The Worst Big Tech Stocks of 2012

Yesterday, I took a look at the tech companies who have followed the Nasdaq to huge gains in 2012 and posted big share price jumps themselves. In some ways, it's been a tough environment for tech companies to land in the red this year. After all, the Nasdaq is up is still up 8.9%.

Yet, that performance is driven in large part by Apple's huge weighting in the Nasdaq and its outperformance. Overall, despite the Nasdaq being up a large amount on the year, 46% of tech and telecom companies with a market cap over $20 billion have seen their share prices fall back this year.

Below are two lists of the worst performers in tech and telecom. First is a list of companies' performance globally, and below you can find some of the worst U.S.-based performers.

The global tech and telecom laggards

Source: S&P Capital IQ. Tech and telecom stocks over $20 billion in market cap at today's prices.

The U.S. tech and telecom laggards

Source: S&P Capital IQ. Tech and telecom stocks over $20 billion in market cap at today's prices.

Rough times for telecom
Right away, the concentration of negative returns in the telecom industry stands out. Both China Unicom and China Telecom significantly outperformed larger peer China Mobile last year. That was in large part because of their success attracting China's enormous customer base to more expensive data plans. Throughout the year, they had higher 3G penetration among their customers relative to China Mobile. However, investors have back-tracked this year and sent China Mobile into positive territory while its smaller competitors have seen their shares aggressively sold off. In the end, it is hard to argue that China Mobile's enormous scale won't make life difficult on its smaller competitors.

Looking back to Europe, we find Telefonica near the top of the list. Of all countries to be associated with right now, Spain's about the last you'd choose, and that's just where Telefonica is headquartered. The company sees most of its operating profit in Latin America, yet it's hard to shake the perception that Telefonica won't continue suffering as Spain deals with an upcoming decade where low-to-no growth is the best-case scenario.

The American underperformers: the usual suspects
Heading back stateside, we see the list led by Dell, HP, and Cisco, three companies that have lost their footing in the past half-decade amidst huge sea changes in technology. Likewise, all three have recently warned of a difficult IT spending environment. It was easy to dismiss those warnings as sour grapes from a group of companies who can't execute, and instead were resorting to blaming the economy for their own problems.

However, with NetApp -- a company that has consistently outgrown the IT market for years -- confirming upcoming challenges with its own weak guidance last week, Dell, Cisco, and HP's warnings hold a lot more weight.

What's the deal with Google?
Finally, let's take a look at Google. The company had good first-quarter earnings and continues growing revenue near 25%, yet it trades at a P/E of just 18 with a forward P/E closer to 12. What gives?

Part of Google's sell-off could be due to investor worries over its ability to keep growing search in the years ahead. Google's cost-per-click has been erratic in recent quarters, sometimes seeing big declines. My take on the issue is: So what? Of course Google will rejigger the difference between charging less per advertisement, but getting more advertisements. They're a data company, and they're set up to optimize around fields like this.

Another issue could be fears over competition. Sure, there's the permanent boogeyman known as Microsoft hiding in the corner with Bing, but investors are fretting that Facebook (NAS: FB) could challenge Google at some point. Google has certainly validated this view by making social such an emphasis of its own; the company clearly sees social as a meaningful component in search.

Speaking of Facebook, it doesn't make the list because it hasn't traded since the start of the year, but if you were to place the company in the table of American underperformers, it'd rank dead last with a -16% performance since its IPO.

The mobile revolution -- the future of tech
That's it for our look at the year's worst performers in big tech. If you're looking for better investing ideas in the space, you have to start with the mobile revolution reshaping the entire industry.

To help investors navigate this change, we've compiled a free report named "The Next Trillion Dollar Revolution," which not only describes why the mobile revolution will dwarf any other technology revolution seen before it, but also names another idea -- not named Apple -- at the forefront of the trend. Hundreds of thousands have requested access to previous reports, and you can access this new report today by clicking here -- it's free.

At the time thisarticle was published Eric Bleeker owns shares of Cisco. The Motley Fool owns shares of Google, Cisco Systems, Facebook, China Mobile, and Microsoft. The Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Automatic Data Processing, Microsoft, Google, and Apple.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Microsoft.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. The Motley Fool has adisclosure policy.
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