Apple Killing the Tech Sector

It's that singular view that pushes Apple to design its own chips, its own operating systems, its own meticulous production process (outsourced to Asian contract manufacturers), its own stores and its own customer support. A company, you could say, that might be freakishly focused on control.

And it's certainly nothing like the PC sector, which had countless contributors and beneficiaries during its boom. The PC movement fed a whole ecosystem of suppliers, manufacturers and retailers. Investors could play chip strategies with Intel(INTC), National Semiconductor(NSM) and Texas Instruments(TXN). Stocks of hardware shops like Dell(DELL), Hewlett-Packard(HPQ) and IBM(IBM) returned gains by the bucket. And in its prime, Microsoft(MSFT) was a growth stock.

Apple's tech support system is largely out of reach of the average investor in public companies. "Apple's secret sauce is its developer community, most of which are private companies," said Bay Bridge Capital's Blake Bath. Bath says his firm sold Apple as it approached $200, "value guys that we are."

One winning alternative to hunting for core Apple stocks is betting against its rivals, said Bath.

"Short anything that Apple sets its sights on -- like music and Warner Music Group(WMG), or phones and Nokia and RIM, and likely in the future, streamed video content like Netflix(NFLX). Those seem to be the best plays," Bath said.

Consumer Backlash

The force of Apple's single-minded push is likely to meet increased resistance. Business partners unwilling to let Apple call all the shots may be encouraged to go elsewhere. And there are still a few remaining alternatives to Apple.

"Apple could well drive some of the targeted industries to get a lot cozier with Google and Microsoft than they would have been otherwise," said MKM's Kuittinen.

There's also the question of sustainability. As some have argued, Apple's winning streak won't last forever.

"While Apple seems infallible now, the beauty of the technology sector is its creative destruction principles," said Bath, citing examples like Netscape and AOL. "Market segments have a way of shifting around significantly every few years."

--Written by Scott Moritz in New York.

Readers Also Like:

>>The Best Android Phone: 8 Contenders

>>10 Best Smartphones for Father's Day 2010

>To order reprints of this article, click here: Reprints