A few weeks ago I wrote about the smart-phone revolution and
some of the explosive opportunities in the technology sector.
Recently we've seen an uptick in merger and acquisition activity
(not just in this sector but others as well) that just serves to
underscore my point that there is a sea-change underway. It's all
about how, where, and when we interact with information.
I can more or less sum this up in one word: mobile
Apple received 600,000 advance iPhone orders on the first day
customers could sign up to receive the iPhone 4, and it has
recently seen strong demand for its new product - the iPad.
Intel (Nasdaq: INTC)
just announced that it is buying
Infineon's (OTC: IFFNY.PK)
wireless processor business. Why? Because tablet devices like the
iPad are flying off the shelves and these don't use Intel's
processors. In order to grab 'missing' sales, Intel needs to grow
its presence in the emerging mobile device space.
As I wrote a few weeks ago,
"Tech companies are always coming out with new products, and
the rate of technological advancement is only increasing. Nowhere
is this more apparent than in the smartphone industry.
There was once a time when you saw only businessmen and
wealthy individuals using smartphones. But now they are becoming
more accessible to the average person - and are stealing market
share from basic cell phones as features such as music, video
streaming and web browsing become increasingly more attractive to
the general public."
***The same switch that is going on with smart-phones (from
feature phones) is also going on with mobile computer alternatives
like the iPad. Face it, we're become a walking, talking, texting,
video conferencing world.
As of the fourth quarter of 2009 more than 20 percent of the
mobile-phone market was taken up by smartphones. Analysts at
Nielsen, a market research firm, predict smartphones will overtake
feature phones before the end of 2011. If you missed the chart I
published earlier, here it is again.
Whether or not smart-phones and their big brother tablet devices
become the dominant players in the mobile market by the end of
2011, the strong trend toward these mobile devices is
The mobile world will never deny itself the simple pleasures
these devices allow once it's hooked. Ask yourself, what is your
willingness to pay for mobile connectivity; $50 per month? $100?
$150 even? The better the equipment and services get, the more we
want them - and the more we can shut down traditional wire-line
services that we can only use at home.
Consumers want phones that let them listen to music, surf the
web, watch video, and access a wide array of applications. Maybe
even occasionally make a call or two.
***Of course, no investment is a slam-dunk, if you play by the
rules. And there are constraints holding back the mobile world.
I'll repeat the cautionary warning I issued earlier:
"There is, however, a dark-side to this smartphone
revolution. The web-browsing, video-watching, Pandora-streaming
mobile devices devour bandwidth. Bandwidth refers to the data
transfer rate on a network, and these little machines consume
huge amounts of it. That wouldn't be a problem if providers could
deliver unlimited data. But providers can't - so bandwidth is
becoming an increasingly scarce resource.
is the provider of choice for smartphone companies like Apple
Research in Motion (Nasdaq: RIMM)
, maker of the Blackberry device. As such, AT&T's successes
and failures foreshadow what the entire industry will soon
The company is desperately trying to update its
infrastructure to accommodate the massive bandwidth demands of
customers. It's fighting a losing battle, as AT&T is being
attacked on two fronts.
There is a literal fear of network collapse among mobile
providers, and they're scrambling to find a solution."
***I like to invest in solutions to the technological challenges
created by the rapid pace of tech development (and I might add: the
rapid rate of adoptions of these technologies).
So I want to remind you that I recently uncovered a tiny Israeli
technology company that develops technology specifically designed
to manage bandwidth use. The company's solutions are critical for
Internet Service Providers (
), cable companies, landline operators, mobile phone companies,
businesses and governments.
In early August I pulled the trigger and added this small cap
stock to the
Small Cap Investor PRO
We're now up over 14 percent on the position, and I've seen volume
surge in recent days. I'm not a big speculator, but I wouldn't be
the least bit surprised to learn that some of the big technology
companies are eying this tiny firm's technology.
That said, I don't encourage investing on speculation alone, so
I've done the research to make sure this company is a good
investment as it stands today.
In the first and second quarters of 2010, this tiny tech company
reported greater than 30 percent revenue growth over the comparable
quarters in 2009. It is profitable on a non-GAAP basis, and is
sitting on $55 million in cash.
This is a great investment opportunity in the mobile space. If
you're interested you can get my full research report on the
company when you sign up
***There are a few things to understand if you're interested in
investing in the mobile computing world. And the two biggest things
are to understand are bandwidth demand, and the right to control
information as it circulates the airwaves.
So I'll repeat what I've said before:
"As more people use smart-phones [and tablet devices] to
listen to music, watch videos, or surf the web, companies are
trying to accommodate the massive bandwidth demands of their
customers. Bandwidth refers to the data transfer rate on a
specific network, and these tiny devices eat up large amounts of
There are a few caveats to consider before investing in this
space. The big one is that bandwidth segmenting technology has
its enemies. The technology plays a pivotal role in the United
States' net neutrality debate.
The idea of net neutrality is that all customers should have
equal access to bandwidth, and all should pay the same rate for
the same service. Service providers disagree. They think
bandwidth hogs should have to pay more since they consume more.
These bandwidth consuming individuals (or firms) make the overall
service more expensive, which providers claim is unfair.
The bottom line is this: the book is not closed on net
neutrality, nor will it be for some time, if ever. The debate
could hold bandwidth management firms from moving drastically
higher, especially if they have large exposure to the U.S. market
where the FCC is still debating net neutrality. But this is not
the case in many overseas markets, and companies with a solid
foothold in the market are unlikely to see their stocks fall
dramatically. In other words, I believe there is more upside
potential with companies like the one I recently recommended than
***There are a lot of ways you can follow this market. But if
you'd like some help, check out my research report on this company.
Take a trial subscription to
Small Cap Investor PRO
and read everything I've written about it. If you don't like it -
cancel your subscription. It won't cost you anything, except the
time to read the research.
This company is a play on the future growth of smartphones, and
the near certainty that service providers will segment bandwidth in
order to design service plans tailored to customer behavior. What's
more, this tiny company is certainly a potential takeover candidate
and management has shown an ability to orchestrate acquisitions in
the past. Investors should expect solid gains with this low-beta
micro cap, although intra-day price volatility will be high due to
Let me know if you sign up, and if you like my report. My