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The Destruction of the American Server Sector

The other newcomers are mainly Chinese companies called Original Design Manufacturers, or ODMs. They are doing to Dell what Dell did to other PC makers in the past, using mass customization and build-to-order strategies so cloud companies don't buy PCs until they need them.

You have barely heard of these guys. They include Quanta Computer, SuperMicro (SMCI), the only one publicly traded in this country, and a unit of Wistron called Wiwynn.

Just as the Chinese are starting to dominate the old PC business with companies like Lenovo, they now dominate the server market because they seized the cloud opportunity while American companies kept trying to sell their old stuff.

IBM has survived this change. The real damage is being done to HP and Dell, both of which took their eyes off the cloud ball and kept them on the old "enterprise computing" paradigm, to their shame and that of shareholders.

Five years ago Dell was worth three times what it is today, a loss of $35 billion in market cap. As late as 2010 HP was worth three times what it is today, and has lost nearly $70 billion in market cap. Microsoft has become a dividend stock, its price going nowhere fast.

The cloud should have begun a new American golden age in technology. In terms of hardware it has, so far, been a huge missed opportunity. Investors have been big losers from this failure to anticipate change.

At the time of publication, the author was long INTC, IBM, MSFT, GOOG and AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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