The economic downturn didn't make 2009 the best year for giant technology companies, but our top tech stocks for 2010 have big plans in place to build a stronger future.
1. Amazon.com
Amazon.com (AMZN, news, msgs) made its name selling books online, but like Google (GOOG, news, msgs), it has become synonymous with the Internet revolution. An e-commerce trailblazer, Amazon is the poster child for online retail, leaving rivals such as eBay (EBAY, news, msgs) in its wake.Even during the recession, when both online and brick-and-mortar retailers were diving for cover, Amazon grew. Crucial for investors, this momentum is expected to continue into 2010.
"This is one of the few large-cap companies in the tech space that will still grow significantly," Youssef Squali, an analyst at Jefferies, told TheStreet.com. "We're expecting top-line growth to accelerate from the mid-20s this year, in a bad economic environment, to about 30%."
During the third quarter, as U.S. consumers began to emerge bleary-eyed from the economic downturn, Amazon reported sales of $5.45 billion, an increase of 28% from the same period in 2008. Perfectly positioned to reap the rewards of holiday spending, the company is expected to go from strength to strength.
After growing more than 165% this year, Amazon's stock is rising, and the Seattle company is gearing up for a bumper 2010. Merrill/Bank of America recently increased its Amazon numbers through 2011, citing a continued shift toward online shopping this holiday season.
With impressive customer service, shipping and order fulfillment, Amazon has built a foundation from which to target new areas, including the launch of new technology, such as its popular Kindle electronic book reader.
Solid fundamentals, though, will prove the biggest factor in Amazon's 2010, Squali said.
"It's the way they are run," he said. "Their strategy is to offer the best user experience with the best price. For the longest time, that was missing from the majority of e-commerce players."
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2. Comcast
Until the recent $30 billion deal to become majority owner of NBC Universal, Comcast (CMCSA, news, msgs) was just a big cable company locked in a joyless battle to win disloyal video subscribers.Comcast has made a bold move to get one foot out of that rut.
The discussions about the deal have explored so-called vertical integration, whatever that is. And media and Internet blogger Henry Blodget called the pact a double hedge against rising programming fees and the falling value of cable's TV and Internet distribution system.
But ultimately, it looks like Comcast is seeking control at a time when the Internet threatens to bring chaos to yet another corner of the digital-media market. The Internet is poised to do what cable companies have opposed for years -- unlimited, à la cart on-demand video. And this being the Internet, it would all be free, or at least advertiser-driven.
Comcast may have coined the phrase "TV everywhere," but television has been the working objective for tech shops ranging from Apple (AAPL, news, msgs) and Google to device makers such as SlingMedia and Roku.
The move by Comcast is somewhat similar to the strategy deployed by Verizon (VZ, news, msgs) and AT&T (T, news, msgs) when they moved into wireless. They sought more control as they watched their core land-line business erode as consumers made more calls from cell phones.
With video available on the Internet and wireless devices, consumers can't be expected to stick with the old system, in which cable TV listings dictate when shows can be seen. The challenge for Comcast and NBC Universal is to find a way to charge for programming or develop an advertising-supported format. Hulu, the free video service run by Walt Disney (DIS, news, msgs), NBC and News Corp. (NWS, news, msgs), is seen as the right delivery method. It's up to Comcast to find a way to make money off it.
If Comcast's gambit is successful, users who would otherwise bypass the cable-subscription model could still be willing to pay for TV and movies when and where they want them.
Unlike its peer Time Warner Cable (TWC, news, msgs), which relishes its role as a pure-play cable shop and has no qualms about being in the video-distribution business, Comcast is building for a future beyond that.
3. Microsoft
It's hard to think of the world's dominant software developer as an underdog, given Microsoft's (MSFT, news, msgs) lock on the market. But after a couple of major setbacks -- the stunning failure of Windows Vista and the company's near ouster from the smart-phone market -- Microsoft has lost quite a lot of business. Its challenge will be to retake some of that lost ground, and its new Windows 7 operating system is the crucial weapon with which to lead the attack. (Microsoft publishes MSN Money.)
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Windows 7 is already off to an encouraging start. Microsoft successfully delivered the widely praised operating system on time in October, well ahead of the holiday buying season.
The big opportunity for Microsoft next year will be cell phones. After Microsoft's long line of cumbersome, crash-prone mobile operating systems, Windows Mobile 7 could be a standout achievement.
Skeptics will point out that Microsoft has whiffed badly at mobile while upstarts such as Palm (PALM, news, msgs) and Research In Motion (RIMM, news, msgs) have hit it hard. And there's no guarantee that Microsoft will alter that pattern.
But there are some positive signs. First, in a shift away from its old drop-down-menu interface, Microsoft seems to have gotten on board with the favored touch-screen user-control software. Second, and even more important, hardware and processor power might have finally caught up with Microsoft's notoriously heavy demands on resources.
Apple's iPhone and Google's Android operating system made great strides this year in delivering consumers Web-integrated, easy-to-use software with loads of cool apps. Microsoft's big edge is in the more serious stuff, such as its Office applications, which could bode well for the company as the power of yesterday's laptops comes to a new generation of smart phones. The ability to run stable, secure, uncompromised work programs like Outlook and Word on phones could be Microsoft's sweet spot in 2010.
