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The holiday shopping season is right around the corner, and all the biggest tech companies are coming for your wallet.

In the past two months, Google has revealed new Pixel phones, Microsoft has launched Surface tablets and laptops, Facebook has introduced a new smart display called Portal along with Oculus VR headsets and Amazon has rolled out a bunch of gadgets that work with its voice assistant, Alexa.

These are the dominant players in software and web services and they’re trying to play in the hardware world, where Apple owns the consumer’s wallet. Google’s Pixel devices, for example, have less than 1% of the global market share, according to IDC.

While Google and Microsoft have to deal with scores of partners to make hardware that runs their operating systems, Apple controls both the hardware and software and can dictate the entire user experience. It’s the foundation of Apple’s $266 billion in annual revenue.

Still, there are strategic reasons for big software companies to launch their own hardware, even if they aren’t throwing off billions in profit like Apple.

“As software, these companies have staked out strong reputations to deliver equally strong experiences,” said Ramon Llamas, research director at IDC. “Coupling them with their own branded hardware makes for a total experience exactly how the vendor has envisioned, and within each category, there is a significant number of loyalists.

Here’s why the world’s most valuable software companies want to sell you hardware.

Google

Google earns nearly all of its revenue from online advertising, so why did it launch new Chromebook laptops and Pixel phones this week, especially when giants like Samsung and Lenovo already use its Android and Chromebook software?

Google wants users to be able to pick up a variety of different gadgets to access services like search or Gmail, whether on a Chromebook, a phone, a voice assistant in your earbuds or in a smart speaker in your home.

It’s a concept Google calls “ambient computing.” As Carolina Milanesi of Creative Strategies wrote this week, “The devices are not the final product; the technology in them is.”

Google’s head of hardware, Rick Osterloh, described it this way: “Our vision for ambient computing is to create a single, consistent experience at home, at work or on the go, whenever you need it.”

One way that Pixel phones can help achieve Google’s aims is by offering a niche product that gives access to unvarnished Google software. Partners like Samsung often add their own spin to Android to differentiate themselves, like Samsung’s Bixby voice assistant. That can get in the way of what Google’s trying to do with ambient computing.

“In the process of being a software provider, and search engine, Google has earned the loyalty of millions of people, who just want to have that Google experience, taking out that bloatware that all these other vendors add,” Llamas said.

Microsoft

Microsoft sells a lot of Surface computers: $5.7 billion worth in the year ending in June, according to a company filing.

That’s at least one good reason why Microsoft released laptops and tablets, including the Surface Pro X, the Surface Laptop 3 and smart earbuds. As former Microsoft CEO Steve Ballmer said earlier this month, “there’s plenty of profit in hardware.”

But Surface is responsible for just under 5% of Microsoft’s total revenue — it makes more revenue from LinkedIn and cloud services, and it’s best known for its Windows and Office software.

The world’s biggest computer manufacturers also buy Windows software to power their laptops and tablets, which sell in much greater numbers than Microsoft’s first-party hardware. Microsoft’s Surface makes up less than 5% of the tablet business worldwide, according to IDC.

One reason why Microsoft invests in its Surface lineup is that it gives its partners a glimpse of where Microsoft wants to take Windows in the future. It’s a lot easier to introduce complicated new features and new designs when one company controls both its hardware and software.

“With every massive shift in tech, or when that change starts to the happen, the form factor changes too, and that’s what we are starting to see here,” Panos Panay, Microsoft’s chief product officer said earlier this week.

Two hardware items announced last month underscore this point: Surface Duo and Surface Neo.

Surface Neo is supposed to go on sale by the end of 2020, and it’s a double-screen folding laptop. The idea is that it can be a powerful computer you use while you walk around thanks to a totally new design.

Surface Duo is a folding phone running Google’s Android, also expected to go on sale over a year in the future. It’s the latest signal that Microsoft wants to closely integrate its Windows desktop system to play well with Android smartphones.

Amazon

Amazon’s hardware strategy is to throw stuff into the market and see what sticks.

The company also hopes that it can get users hooked on its voice assistant. At a launch event in September, it released a lot of new products, including headphones, speakers, wearables and even a pair of computer glasses. The one commonality among the products? They all can summon Alexa.

That’s led Amazon to have a dominant 75% market share in smart speakers around the world. If voice interfaces continue to grow, Amazon has the advantage.

“The hardware is the starting point, but Alexa is the thing that keeps you coming back,” Llamas said. “It’s not so much they’re trying to make money off of that hardware, if they are making some it’s probably not much. Instead, you’re going to be reaching for Alexa or Amazon to make that next purchase.”

If an individual product doesn’t resonate with consumers, Amazon quietly ends the product line. But if it takes off, that helps Amazon’s goal of getting Alexa everywhere.

“Not all companies have that luxury,” Llamas said. “It helps to be Amazon with billions, so if a product fails, the lights will still be on tomorrow.”

Amazon’s hardware strategy is somewhat different from Microsoft and Google, both of which own massive computing platforms. While Amazon has released Fire tablets running on a custom version of Android, it’s never owned a gateway platform like the other tech giants.

Facebook

Facebook once wanted to make a phone.

That project failed, leaving the company without control of the hardware and vulnerable to changes from companies like Google and Apple.

