It's Time To Stop The Apple and Google Fervor
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Tech sector news over the last few years has been dominated by the growth prospects of Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG). Yes, they have been technology stock darlings for the last several years, but it's time to start easing up a bit on these companies. In fact, Apple and Google are now more like Microsoft (NASDAQ: MSFT), mature companies with large piles of cash, not the tech stocks with huge growth potential they once were.
The Evolution of Apple
Apple has enjoyed a 250%+ return over the last five years, which is amazing growth. However, its last few product launches, and its financials, are eerily similar to Microsoft. Instead of leading the industry with its products and innovation, it is now joining the pack. The iPad Mini is designed to compete with other products in the market, instead of defining the market. This is like Microsoft unveiling Bing to compete with Google.
Furthermore, Apple is now just coming up with product iterations, rather than new product lines. We're going from iPad, to iPad2, to iPad 3, to iPad Mini. This is similar to Microsoft Windows and Office - just new iterations of the same product.
The Evolution of Google
Google seems to be doing the same thing as well. Instead of driving value with new products, it is becoming a mature company that is making small iterations to its same bread and butter product. And like Microsoft branching into other businesses and then reeling back - Google is doing the same thing with cars to apps to phones to just about anything. Many of these ventures will not yield a profit for Google, just like many of Microsoft's ventures have not yielded it a profit.
The Bottom Line
The bottom line is that the maturation of these companies is not a bad thing - but people need to realize and accept the changes in these tech darlings. They are transitioning from incredible growth companies to mature cash cow companies. Apple is now sitting on over $100 billion in cash, while Google has almost $50 billion in cash.
As such, they can do as they please, but with declining growth prospects and little return on cash, investors should be viewing this as more of a negative than a positive. Yes, Apple just paid its first dividend, but that just reinforces its maturation.
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