Imagine that you’re coaching one of the four teams in the NBA Eastern or Western Conference Finals. You’ve watched films, studied the competition, and prepared your team. You’re ready, and the game begins. During the first quarter, you realize, whether directly or indirectly, that you and the other coach are making similar calls. You have to wonder: Did he see my game plan?
Someone once said that there are two secrets to investing success:
- Do NOT tell others everything you know and foresee
- Refer to rule number one
First, the battle
Whether by introducing innovative products or services, duplicating existing market technologies, or improving processes, technology giants are always trying to one-up competitors. For example, take a look at Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) because they sure seem to be referencing one another’s playbook.
In January, Google Inc (NASDAQ:GOOG) matched AmazonSupply, an e-commerce store for industrial products, by rolling out Google Shopping for Suppliers. Additionally, both firms entered the tablet-computing segment to wage war on Apple Inc. (NASDAQ:AAPL). Or, ponder Google Inc (NASDAQ:GOOG)’s version of Facebook, Google+. What about the cloud computing space?
Recognize any common trends?
As discussed in The Wall Street Journal, Google anticipates expanding into the e-commerce space which, according to Forrester Research, is expected to grow 9% annually through 2017. Because Amazon receives three to seven times as many product-related searches as Google, and considering that nearly $43 billion of Google Inc (NASDAQ:GOOG)’s ad revenue comes from product related searches, Google may have reasons to mimic the online retailer.
So, what’s the next move? Even though Google Inc (NASDAQ:GOOG)’s CEO Larry Page affirms the company vision and strategic plan, not focusing on competitors’ actions, expect the tactical plans mirroring competitors to continue.
What if a firm can’t compete in an industry or gain a leg-up advantage?
Simple: Hinder the competition from winning.
To fend off Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG) is considering purchasing Waze, a start-up that uses personal information from its 47 million members to create its own mobile-oriented maps. The estimated $1 billion acquisition would impede Facebook Inc (NASDAQ:FB)’s attempt to grow and blossom into the mobile smartphone industry. The primary advantage to Google is crippling Facebook Inc (NASDAQ:FB), and the secondary benefit is owning a firm that can customize maps for Google users.
Perhaps, part of Google’s strategic plan involves acquiring other firms to squelch competitors or grow its business segments. Regardless, Google seems to have an unlimited M&A budget while working on its own technological advancements. In fact, I see Google paving the path for the future.
Still not convinced duplication occurs?
Well, have you considered Microsoft Corporation (NASDAQ:MSFT)’s fierce battle against Amazon?
As seen via its financial and media reports, Amazon.com, Inc. (NASDAQ:AMZN) sacrifices profit for growth. The below data further indicates the extent to which Amazon.com, Inc. (NASDAQ:AMZN) tries to increase its revenue and market share, even if it comes at the expense of profit, financing through debt, or not paying dividends.
| Amazon | 2012 | 2011 | 2010 | |
|---|---|---|---|---|
| Total Equity | $ 8,192,000 | $ 7,757,000 | $ 6,864,000 | |
| Long-Term Debt | $ 3,084,000 | $ 255,000 | $ – | |
| Net Proft Margin | 0% | 1.31% | 3.37% |
Interestingly, as a mature, dividend paying firm, Microsoft still competes with Amazon.com, Inc. (NASDAQ:AMZN), particularly Amazon Web Services (AWS). Microsoft Corporation (NASDAQ:MSFT)’s Azure cloud platform is currently snatching customers from Rackspace Hosting, Inc. (NYSE:RAX) while giving Amazon.com, Inc. (NASDAQ:AMZN) a run for its money.
For example, Microsoft Corporation (NASDAQ:MSFT) is matching Amazon.com, Inc. (NASDAQ:AMZN) Web Services’ prices. AWS earned $1.8 billion in revenue in 2012, but Microsoft Corporation (NASDAQ:MSFT) recently announced that Azure has surpassed the $1 billion revenue mark. Furthermore, over a six month period ending last month, Azure subscriptions skyrocketed 48%. I anticipate that these two mammoths will continue to earn revenue while wreaking havoc on the smaller firms in the industry…or acquiring them.
Another case and point example: Microsoft Corporation (NASDAQ:MSFT) is considering acquiring Barnes & Noble, Inc. (NYSE:BKS)’s Nook Media business segment for about $1 billion. Why would Microsoft buy a business that has not posted a profit in over three quarters?
Think Google. Microsoft Corporation (NASDAQ:MSFT) is likely removing potential competition so that it can be better positioned. Or, it could actually plan to invest into the project, hoping to turn the Nook into its own Tablet platform.
Takeaway
With shield and spear in hand, technology giants are waging a long lasting, full-fledged war that will continue to have lasting repercussions and benefits.
But the question still remains: What is seen or recognized by these firms that is not conveyed to us?
Therein lies the key to victory.
The article Epic Battle Paves Way for Growth originally appeared on Fool.com is written by Brendan Marasco.
Brendan Marasco has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Google. The Motley Fool owns shares of Amazon.com, Google, and Microsoft. Brendan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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