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Internet Investing Continued from page 3

technology today. “Cloud computing is more about companies and mobile communications is more about individuals,” he says, “but they tie together because a lot of what we do on smartphones and tablets relies on cloud computing. Without these data centers in the cloud, you could not do as much on your smartphone.”

  • T.

    Rowe Price managers are also

    • nding attractive opportunities in

a range of infrastructure companies and component manufacturers that serve the wireless community.

These include such companies as Juniper Networks (networking and switching equipment), Qualcomm (semiconductor chips for mobile devices), American Tower (cellular towers), Corning (the damage- resistant “Gorilla Glass” for all high-end tablets and smartphones), and several software business devel- opers that stand to benet from the growth in mobile connectivity.

And then there are even more opportunities in emerging markets, especially Asia, to invest in such companies, because of the rapid growth of consumer classes in India and China. “Valuations are compel- ling among many companies in the region that have strong exposure to mobile computing, including Digital China, Baidu.com, China Unicom, and Tencent,” Mr. Eiswert says.

Investments in emerging markets are subject to abrupt and severe price declines and should be regarded as speculative.

Threats and Opportunities

The changing technology landscape is unfolding at such speed that fund managers say vigilance is in order. While closely tracking these new digital companies for potential opportunities, they also are watch- ing out for possible threats to established leaders.

4 www.troweprice.com

“For Apple, Google’s Android is a threat,” Mr. Sharps says. “For Google, Facebook is a threat because it could attract more advertising dol- lars as people spend more time on the site. So you have to be on the lookout for whatever threats could emerge from any of these new players.

“No one is immune to the effects of rapid change,” he adds. “The odds are that some of these leading compa- nies will continue to take advantage of the magnitude of this change, but the pace of change suggests they have to anticipate and be highly innovative. If Amazon had not invested in the Kindle and the iPad came along and e-books took off, Amazon would have been in trouble.”

Managers expect a stream of other dynamic companies to come to the fore. “The Goupon business model and the Twitter business model didn’t exist a couple of years ago,” Mr. Sharps says, “so it would be foolish of us to think we are going to go through this period of innovation right to maturity just riding existing companies.”

Mr. Eiswert concurs. “This is a great time to be a tech investor, considering the potential opportuni- ties,” he says. “Five years ago people thought tech was dead. And that may be true for some parts of it. But for other parts we’re just at the beginning.”

1. Apple

$60.8

$321.1

428%

2. Google

121.6

188.7

55

3. Amazon.com

19.6

81.2

314

4. Baidu.com (China)

2.1

48.0

2,187

5. Tencent (China)

1.9

44.4

2,238

6. eBay

60.7

40.3

-34

7. Priceline.com

0.9

24.9

2,666

8. Yahoo!

56.0

21.8

-61

9. Yahoo! Japan

45.9

20.9

-55

10. Salesforce.com

3.5

17.8

407

Top 10 Public Internet Companies Ranked by Market Values as of March 31, 2011

% Change

Sources: Morgan Stanley and Capital IQ.

Investing in technology companies involves special risks, including earnings disappointments and intense competition for market share that can result in sharp price declines. Of the stocks mentioned in this article, these funds had the following percentage of their assets invested in them as of March 31, 2011: Science & echnology Fund: 23.7%; Media & elecommunications Fund: 25.7%; and Global echnology Fund: 28.6%. These companies were not owned by any of these funds as of that date: Twitte , LinkedIn, Groupon, Living Social, Zynga, Angie’s List, Blockbuste , Borders, and Digital China. The Science & echnology Fund did not hold Priceline, American owe , Baidu, or encent. The Media & elecommunications Fund did not hold Priceline, Microsoft, Juniper Networks, or Corning. The Global echnology Fund did not hold American ower.

Company

Market Value (Billions)

12/31/2005

3/31/2011

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