Out With the Old, In With the New

In other words, don’t stay wedded to one particular specialty or stock. Innovation changes way too fast, leaving booming businesses faltering within a few years’ time.

Consumers continue shifting away from traditional innovation. Forget buying a Dell computer, with an Intel processor, Seagate hard drive, Logitech mouse and keyboard, Microsoft Windows operating system and Adobe media editing software.

Each of those companies is seeing its market share come in accordance with attack. More and more consumers want mobile tablet devices and smartphones like the iPhone and iPad from Apple instead.

The same goes for processors based on research from ARM Holdings ADR and the Android operating system from Google with flash memory. Devices that feature those don’t need mice, keyboards or packaged software since they stream services over high-speed connections.

Jim McGregor, chief innovation strategy at the InStat innovation firm, sees 2011 as a year of consolidation. He predicts it will be "the beginning of the end of several technologies and high-tech companies."

That includes Dell, which could have about two-thirds of its earnings and half its income-operating base at risk from declining PC and server growth this year. That’s due to consumers buying tablets over notebook PCs, and businesses buying cheaper desktop machines that run applications and services from "clouds" of data center servers.

Its PC clients are as well beginning to opt for chips from ARM Holdings over its x86. Even Microsoft may start enabling Windows for Intel’s competition.

That will at that time speed up the change already occurring in the computing supply chain. That includes retailers, where consumers buy their "computers" from a Verizon store to put it more exactly than Best Buy, to the software industry, where people download apps and services over high-speed connections.

Jen-hsun Huang, CEO of chipmaker Nvidia, says this year will be one of "superphones" and tablets. During the PC will remain important, he says, "everyone had better be so then-positioned in mobile and cloud computing, because that’s where the new growth is coming from."

The company believes the extra computing power offered will allow PCs to offer more than tablets. This includes gesture recognition, which may trump touch screens.

Technology investors need to prepare for that by removing companies like Dell and Intel. Their portfolios will be much better off with shares of Apple and ARM.