I began this article as an email to some industry friends to discuss but thought I'd share these observations with the wider community. Since I am no financial analyst you can take these thoughts with a pound of salt, but the comparisons are interesting none the less, and you can draw your own conclusions from the stock itself. Many companies took a steep dive in recent months including Apple, Microsoft, Red Hat and Engin. The general trend however is the increasing value of stock of a 5 year period as the IT world recovers from the millennium slump of 2000 that saw the end to the world's largest IT bloom that inevitably ate its own tail with the y2k doomsday that never was. It's any wonder that faith was lost in the promises of the digital faithful from that point.

Is the second bubble bursting? Or is it the right time to buy?

So lets put the magnifying glass over a few key companies and see if we can spot the trends, the good times and the bad times and everything in between. The retrospective will perhaps illuminate the direction of things to come.

Microsoft

Microsoft - Stock has held considerable strength despite the post 2000 slump. Overall however the company fluctuates wildly in comparison to other tech stocks with regular peaks and subsequent lows. Windows XP's 2001 launch is followed by a shareprice decline, but 2003's growth co-incides with the release of Windows 2003 server platform. Microsoft's last peak follows Windows XP service pack 2 release but as is the trend with most tech stocks declined heavily this year, perhaps more dramatically than most probably due to the vaporware experience caused by Vista's lengthy delays and tumultuous project management woes.

Red Hat

Red Hat - Almost behaving inversely compared to Microsoft's stock, Red Hat has weathered the bursting bubble with strong gains in the last few years but like the others, doesn't escape the recent 2006 decline. With its hand now firmly in the corporate / enterprise and server markets Red Hats stock price reflects a general success of the brands strength. The growth of 2004 represents strong partnership ties in education and government around the world as well as its desktop version release, but bottoms out shortly afterwards after acquiring Netscape enterprises. This recovers through further strong partnerships with Oracle and IBM in late 2005.

Apple

Apple - After a long period of stasis, the iPod bloom is obvious in this history. Whether apple can keep the momentum is the subject of much speculation right now, and the next WWDC announcement in August will follow the regular period of stony silence from the company. Last years christmas sales are an obvious spike so it remains to be seen if this can be a repeat performance.

Dell

Dell - Dell shows relative stability during the turbulent downturn and steady growth peaking in 2005, since then it has paid the price for a reversal of its brands reputation. The distinction between a "well priced" and a "cheap" computer is an important one. Dell's general reliability and affordability together with strong customer service made it an excellent choice of hardware for large corporate sales, server platforms, desktops and laptops. Whether the company can reinvent itself after the downturn and repossess the positive corporate identity it once had will be the key to its success.

Google

Google - Lacking the history of its competitors, Google's float has been a success story from day 1 and even escapes the recent 2006 falls seen in other IT stocks. Its ubiquitous brand coupled with its hugely profitable adwords / adsense program has been its recipe for corporate success. Fortunately for the company, there appears to be little relevant competition in both in Search and in Ad campaigns. Its video service has been overshadowed by other sites however and it is perhaps unclear whether Google can ride the web 2.0 wave successfully.

Yahoo

Yahoo - One of the biggest success stories of the 90's infotech revolution and the template for web-based business models since, Yahoo has tempered the last few years beautifully to capitalize on the industry comeback with aggressive takeover tactics in 2003, a gamble which appears to have paid off nicely. Despite Googles authority over web search, Yahoo has remained a strong brand through sheer business strategy and partnership.

Telstra

Telstra - The government owned telco's stock picks up with the broadband uptake of the last few years, but is a notoriously bumpy ride for investors at the mercy of the companies political relationship. The sell-off announcements and attempts are disastrous. Coupled with the natural progression to VoIP after the spread of broadband and the negative reputation of the brand generally, the company hasn't seen a worse year for some time. They are, ironically their own worst enemy.

Engin

Engin - Engin shares a stock relationship not unlike the Microsoft - Red Hat stock described above, being almost inversely proportional to the others success or failure. Despite its 5-year "running at a loss" strategy, the company has shown strong growth in 2006 following the initial years of broadband uptake and the recent interest in VoIP technology. As Telstra's reputation fails, Engin's stock reflects a general trend regarding the telephony industry shift to VoIP technology. It too however does not escape this years drop off and initial consumer reports indicate that the growing company may need to improve its customer service if it hopes to compete head to head with Telstra's biggest weakness.

In the interests of full disclosure, VoIP Choice is an authorized Engin reseller. To be fair though, Engin has established itself as a dominant provider in Australian VoIP through its marketing and the scale of it's reseller program and is one of many Australian VoIP Providers you can compare with our consumer plan comparisons. We encourage readers to compare the price structures of various providers and make an informed choice.

It is interesting to view these companies together, and in the context of the IT 'recession' and its subsequent recovery. In some respects, such as with Microsoft's stock it seems easy to correlate its behavior with releases and service packs, whereas other cases are far from clear cut. As always the IT world is unpredictable and difficult to preempt but is also anything but stagnant. Does the recent stock downturn represent the beginning of the second bubble bursting... or is it just the right time to buy?

Cheers,

Dylan O'Donnell
www.voipchoice.com.au

References and Sources Reuters Stocks