The economic downturn didn't make 2009 the best year for giant technology companies, but our top tech stocks for 2010 have big plans in place to build a stronger future.
1. Amazon.com
Even during the recession, when both online and brick-and-mortar retailers were diving for cover, Amazon grew. Crucial for investors, this momentum is expected to continue into 2010.
"This is one of the few large-cap companies in the tech space that will still grow significantly," Youssef Squali, an analyst at Jefferies, told TheStreet.com. "We're expecting top-line growth to accelerate from the mid-20s this year, in a bad economic environment, to about 30%."
During the third quarter, as U.S. consumers began to emerge bleary-eyed from the economic downturn, Amazon reported sales of $5.45 billion, an increase of 28% from the same period in 2008. Perfectly positioned to reap the rewards of holiday spending, the company is expected to go from strength to strength.
After growing more than 165% this year, Amazon's stock is rising, and the Seattle company is gearing up for a bumper 2010. Merrill/Bank of America recently increased its Amazon numbers through 2011, citing a continued shift toward online shopping this holiday season.
With impressive customer service, shipping and order fulfillment, Amazon has built a foundation from which to target new areas, including the launch of new technology, such as its popular Kindle electronic book reader.
Solid fundamentals, though, will prove the biggest factor in Amazon's 2010, Squali said.
"It's the way they are run," he said. "Their strategy is to offer the best user experience with the best price. For the longest time, that was missing from the majority of e-commerce players."
2. Comcast
Comcast has made a bold move to get one foot out of that rut.
But ultimately, it looks like Comcast is seeking control at a time when the Internet threatens to bring chaos to yet another corner of the digital-media market. The Internet is poised to do what cable companies have opposed for years -- unlimited, à la cart on-demand video. And this being the Internet, it would all be free, or at least advertiser-driven.
Comcast may have coined the phrase "TV everywhere," but television has been the working objective for tech shops ranging from Apple and Google to device makers such as SlingMedia and Roku.
The move by Comcast is somewhat similar to the strategy deployed by Verizon and AT&T when they moved into wireless. They sought more control as they watched their core land-line business erode as consumers made more calls from cell phones.
With video available on the Internet and wireless devices, consumers can't be expected to stick with the old system, in which cable TV listings dictate when shows can be seen. The challenge for Comcast and NBC Universal is to find a way to charge for programming or develop an advertising-supported format. Hulu, the free video service run by Walt Disney , NBC and News Corp., is seen as the right delivery method. It's up to Comcast to find a way to make money off it.
If Comcast's gambit is successful, users who would otherwise bypass the cable-subscription model could still be willing to pay for TV and movies when and where they want them.
Unlike its peer Time Warner Cable , which relishes its role as a pure-play cable shop and has no qualms about being in the video-distribution business, Comcast is building for a future beyond that.
3. Microsoft
Windows 7 is already off to an encouraging start. Microsoft successfully delivered the widely praised operating system on time in October, well ahead of the holiday buying season.
The big opportunity for Microsoft next year will be cell phones. After Microsoft's long line of cumbersome, crash-prone mobile operating systems, Windows Mobile 7 could be a standout achievement.
Skeptics will point out that Microsoft has whiffed badly at mobile while upstarts such as Palm and Research In Motion have hit it hard. And there's no guarantee that Microsoft will alter that pattern.
But there are some positive signs. First, in a shift away from its old drop-down-menu interface, Microsoft seems to have gotten on board with the favored touch-screen user-control software. Second, and even more important, hardware and processor power might have finally caught up with Microsoft's notoriously heavy demands on resources.
Apple's iPhone and Google's Android operating system made great strides this year in delivering consumers Web-integrated, easy-to-use software with loads of cool apps. Microsoft's big edge is in the more serious stuff, such as its Office applications, which could bode well for the company as the power of yesterday's laptops comes to a new generation of smart phones. The ability to run stable, secure, uncompromised work programs like Outlook and Word on phones could be Microsoft's sweet spot in 2010.
