by Anthony John Agnello | July 21, 2011 6:15 am
In the past it was hard to keep up. Now, it’s downright impossible. Companies like Hewlett-Packard-owned (NASDAQ:HPQ) Palm, the search engine and web services of Yahoo (NASDAQ:YHOO), the booming DVD rental business of Blockbuster – all of them were huge just 10 years ago. They still looked like the future. Now they’re all slowly crumbling, trying to keep up with the likes of Apple (NASDAQ:AAPL) and its iPhone, Google (NASDAQ:GOOG) and its ever-tightening grip on the Web, and the ubiquity of Netflix‘s (NASDAQ:NFLX) streaming video.
The road to obsolescence is shorter than ever. Investors, analysts and reporters are turning on hot companies shortly after or even before their lusted-after IPOs are delivered. Look at the backlash against daily deals business Groupon or floundering streaming music service Pandora (NYSE:P).
Who will be obsolete by the middle of this decade? Consider these three stocks:
GameStop (NYSE:GME), the leading video game retailer in the U.S., is doing a whole lot better in 2011 than it was in 2009. Sales for the first quarter were up almost 10% over the previous year, totaling more than $2 billion. The company’s greatest cash cow, used video game sales, also were up almost 10% for the period, totaling $300 million.
However, the day is fast approaching when GameStop’s business simply won’t exist in its current form. Although game consoles that rely on physical discs like Microsoft‘s (NASDAQ:MSFT) Xbox 360 still are the norm, they are quickly being replaced by devices like Apple‘s iPhone that allow consumers to buy games digitally. More game publishers like Electronic Arts (NASDAQ:ERTS) are investing in digital products rather than multimillion-dollar retail games.
While GameStop is adapting to the digital age with services like Web game portal Kongregate, its current efforts never will generate the same revenue. It won’t happen today or tomorrow, but GameStop might suffer the same fate as Blockbuster unless it fundamentally changes its business model.
Although it hasn’t officially announced it yet, Apple is phasing out its entry-level MacBook laptop computers in favor of the more popular, streamlined MacBook Air. This is just one more popular consumer product that’s abandoning traditional hard disk drives for storage in favor of flash memory.
The hard drive manufacturers of the world like Seagate (NASDAQ:STX) and Western Digital (NYSE:WDC) have been consolidating (Western Digital purchased its chief competitor Hitachi for more than $4 billion in March), creating at least a more stable industry as demand decreases.
Fusion-io (NYSE:FIO), Intel (NASDAQ:INTC), Micron (NYSE:MU) and other major players in the flash memory business still are rapidly stealing what business remains for those HDD makers. That’s not to mention the growing prominence of cloud storage services replacing consumers’ computing storage needs.
It’s been a tumultuous two months for the professional social network LinkedIn (NYSE:LNKD). Since going public in May, the company has been an investor’s darling – and red herring. Whether the stock’s strong early July performance maintains across the back half of 2011 is neither here nor there, as LinkedIn’s business might suffer the same fate Yahoo did last decade: death by Google.
Google’s new social network Google+ might, by way of its privacy features and connection groupings, succeed at creating a network that serves as both professional and personal outlet where LinkedIn has failed. If it does, LinkedIn might be desperately wishing for even today’s numbers in 2015.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
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