Tech Companies That Expand Mission Have Best Chance To Thrive

The best-performing technology companies are those that have expanded their businesses beyond their origins of initial success, according to a recent report.

"A few years ago, it would have been hard to imagine Apple in the music business or Google in the operating system business," Robert Fox, head of Oliver Wyman's Communications, Media, and Technology consulting practice, said in a statement. "Now companies are stepping without warning into new sectors and geographies."

The 2009 Communications, Media, and Technology State of the Industry Report analyzed the top 450 publicly quoted communications, media, and technology companies around the world. The results, released Friday, show that some companies fared well despite economic problems in 2008.

Apple ranked first for Shareholder Performance Index (SPI) in the report. The SPI is based on five years of data collected for consistent comparison of shareholder returns, adjusting for volatility of returns, differences in local interest rates, and mergers and acquisitions.

Apple fared four times as well as the average technology company, according to the report. Nintendo ranked second, and U.S. engineering software firm Ansys ranked third.

In the technology sector, consumer electronics suffered the biggest blow last year, with 49% drop in market value, followed by hardware and semiconductors, with a 48% decrease.

From Dec. 31, 2003, to Dec. 31, 2008, the semiconductor share of the total communications, media, and technology market decreased from 13% to 7%, with large losses in the United States and Canada, where value migrated to fixed and mobile communications, Oliver Wyman found.

Distinctions between technology, telecom, and media blurred, as device manufacturers compete with media to deliver content, the report stated. Apple's mission has also changed, with computer hardware accounting for all of its revenue 10 years ago and accounting for just 44% of its revenue today.

Geographic boundaries have also softened, with more companies that began in emerging markets seeking outside opportunities for sales and investments.

Asustek, a Taiwanese computer maker, has focused on creating high-value computers for as little as $250. The company ranked sixth for laptop sales in the first half of 2008, according to the report. Its Eee line is aimed at consumers in the United States and European Union seeking a second home computer, while other models appeal to those seeking energy-efficient machines with fewer toxic components than most PCs.

Lenovo is another example of a company attempting to expand its reach, through its failed attempt to buy Netherlands-based Packard Bell last year. Acer, the Taiwanese PC manufacturer that beat Lenovo to the punch, has successfully broadened its markets with the purchase of that company as well as its purchase of U.S.-based Gateway in 2007, the report pointed out.

"As geographic and sector boundaries blur, large companies that are flush with cash have the opportunity to redefine themselves through acquisitions, relocated plants, and other strategic moves," Fox said. "An economic crisis like this is also an opportunity for companies with strong balance sheets to make smart investments."