Why it's still worth sinking your teeth into Apple

Following the launch of iPad and recent news that Apple’s market value has overtaken that of Microsoft, technology has been thrust into the limelight once again.

There are attractive investment opportunities to be had, in spite of the largely cyclical nature of the technology sector.

Since the early boom years and the dotcom bubble, many technology companies have steadily evolved into highly efficient businesses that are now prudently managed.

The most prudent are particularly focused on profits and cash returns and have managed their balance sheets carefully to reduce debt levels substantially. Very often, they have net cash in the bank; Apple has over $40bn of cash on its balance sheet, which is around 20% of its market capitalisation.  

Competition to bring new products to market is often intense and occasionally a product comes to market that sparks meteoric changes in the technology landscape.

The Apple iPhone is a good example. The iPhone has prompted significant growth in “smartphones”, miniature computers with phone capabilities that are the fastest growing segment of the mobile phone market, growing at over 20% per annum.

Such rapid growth brings intense competition among manufacturers, which itself can bring about additional investment opportunities as manufacturers fight to provide the best user experience.

Competition is good for the consumer as well as for component manufacturers, wherein lie investment opportunities.

For individuals, technology is often considered a discretionary item. However, having been stretched by the economic crisis, the consistent growth in sales of iPhones over the past three years shows that consumers are willing to spend on technology if the product is right.