With the Info Tech 100, BusinessWeek gauges the temperature of the high-tech industry worldwide. Sifted from a collection of 500 technology companies, the IT 100 list provides insight into major trends and the interplay of different tech sectors across the globe. The list also gives an early glimpse of up-and-coming tech stars and shines a light on the strengths of established players.
This year is no exception. Though competition is testing the very business models of the established phone giants, the expansion of wireless in emerging markets and across geographic boundaries continues to pay off, putting Mexico's America Movil (AMX), Spain's Telefonica (TEF) and Telefonica Moviles (TEM), and China Mobile (SEHK) among the top 10 companies on the list.
Wireless phone and gear makers, including Motorola (MOT), Nokia (NOK), and Ericsson (ERICY), are shining because of the steady rollout of next-generation wireless networks and the seemingly insatiable demand for whizzy phones that can handle games, video, and music. And the drum beat of outsourcing continues, benefiting the Indian giants Tata Consulting Services (TCS) and Satyam Computer Services, in particular.
DEADLY COMPETITION. Internet players made a big return to the IT 100 list this year—both in terms of demand for their services and products, as well as profitability. Stock-trading services TD Ameritrade Holding and E*Trade are spinning acquisitions of smaller rivals into gold. And with search still the name of the game in online advertising, Google (GOOG), Yahoo (YHOO), and Yahoo Japan made strong showings. Amazon.com (AMZN) even resurfaced among the top 100, thanks to efforts to keep cash flow high and a stellar return on equity.
Competition can be deadly among the companies that make the bits and pieces that go in digital gizmos. Samsung Electronics is Asia's most profitable tech company, but falling prices for memory chips and liquid crystal displays led to a drop in revenues and kept the company off the IT 100. Still, Corning (GLW) made a huge return, propelled by demand for its glass used in flat-panel monitors and LCD TVs. And Toshiba continues to reap the benefits of providing flash memory for Apple's (AAPL) hot iPods.
With the Internet and digital networking continuing to reshape industries, companies in a wide variety of industries marched steadily into the IT 100 rankings. Heartland Payment Systems (HPY), which processes payroll for customers, made its first showing after its August, 2005, initial public offering. Amdocs (DOX) made the cut, thanks to demand for the help it gives consolidating telcos in sorting out their systems.
MARKET LEADERS. For companies in embattled industries such as telecom, branching off into new territories paid off. Among the traditional telephone companies, Verizon Communications (VZ) is pushing more aggressively into wireless and Internet TV. Britain's BT (BT), meantime, is busily piling on up-and-coming technologies, such as telephony and wireless networking, to drum up more customer demand.
In the software sector, acquisitions and solid market leadership carried the day. Last year, Oracle (ORCL) spent billions acquiring other companies, including PeopleSoft and Siebel Systems. Despite this rising competition, SAP (SAP) continues to lead in the enterprise space, as it adds more customers from small and midsize companies. And a strong showing for Intuit's TurboTax meant stronger-than-expected, double-digit growth for the company.
Still, some of last year's stars couldn't stave off competition, so they fell off the list. France Télécom has pushed into new markets such as wireless. Still, it’s losing ground to rivals who are offering cheap bundles of phone, TV, and Internet service. Giant chip maker Intel (INTC), meantime, is under attack from rival Advanced Micro Devices (AMD). Dell (DELL), which used to buy chips only from Intel, said in May it plans to start purchasing from AMD.