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Many trends to play in tech world

The Baltimore Sun

International Business Machines Corp. did not devour the world. Neither did Microsoft.

Google won't either. But just as those once-feared, now-mature technology behemoths did in the past, it is substantially raising the bar of expectation and innovation.

The No. 1 Internet search engine has $11.2 billion in cash and no debt. It exceeded analyst expectations for earnings in all but one of its 10 quarters as a publicly traded company. Earnings nearly tripled in the fourth quarter, to $1.03 billion, on a 67 percent increase in sales over a year earlier. Its shares remain a consensus "buy" among analysts, according to Thomson Financial.

Daunting, yes. But a single company is not a technology portfolio, innovation has never been anyone's sole property, and there are many trends to play. In fact, Google's success can provide something of a road map for investors in other technology shares, if not the same returns.

Google Inc. shares have soared since their initial public offering in 2004, but some anaylsts think they might be slowing down. And experts see opportunities in other corners of the technology arena.

Consider the personal navigation device that provides displays and maps for motorists. Some analysts expect the market to triple in the next five years.

Garmin Ltd. is a leading designer and manufacturer of these global positioning systems, while SiRF Technology Holdings Inc. is the most prominent maker of computer chips that run them.

Indeed, it can be what's inside that's important. In the past two years, sales have doubled for SanDisk Corp., the pioneer and leader in flash memory technologies used in portable consumer electronic devices such as music players, cell phones and digital cameras.

Investors, thanks to the example set by Google, are learning that a technology company's ingenuity and growth potential can mean even more than being first.

"Google changed the perception of what it takes to be a superstar," said Allen Weiner, managing vice president for the Gartner Group, a research and advisory firm in Stamford, Conn. "It came to the market when search engines were already there, but found a better way of doing it."

When Google was stealing other firms' thunder in the search engine business it was also becoming a part of pop culture - and a sizzling investment. But don't expect such lightning to strike often.

"I can't imagine technology stocks being held to the standards of Google, for there are no other companies of its size with its growth and profit margins," said Scott Kessler, director of the information technology group of Standard & Poor's Corp. in New York. "There is no peer for Google."

Although investors and analysts generally adore Google shares, a few dissenters are worth a listen. Kessler said Google stock was the right call for those who got in early and he considers its fundamentals still strong. Yet he believes it is fully valued.

"Google shares are now widely held, and it will be difficult to get additional investors involved unless the company was to undergo some basic change in the way it operates and delivers," Kessler said.

Kevin Landis, chief investment officer of Firsthand Funds in San Jose, Calif., owns shares of Garmin, SiRF Technology and SanDisk. He urges technology investors to look beyond the obvious.

"Anytime you receive a technology product or service, it is the result of cooperation among dozens of companies, a whole ecosystem bringing it to you," Landis said.

"As a consumer, it is fine to focus on the company whose name is on the outside of the box or the logo on the cell phone, but as an investor you want to look past that."

He noted that in the late 1990s everybody was talking about the Internet, but digital photography was sneaking up at the same time and replacing the old photographic technology while receiving fewer headlines.

Here are a half-dozen tech innovators - new and old, famous and unfamiliar - whose stocks merit a look, experts say:

L-1 Identity Solutions Inc., a provider of identity-verification systems for government, law enforcement and business to guard against identity theft and invasion of personal privacy. Landis calls it "an emerging gorilla in biometrics."

Echelon Corp., whose hardware and software sends information over power lines, could make meter reading obsolete by providing accurate time-of-day billing. That improves efficiency and saves energy, Landis said.

eBay Inc., the No. 1 global e-commerce brand, has strong fundamentals and a compelling valuation despite facing many challenges, Kessler said. Its PayPal has more accounts than American Express and Discover.

Nokia Corp., with its worldwide dominance of so-called smart phones, has elevated the cellular handset to a "multipurpose device for content creation, consumption and distribution," Weiner said.

Apple Inc., an undisputed leader in selling technology to consumers, is "without question the most innovative tech company out there, even bigger than Google as a technology cultural icon because it is a pioneer on so many fronts, such as the iPod," Weiner said.

Corning Inc., an older, established company doing cutting-edge scientific research, makes products such as glass for liquid crystal displays in notebook computers, flat-panel desktop monitors and LCD televisions. It benefits from the "slow but accelerating death of the cathode ray tube," Landis said.

Andrew Leckey writes for Tribune Media Services.

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