4. Red Hat
Microsoft's Windows may be the go-to system for many businesses, but that doesn't mean companies aren't considering Linux enterprise options. During its recent second quarter, Red Hat's sales jumped 12% -- none too shabby, given that Mr. Softee's revenue dipped 14% in its most recent results.
Red Hat, which competes with Novell and Oracle, also enjoyed subscription revenue growth of 15% for both the quarter and for the first half of fiscal year 2010.
The company's shares surged on the results, and Red Hat's stock has risen a whopping 114% this year.
Last month, Standard & Poor's raised Red Hat's corporate credit rating from BB to BB+, which the company cited as evidence of its strong performance and growth during a challenging global economic environment.
Although recently downgraded by Goldman Sachs on a valuation call, Red Hat has been striking a bullish tone in recent months, ramping up its virtualization efforts.
Red Hat, which recently celebrated its 10th anniversary as a public company, has also attracted mergers-and-acquisitions chatter.
Barron's, for example, cited Red Hat as one of the tech sector's most likely acquisition targets. There has even been speculation about IBM and Oracle as potential suitors, although whether Larry Ellison has the stomach for another major purchase after the Sun deal remains to be seen.
And whether Red Hat is in IBM's or Oracle's sights or not, the company will remain in the spotlight in 2010.
5. Research In Motion
If Apple's iPhone success didn't make it clear, the consumer shift toward Web-friendly, application-rich, touch-screen-driven devices was crystallized by the popularity of Google Android phones.
Research In Motion tried to respond with the touch-screen BlackBerry Storm, but its floating, clickable screen didn't stack up well against the iPhone's more versatile design.
The BlackBerry maker was caught flat-footed in 2009 with its crop of updated devices, which featured neither a significant revamp in design nor an upgraded operating system.
RIM has defended its operating system, touting its simplicity of design. The company stresses that the beauty of the BlackBerry is in its brainy network, which instantly pushes e-mail and syncs calendars and contacts sans any user effort.
That, however, won't do in this expanding world of mobile computing. RIM is no doubt developing new devices that can do the double duty of providing business users secure e-mail while giving consumers easy mobile access to the Internet.
With each new BlackBerry generation, RIM has demonstrated skill in delivering sleek, powerful devices. A look back at the tiny BlackBerry Pearl and the very capable BlackBerry Curve shows the company's success in reaching beyond its business-user specialty and into the consumer market.
RIM is too nimble to fall far behind in the game it helped invent.
6. VMware
The Palo Alto, Calif., company blew past Wall Street's estimates in its recent third-quarter results, boosted by an uptick in spending by the U.S. government.
With a fourth-quarter budget flush acting as a tailwind and an overall improvement in the economy, 2010 bodes well for the company.
"VMware is one of the stocks to watch for next year," Kaushik Roy, an analyst at Wedbush Morgan, told TheStreet. "I think there's more upside for VMware than (for) someone like NetApp ."
Still the dominant force in virtualization software, which moves computing resources off your machine and onto a virtual cloud, VMware is well-positioned for companies' post-recession upgrades.
Desktops in particular could open up a large new revenue stream in 2009. With a PC refresh likely following the launch of Microsoft's Windows 7, Roy thinks many companies are likely to virtualize their desktops.
"Server virtualization is an instant (return on investment, but) if there are PC desktop upgrades, then desktop virtualization will start to really take off," Roy explained. "VMware is defining what the computing paradigm might look like five years from now."
The company's shares have risen more than 80% this year, from $24 to more than $44. Trading at almost 70 times earnings, VMware is not exactly cheap, although the company is clearly positioning itself for a tech spending rebound.
The AT&T partnership, for example, came hot on the heels of a deal with networking giant and parent company EMC to sell prepackaged hardware and software for companies' cloud efforts.
VMware CEO Paul Maritz has made cloud computing one of his top priorities and expects a boost from both Windows 7 and Intel's Nehalem processor. Investors should also expect to see VMware forge more strategic alliances as the company attempts to squeeze rivals Citrix , Microsoft and Oracle. ( msn.com )
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