In this downturn, the strong are getting stronger and the ones with cash are getting richer.
There are several factors at work here, and all of them play prominently across the tech world.
Factor No. 1: Those with the deepest pockets can afford to really ratchet up the pressure on competitors in a downturn. Case in point: Hewlett-Packard's (nyse: HP - news - people ) recent haul at Best Buy (nyse: BBY - news - people ) on Black Friday outpaced Dell's (nasdaq: DELL - news - people ) by five to one. Given the brand recognition of both companies and the fact that they're competing with commodities, the only differentiator is price and features. HP can afford to pack more into a box for the same price if it means gaining market share.
Ditto for Advanced Micro Devices (nyse: AMD - news - people ) vs. Intel (nasdaq: INTC - news - people ). AMD has been trying to keep up with Intel for decades. Its low-power chips were a major leap forward until Intel caught on, zipping by AMD like it was a tractor on a superhighway. Intel has deeper pockets for research. Its sales are expected to be 10% to 20% below expectations this quarter, but AMD's sales will be 25% lower. Even more to the point, AMD posted a loss last quarter of $67 million, while Intel posted a profit of $2 billion. The only thing that's really keeping Intel from wiping AMD off the map is the U.S. Department of Justice. Competition is the best way to keep the antitrust wolves at bay.
Factor No. 2: Those with the strongest positions get stronger because they're considered a safe haven. In the electronic design automation world--the software used to design semiconductors--Synopsys (nasdaq: SNPS - news - people ) and Mentor Graphics (nasdaq: MENT - news - people ) have been showing much better than expected numbers because they're picking up market share from their troubled competitor Cadence Design Systems (nasdaq: CDNS - news - people ).
This is like the old adage to information technology managers that you can't get fired for buying IBM (nyse: IBM - news - people ). Well, you can get fired for investing precious resources in a company that won't have the resources to refresh its product line on a regular basis.
Factor No. 3: Those with the most cash can buy companies, market share or longevity--or all of the above. With the stock market getting pummeled, the only thing that has held back massive acquisitions is the availability of capital. That makes those with cash all the more powerful.
