Consolidation, Windows 8 and Ultrabook hint at a bit 2012 for the tech sector.
NEW YORK (TheStreet) - With record amounts of cash on corporate balance sheets and several new exciting products on deck, 2012 could be one of the better years for the technology sector.
Here are three major trends that could drive tech sector growth during the coming 12 months.
We are starting to see another wave of consolidation in the tech sector, as evidenced by Lam Research(:LRCX) and Novellus Systems'(:NVLS) recent decision to merge and Blue Coat Systems'(:BCSI) plans to sell itself to an investor group. There have also been rumors that Apple(:AAPL) may open up its wallet for Flash memory company Anobit.
With over $2 trillion in cash sitting on corporate balance sheets at the end of the third quarter, there's significant firepower waiting to be deployed to help companies continue to grow.
Combined, heavy hitters such as Microsoft(:MSFT), Apple(:AAPL), Cisco Systems(:CSCO) and Google(:GOOG) have over $226 billion in cash on their balance sheets. Additionally, IBM(:IBM) intends to spend up to $20 billion on acquisitions through 2015. Clearly, there are ample amounts of tech sector cash waiting to be deployed.
Microsoft's announcement that Windows 8 would run on chips using ARM Holdings'(:ARMH) technology, as opposed to the traditional x86 architecture used by Intel(:INTC) and Advanced Micro Devices(:AMD), will have major implications in 2012 , says Sanford Bernstein analyst Mark Moedler.
"The game changer comes from the fact Microsoft has re-architected everything, and everything is touch-based now. The Windows Store is also a major driver of the Windows 8 operating system, and Microsoft is really driving to develop uses of it so that Windows 8 will be populated with a wide range of applications, and not just games."
He said that if Microsoft can execute effectively with Windows 8, then tablets would be a three horse race, including Apple's iOS, and Google's Android.
He has an Overweight rating and a $33 price target on Microsoft.
Windows 8 allows chip makers which use ARM-based technology, such as Qualcomm(:QCOM), Texas Instruments(:TXN), and Broadcom(:BRCM) to get their chips into computers running Microsoft's latest software. Qualcomm President Steve Mollenkopf said in November, "We're investing very heavily to really prepare for Windows 8."
Microsoft shares have lost 7.7% since the start of 2011, and trade at 8.5 times expected 2012 earnings. Ultrabooks
Consumer spending has been positive for three of the past fourth months, and as the macro economy continues to strengthen, consumers may continue to keep spending. New product categories, most notably Ultrabooks, will keep consumers' wallets open.
Ultrabooks are set to be a big trend in 2012, with various original equipment manufacturers (OEMs) devoting significant time and resources to the technology.
Lightweight and thin laptops designed based off Intel's specifications, Ultrabooks compete with Apple's MacBook Air and tablets. Ultrabooks have a longer-lasting battery than notebooks, no hard drives, start faster than notebooks, and use Intel's Sandy Bridge mobile processors.
Companies like Toshiba, Lenovo, Asus, Acer, Samsung, and HP(:HPQ) have already made moves in this space, but more products are expected to hit the shelves in 2012 and 2013.
--Written by Chris Ciaccia in New York
>To follow the writer on Twitter, go to http://twitter.com/commodity_bull.
>To submit a news tip, send an email to: firstname.lastname@example.org