I'll never forget the dot-com boom. It was an unbelievable
time to be involved in thefinancial markets . Tiny companies with
only a dream and a sketchy business plan were able to raise
millions if their name included the dot-com suffix.
Things became so crazy that a close friend confided to me that
he felt embarrassed to be making so muchmoney in such a quick and
easy fashion by getting in on Internet IPOs. Once a hyped
Internet company'sstock debuted,shares would often move 2 to 5
points higher. If you wereinvesting during this time, you know
exactly what I'm talking about.
The Internet has truly revolutionized the way we live. Not
only has it enriched investors untold amounts, but it has
empowered everyone in ways never thought possible.
If you missed out on the lucrative Internet revolution, a
second revolution has started to emerge. This revolutionwill
dwarf the first one interms of magnitude, personal impact --
Now, I am not talking about a new company with a new unproven
technology like was seen during the first revolution. This isn't
something like the overhyped Segway transporter or a new way to
sell pet food. This revolution will be built on the backs of
established technology companies that have already started to
develop tools and techniques to exploit the pending sea
In fact, many people are already using rudimentary aspects of
the world-changing technological shift. The first Internet
revolution connected billions of people to one another through
social networks. It provided easy access to knowledge and
products that had been previously nearly inaccessible.
The pending revolution will connect everything on the planet.
Now, before you think I have lost my mind by watching too much
"X-Files" or "Star Trek," let me explain.
Many of you have experienced the first ripples of this
revolution. Some of you even use it on a dailybasis .Prime
examples include the E-ZPass for toll roads, ATMs and gas pumps.
These tools are all connected to the Internet through
Soon, nearly everything will be connected. This revolution is
called the "Internet of Everything," or IoE for short. It is
forecast to produce profits of $613 billion in 2013 and has the
potential to become a $14 trillionmarket .
It is estimated that by 2020, 50 billion connections will
exist between everyday objects, people, and devices. The Internet
of everything will connect everything from digital remote health
monitoring to smart factories and virtual assistants.
Everyday objects will be able to "talk" to keep owners
informed and up to date. For example, imagine running low on
milk. A throwaway tag will sense this fact and automatically
place an order using your virtual assistant to deliver another
gallon to your refrigerator.
(Click to enlarge)
||The Internet of Everything is truly a world-changing
revolution that will forever alter the way we live, work
The potential is mind-blowing. The Internet of Everything is
truly a world-changing revolution that will forever alter the way
we live, work and play.
Sounds fascinating, but how can weprofit ?
The No. 1 company on the forefront of designing and profiting
from this trend is
Cisco Systems (Nasdaq: CSCO)
The company is developing routing technologies to help manage
this revolution. It's a high-end routing device consisting of 1.5
million lines of code and 4 billion transistors and is expected
to cost $250 million. This application-specific integrated
) will create the technology needed for the Internet of
Everything to become a reality. Cisco developers expect this chip
to be available by the end of thisyear .
In addition, Cisco's Insieme Networks is working on the
convergence of switching, routing, storage and computing on a
common platform. The purpose of this device is that it allows the
architecture to spread to the edge of the network providing the
brains to the Internet of Everything.
A look at the financial health of the company shows Cisco
reported decent results for the fourth quarter of its 2013fiscal
year .Earnings per share (
) increased by 11%year over year , to $0.52 a share, whilerevenue
followed suit with a 6%gain .
"Our fourth quarter was a record on many fronts with record
revenue, and record non-GAAPincome ,net income andEPS . We also
generated $4 billion in operatingcash flow , another record,"
CiscoCEO John Chambers said.
While things appear to be strong, the company just announced
it is slashing of 4,000 jobs (5% of its workforce) in a
cost-reduction effort. In addition, 2014guidance was in line
withanalysts ' expectations, but certainly nothing to get excited
Taking a technical look, shares have pulled back from
hittingresistance at the high of $26.50. Price broke through the
50-day simplemoving average on thedownside and may findsupport in
the $23 range. The 200-day simple moving average in the $22 area
is the next solid technicalsupport level .
Risks to Consider:
The Internet of Everything is an exciting idea, and Cisco
appears to be the company best poised to profit from its growth.
However, it remains unclear how consumers, businesses and
governments will accept the concept at the projected scope. In
addition, all the standard stock market risks arein play despite
the huge projections. Always use stops and position size
correctly when investing.
Action to Take -->
The recent lackluster projections by Cisco has knocked the shares
down into my value buy zone. Buying now, with a stop at $23 with
a 12-month target of $33, makes solid sense right now. Investors
interested in the Internet of everything should also look at
General Electric (
as an alternative way to profit in this space.
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