings that suggest the American consumer is back. Forget the fact that the Dow Jones closed on Friday right at 11,000 – the highest it has been in 18 months. Want to know the really good news? The US technology industry has never been in better shape, and has arguably entered what may become one of the greatest sector growth eras in business history.
Lost in the news of the tepid (now maybe solid) recovery over the last year is that the top US technology firms have become absolute world beaters and are surging through the recovery. The US now has seven leading technology companies with over 100 billion in market capitalization that have never been in a better position in their respective industries – Apple, Cisco, Google, HP, IBM, Microsoft and Oracle.
Want proof? On October 9th, 2008 – the last time the Dow was at 11,000 – the aggregate market capitalization of these seven companies was 770 billion. At the closing bell on April 9th, 2009 - with the Dow back to 11,000 – the aggregate market capitalization of these seven companies was 1,238 billion. In these 18 months, while the Dow fought its way back to par, these seven companies saw an increase in their market capitalization of over 60 percent!
Anecdotally, each of these seven companies is arguably in a stronger position than they have ever been and poised to take advantage of the very bright future presented by the dual forces of innovation and globalization. Apple? iPad, iPhone, iTouch, iAd, 'nuff said. Cisco? Think of the bandwidth IP video is going to require over the next 5 years. Google? The youngest company in this cohort, they continue to suck billions of advertising dollars away from media and traditional advertising companies into their online money-making machine. HP? The company has remade itself under Mark Hurd's steady leadership to once again become a trusted enterprise solutions company for IT and a surging leader in the PC industry. IBM? With its globalization push, the company is taking advantage of every major industry around the world treating technology and enterprise systems as a competitive weapon. Microsoft? Its Windows hegemony remains a strong cash cow, despite threats from Apple and Google. (Interestingly, at 266 billion, Microsoft has the largest market capitalization of this group, but its valuation growth of 34.2% over the 18 month period was the smallest. At 170.4%, Apple's was the largest.) Oracle? They continue to get rewarded handsomely as they continue to stitch together the software that runs business aroud the globe.
Behind these seven behemoths, there are numerous other leading US technology companies that are emerging as potential long-term winners. Amazon's market capitalization is 62 billion – over 150% higher than it was 18 months ago. They clearly have a shot at entering the 100 billion club and also appear to be in an extraordinarily strong position for the future, with secular growth expected in their core strength areas of e-commerce and cloud computing. Never mind the private companies, like Facebook, that continue to grow rapidly and may someday enter into this elite 100 billion club.
So forget about the good news about the America consumer, the return of the Dow, and even that baseball is back. The best news of all – it's glory days for US technology.