Company Failures Are Not Industry Failures
Nearly all the big computer companies of the early 1970s have since gone out of business. Remember the BUNCH? Burroughs, Univac, NCR, Control Data, Honeywell (HON)? The first two became Unisys, the last three are still around, but none is a real factor in the computer industry as it exists today. Betting on the BUNCH in 1971 would not leave you in the chips in 2011.
Digital Equipment, Data General, Wang, Amdahl? All gone. Along with nearly every company that made PCs in the 1970s save one – Apple. International Business Machines Corp. (IBM) didn't get into the PC market until 1981. Until then they thought it not worth their time.
Point is failure is common in a fast-growing market. Most of the early auto makers failed. It's perfectly natural.
That's the way you have to look at the recent problems with Evergreen Solar (ESLR) and Energy Conversion Devices (ENER). Evergreen has been written about here several times. The doomsayers are all over ENER like bears on a picnic basket.
They're not looking at reports ENER has a hot new patent involving “the deposit of microcrystalline semiconductor materials” on thin film. Think of that as something you might find in a box at the garage sale afterward. Maybe someone will get a bargain on that.
Fast-growing markets are also fast-moving ones. When technology can change on a dime, when financing conditions and channels are always in flux, there is going to be a high failure rate.
That's one reason I don't own any solar stocks. (I also don't want the ethical risk.)
And it's one reason those who follow the space are desperate for secure leadership to develop. They want to see an IBM in this space, and many have anointed First Solar Inc (FSLR) with the title. Personally I don't think its lead is nearly as solid or secure as IBM's was in 1971, and even IBM went through a lost decade between that time and now. The company was late to the PC party and fumbled away its early lead in PC software to Microsoft. You can lose money on anything.
What matters is not the fate of any single stock, but the progress of the technology and that of the whole industry. That industry is growing, rapidly. It has been doing so for years. It should continue doing so. That industry is hiring. It has been hiring for years and will continue to hire.
But look at the resume of any tech executive you see in the next few weeks, getting hired by some up-and-coming start-up. What you're going to see on that resume are a lot of jobs, at a lot of companies, many of which no longer exist.
Would that keep you from investing in the Internet?
Dana Blankenhorn first covered the energy industries in 1978 with the Houston Business Journal. He returned after a short 29 year hiatus because it's the best business story of our time. In between he covered PCs, the Internet, e-commerce, open source, the Internet of Things and Moore's Law. It's the application of the last to harvesting the energy all around us he's most excited about. He lives in Atlanta.
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