Let’s be honest, traditional laptop and desktop computers are the best content production devices on Earth. The tablet and smartphone will not replace desktop and laptop computers any time soon. IDC projects that PC demand will stabilize at a 1.9% growth rate following 2014, and Meg Whitman (Hewlett-Packard’s CEO) believes that demand in computers should stabilize in 2014 due to an enterprise upgrade cycle in Windows XP PCs due to Microsoft no longer supporting that operating system. Currently, 40% of businesses still run Windows XP, meaning potential pent-up demand in computers is just around the corner.
Analysts anticipate Microsoft Corporation (NASDAQ:MSFT) to grow earnings by around 8.74% on average over the next five years. The company could surprise analyst expectations if Windows Mobile license sales beat expectations. The company also has a 2.64% dividend, which is pretty healthy for a technology company.
Investors should also consider a position in Amazon.com, Inc. (NASDAQ:AMZN). For the same amount of risk, Amazon has high growth businesses that are continuing to grow. Amazon is setting up its own application marketplace, meaning the company could generate substantial fees from digital content sales. The company is continuing to roll out a number of retail websites across the world. The company’s global retail strategy grew at a 16% rate in its most recent quarter (European sales sagged, but 16% growth in a deflating economy is still impressive). The company also expects substantial growth from Amazon.com, Inc. (NASDAQ:AMZN) Web Services (cloud), which grew by 47.3% year-over-year in the latest quarter.
Amazon.com, Inc. (NASDAQ:AMZN) anticipates 22%-26% revenue growth for the full-year. If conditions improve in Europe, the growth in sales could potentially accelerate. The company is focused on growing its capital expenditures in order to sustain its high growth rate. The company was able to grow operating cash by 39% for the most recent quarter, which implies that the company’s 49.7 price-to-cash ratio is reasonable.
Conclusion
I doubt Facebook Inc (NASDAQ:FB) is sitting on its hands. The company is investing aggressively, but the desired outcome is something we haven’t seen yet. The company hasn’t been able to break out of decelerating revenue growth, plus the rapidly rising costs of operating the business have been sinking the price of the stock since IPO. Because of this, investors should also diversify.
Microsoft Corporation (NASDAQ:MSFT) is pretty much your safe-haven in technology, and Amazon.com, Inc. (NASDAQ:AMZN) is the alternative growth strategy. With Amazon, you have a business that churns out predictable amounts of revenue and cash flow growth. Jeff Bezos has two core businesses that operate at scale and generate substantial growth. With Facebook, you’re seeing product cannibalization (mobile hurts desktop ad-sales) and un-proven spending practices. If anything, Amazon.com, Inc. (NASDAQ:AMZN) is another worthy alternative.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Facebook. The Motley Fool owns shares of Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT).
The article Facebook’s Growth Strategy Going Forward originally appeared on Fool.com.
Alexander 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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