Does the high-tech firm you're considering make its money selling products, parts, or consulting services? Manufacturers of disk drives and standard memory chips are commodity producers; having the lowest costs is the most important factor. Amazon, by contrast, is willing to slash the price of its Kindle so it can sell e-books, movies, and games. Chipmaker Qualcomm licenses its intellectual property to other manufacturers, but retains its intellectual property.
Each model makes money differently. A lot of recent merger and acquisition activity has focused on acquiring patent portfolios: Google bought Motorola Mobility for its cellphone patents to defend Android, notes Frederick.
