Investing in Red-Hot Technology Trends for 2013
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
CES 2013 successfully ended on Jan. 11, 2013. This article will provide a snapshot of developing technology trends from CES to help investors research further into the technology sector for 2013.
Qualcomm Inc.: Wireless and Mobile
"Born Mobile" was the central theme for Qualcomm (NASDAQ: QCOM) this year. Qualcomm's CEO, Paul Jacobs, delivered the opening keynote to kick start CES 2013. The CES featured Qualcomm-powered Android phones with 5-inch plus display, confirming the trend toward larger screens and showing a positive factor for Qualcomm's royalty business, as stated by Morgan Stanley. Qualcomm also announced the all-new StreamBoost technology, which is designed to optimize the performance and capacity of home networks by enabling the router to intelligently manage the broadband connection.
QCOM has an enterprise value of $98.24 billion with a market cap of $110.39 billion. The company also has a profit margin of 31.95% and an operating margin of 30.12%. QCOM has a total cash of $12.37 billion and generates an operating cash flow of $6.00 billion, with a levered free cash flow of $4.57 billion. QCOM should continue to lead in the wireless communication equipment industry with strong fundamentals and growing revenue.
Intel Corporation: Power Saving and Mobility
Intel (NASDAQ: INTC) announced a new smartphone platform for emerging markets, details on a forthcoming 22nm quad-core SoC for tablets, and more personal and intuitive Ultrabook devices.
The new Intel Atom processor Z2420 utilizes Intel Hyper-Threading Technology can achieve speeds of 1.2 GHz, 1080p hardware-accelerated encode/decode, and support for up to two cameras delivering advanced imaging capabilities. The platform also includes the Intel XMM 6265 HSPA+ modem, which offers Dual Sim/Dual Standby capability for cost-conscious consumers. The forthcoming Intel Atom Z2580 processor (formerly "Clover Trail+") targeted at performance and mainstream smart phones was also highlighted. The new platform will deliver up to two times the performance benefits over Intel's current-generation solution (Intel Atom processor Z2460 platform), while also offering competitive power and battery life.
For tablets, the next-generation 22nm Atom SoC, codenamed "Bay Trail," is scheduled to be available for the 2013 holiday season. The first quad-core Atom SoC will be the most powerful Atom processor to date, delivering more than two times the computing performance of Intel's current tablet offering. New and improved integrated security offerings and all-day battery life are highlighted. Intel is also bringing the lower-power line of processors into its existing 3rd generation Intel Core processor family for Ultrabooks. The 4th generation core processor is about power-saving and making Ultrabooks and tablets thinner and lighter, while having the performance required for more human-like interaction.
INTC has an enterprise value of $103.48 billion with a market cap of $108.48 billion. INTC has a profit margin of 22.13% and an operating margin of 29.92%. INTC has a total cash of $10.50 billion and a total debt of $7.25 billion. INTC generates an operating cash flow of $19.49B with a levered free cash flow of $5.32 billion. Intel continues to generate strong cash flow and is catching up in the mobile market. More growth should be expected from the ultrabook end for 2013.
SanDisk Corporation: SSD Focused
SanDisk (NASDAQ: SNDK) announced new SSD products, a new distribution channel, and a key notebook design win. SanDisk Ultra Plus SSD for the retail channel and SanDisk X110 SSD for OEM customers were also announced. The SanDisk Ultra Plus SSD is ideal for consumers who want to boost their notebook or desktop computer's boot, shutdown, data-transfer and application launch times. The X110, successor to SanDisk's popular X100 SSD, delivers fast sequential and random read/write speeds and employs a low power architecture that significantly reduces the power consumed by the device in low power modes. SanDisk also announced a new distribution channel, "SanDisk for Business," which focuses on small and medium-sized businesses, to offer OEM and enterprise-grade SSDs to value-added resellers, system integrators, and direct market resellers. SanDisk U100 SSD is also selected by ASUS in the ASUS Transformer Book, the world's first notebook with a detachable tablet.