So Facebook is looking for the next big platform. It’s investing in smart displays, like Facebook Portal and virtual and augmented reality.

And it’s telling the world about its plans.

“I’ve been saying for a while that augmented and virtual reality is going to be the next major computing platform,” CEO Mark Zuckerberg said on stage at the Oculus Connect 6 conference last month. “You know, there’s only so much you can do with apps without also shaping and improving the underlying platform.”

Facebook is spending real money on this project — it bought Oculus for $2 billion and it paid between $500 million and $1 billion for CTRL Labs, an early-stage company that could be the technical basis for a way to control computer glasses without a keyboard or mouse.

It’s early for Facebook. Portal only has 1% of the smart display market. And while Oculus is one of the leaders in the VR market, with 27% market share according to IDC, it’s still a very small business.

Source: https://www.cnbc.com/2019/10/19/microsoft-amazon-google-and-facebook-have-new-gadgets-for-holidays.html?recirc=taboolainternal

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U.S. markets rebounded on Thursday following another round of mostly positive 3Q earnings and upbeat comments on the China trade deal. Larry Kudlow, Director of the National Economic Council, said US Trade Representative Robert Lighthizer has been speaking to high-level Democrats about a trade deal with China.

Kudlow also added although there are skeptics, there is a lot of momentum on both sides toward finalizing a trade deal with China. The major indexes once again pushed near-term resistance levels with Tech and the small-caps tapping higher highs for the week.

The Russell 2000 showed the most strength after jumping 1.1% and tapping an intraday high of 1,542. Upper resistance at 1,530-1,345 was challenged but held with the close back above the 200-day moving average being a bullish signal.

The Nasdaq rose 0.4% following the 2nd-half push to 8,183. Prior and lower resistance from mid-September at 8,150-8,200 was cleared and held with a move above the latter keeping mid-July barriers at 8,250-8,300 in play.

The S&P 500 added 0.3% after trading to a morning high of 3,008. Major and lower resistance at 3,000 was cleared but held with a close above 3,025 and the record peak at 3,027 being an ongoing bullish development with blue-sky territory towards 3,050-3,075.

The Dow nudged up 0.1% with the opening high reaching 27,112. Fresh and lower resistance at 27,200-27,400 easily held with a close above the latter and the all-time high 27,398 getting 27,600-27,800 in focus.

Healthcare and Real Estate were the strongest sectors after rising 0.7% while Communication Services gained 0.6%. Technology was the only sector laggard, despite the higher Nasdaq close, after giving back 0.2%.

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Investors rotated money from fast-growing stocks to “clean companies with no real flaws” as major indexes dipped during the session, CNBC’s Jim Cramer said Wednesday.

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all slipped no more than 0.30% on the trading day. The action coincided with a Federal Reserve report that said many businesses have reduced their growth forecasts as the U.S.-China trade war drags on.

“But the bottom line is that today’s winners are immune to the fallout from the trade war. They can create terrific earnings from the consumer, or from health care businesses, that have nothing to do with China,” the “Mad Money” host said. “For this session, that was enough to do the job.”

Cramer cited strong quarterly performances in reports this week from the big banks, including J.P. Morgan Chase, Citigroup and Bank of America. J.P. Morgan, shares surging more than 3% on the Tuesday report, led the fray with record revenue that smashed Wall Street’s estimates. The latter two also turned in top- and bottom-line beats.

Bank of America, whose shares climbed 1.48% off a Wednesday earnings report, posted 7% loan growth in its consumer banking division, a sign that the consumer is in good shape, the host pointed out. The big banks were not as hostage to the trade war as many thought because of their link to the consumer economy, Cramer suggested.

“With their consumer emphasis, the big banks can decouple from the trade wars,” he explained. “Now, I know the Commerce department just released some ugly retail sales numbers this very morning — down 0.3% in September — but these banks tell a different story. They’ve become the ideal names for this Starkist-style market ... [because] they’re not flashy, they’re just tasty.”

Last month, monthly U.S. retail sales declined for the first time since February as consumers cut back spending on building materials, online shopping and cars, according to the Commerce Department. A “more durable slowdown” could hit the economy if consumerism continues to fall, BMO Capital Markets’ Ian Lyngen said in reaction to the September report.

Cramer also recognized positive quarterly results printed by health care and transports companies. Johnson & Johnson rose more than 1.60% in back-to-back days after delivering an earnings beat Tuesday, despite facing legal troubles over talc and opioids. UnitedHealth’s stock surged more than 8% Tuesday after topping profit estimates. United Airlines shares jumped about 2% in Wednesday’s session after the company raised its full-year guidance.

The host juxtaposed the aforementioned winners to the negative pin action in high-growth stocks of Workday, ServiceNow, Adobe and Salesforce. Workday had the biggest losses of them all, plummeting more than 11% in Wednesday’s session.

“Can this rotation last? I don’t think it’s permanent. They never are,” Cramer said, arguing that investors in coming days will move past the bank and health-care stocks to circle back to fast growers as the global economy slows. “Still, the high-flyers that got hammered today will need to report some terrific quarters before this market’s going to forgive them.”

Source: https://www.cnbc.com/2019/10/16/jim-cramer-the-big-banks-have-become-the-ideal-stocks-for-this-market.html

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