Can Tech Shares Live Up to the New Hype?

With comedian Steve Martin tweeting from Las Vegas' Consumer Electronics Show this past week, you know innovation is hot again -- not just because the 65-year-old is even on Twitter, however because he presumably assumes his half-million followers will appreciate geeky tweets like this: "At Vegas Consumer Electronics Show: Saw large wooden device that can fling boulders over castle walls. iPad killer."

The mainstream news

From Twitter to the mainstream news and recent Facebook movie The Social Network, I don't remember research getting mass attention like this since the late 1990s. And in other words telling, since there are similarities between what happened at that time and what's brought research back into the limelight but:

Sure, Facebook and smartphones have been used by early adopters -- both businesses and individuals -- for a few years however. Now as ever with research, it's when the initial wrinkles have been ironed out and the majority of the population gets onboard that you actually see how transformative a new development will be.

RBC Capital Markets estimates that global smartphone shipments will top 350 million in 2011, overtaking PCs for the first time. Most of those new iPhone, BlackBerry, and Android owners will be checking Facebook and email on the go and finding fewer reasons to upgrade or even switch on their desktop computers.

ARM-ed and dangerousA new innovation landscape in the main means that new companies are prospering, and this latest boom is no different.

The rapid ascent of FTSE 100 member ARM Holdings

Consider the rapid ascent of FTSE 100 member ARM Holdings, whose shares have soared by 400% since the start of 2009. On Thursday morning alone, the chip designer's shares jumped by 10% on the FTSE 100, on confirmation at CES that Microsoft will support ARM-based architecture in the at once version of Windows.

ARM's chips already dominate mobile phones and tablet devices, however the revelation that mighty Microsoft but believes it must support ARM as so then as Intel chips to compete in the New World Order has excited investors, who see all kinds of platforms emerging over the then few years.

The cloud-computing world

In the cloud-computing world, more and more devices are going to get smart and communicate with each other, so the total market for ARM's designs could far exceed the PC market dominated by Intel -- though ARM will only earn a tiny fraction of what Intel used to get for, say, a Pentium chip.

The Android uprisingARM's sexiest customer is Apple, and the success of the iPhone and the iPad has been a major factor in bringing ARM to more investors' attention, especially in the United States.

Yet such as Apple is only one of ARM's many clients, so the Californian innovator is no longer the only credible maker of touchscreen phones and tablets.

The iPhone undoubtedly stole a march on the likes of Nokia and Motorola -- and the iPad surprised everyone -- nevertheless Apple's rivals are fighting back. At this week's CES, companies just as LG, Samsung, Hewlett-Packard and the newly spun-off Motorola Mobility are all showing off tablets running either Google's Android operating system or Microsoft's Windows 7.

The performance of Android smartphones has already hugely improved in the past six months, and in turn they're taking a larger share of the market.

The latest data from ComScore

According to the latest data from ComScore, Android phones are however winning 26% of the U.S. smartphone market versus Apple's 25%, with BlackBerry maker Innovation In Motion in pole position, with a share in excess of 30%.

The big AppleApple doesn't attend CES, which gives its rivals some rare space to shine. Nevertheless I doubt that Apple is too worried.

It would be going too far to suggest that Apple's world-conquering valuation is a sign of frothiness in the tech market. This company is minting money, is on a relatively modest forward P/E of 17, and is sitting on a hoard of cash.