SNDK has an enterprise value of $10.03 billion and a market cap of $11.03 billion. SNDK currently has a total cash of $2.60 billion and a total debt of $1.67 billion. SNDK generates an operating cash flow of $423.78 million with a levered free cash flow of -100.90 million, ttm. While SNDK has a strong technology position, SanDisk will be affected by the commodity-like and cyclical natures of the flash memory market.
Corning Inc.: Gorilla Glass 3
Corning's (NYSE: GLW) Gorilla Glass 3 has been improved at the molecular level, incorporating a proprietary feature called Native Damage Resistance, NDR. Gorilla Glass 3 claims a three-fold improvement in scratch resistance, 40 percent reduction in the number of visible scratches and 50 percent boost in retained strength after the glass becomes flawed. Gorilla Glass 3 can be used in a larger format, multi-touch displays for education, entertainment and other applications, as reported. The new Gorilla Glass 3 is expected to make its way into the next iteration of Apple (NASDAQ: AAPL)'s iPhone, iPad and iPod touch and make these devices even tougher than before. Gorilla Glass has been used in every iOS device to date as well as devices from numerous competitors.
GLW has an enterprise value of $15.38B and a market cap of $18.68B. GLW has a profit margin of 24.97% and an operating margin of 18.17%. GLW has a total cash of $6.35B and a total debt of $3.40. GLW generates an operating cash flow of $3.12B with a levered free cash flow of -613.12M. With the upcoming Gorilla Glass 3, investors are safer on the long side.
Although Microsoft's CEO, Steve Ballmer, did not deliver the keynote speech this year, Microsoft grabbed the attention by its Microsoft Surface Pro. PCMag.com had done a great review on the product and wrote,
"Windows RT is like a subset of Windows 8, but one that's unable to run Windows XP/Vista/7 programs and plug-ins. It's not surprising that many people have been waiting for the Surface with Windows 8 Pro (aka Surface Pro), which runs a full copy of Windows 8 with all the backwards compatibility and support for programs acquired outside the Windows Store."
Lastly, investors might also want to research further on 3D printers, where it is getting to a point of awareness and recognition by the other 99% that never heard of it before, as stated by Abe Reichental, chief executive of 3D Systems. 3D Systems (NYSE: DDD) and Stratasys (NASDAQ: SSYS) are among 7 companies that are exhibiting at CES. According to the report, 3D Systems unveiled the second generation of its home 3D printer, called the Cube. The new device features faster printing, better quality, and more materials and colors. CubeX is also introduced as a higher-end version.
Outside the Show
Apple Inc. did not present at CES 2013, but it continued to attract attentions as CEO, Tim Cook, met with China Mobile's Chairman Xi Guohua on Jan. 10 to discuss "matters of cooperation," as reported by Reuters. Brian White of Topeka Capital Markets opined that the tone of that meeting, based on the press reports, sounds similar to the tone between Apple and China Telecom (NYSE: CHA) just before the two finally inked a deal for China Telecom to carry the iPhone. Brian White expects apple to get a deal this year.
Apple and China Mobile (NYSE: CHL) are having two major issues: technology, where TD-SCDMA network is not compatible with the iPhone 4S or iPhone 5; profit sharing and business model, China Mobile insists on a cut of Apple's action. Can it be solved? It is very possible for 2 major reasons: 1) China Mobile is expanding aggressively into TD-LTE 4G market, which could become the popular international standard joined by Clearwire (NASDAQ: CLWR), being acquired by Sprint Nextel (NYSE: S), and Softbank. It makes sense to give up some Apple's profit cut for China Mobile if it can speed up and increase the TD-LTE sign-ups by having Apple's iPhones. 2) Apple may be more willing to design and work with China Mobile for the TD-LTE network as compared to the TD-SCDMA network. Sooner or later, the deal should happen for the best benefits of both companies.
Analyzing, Digesting and Investing
Investors should have enough now to digest the new developments for 2013. As CES 2013 show time ended, the hard-core investing began for technology investors.
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Note: All numbers are quoted from the closing of January 10, 2013. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.
Disclosure: Nick Chiu is long INTC and S.