2015 – Themes and Forecast

2014 2015 imageWith 2014 in the books it is time to take a look at 2015 and see if we can match or exceed last year’s results. Let’s start with the M&A picture for 2015, which should continue to be strong as long as interest rates stay low.  The tricky part now is that the valuations have continued to rise in this cycle and there are fewer undervalued names from which to choose so companies likely to be acquired but trading near their highs such as CoreSite and Inphi are not listed.

To further complicate things we have the fragile world economy, oil dropping 50%+ in a few months which impacts more than most people think and then add in copper prices at 5 year lows and it smells like deflation. With that in mind, we could be in for a very tough year. The M&A picks for 2015 include a few very solid companies as well as a couple of much more speculative turnarounds.

Aviat Networks – AVNW – Speculative niche wireless player and small market cap could make them an interesting play.  Turnaround appears to be happening so it makes them much more interesting.

Lumos Networks – LMOS – Lumos has been unloved for some years now but is sitting on some great assets and appears to have a very motivated management team.  The company can do fine as a standalone but with all of the fiber consolidation going on it seems like they would be a great fit for a number of larger providers. Like this one a lot especially on any pullbacks.

Nokia – NOK – Turnaround underway and a number of their competitors look like they may have topped out. I also like their investment and research around haptic technologies. While it would have been much cheaper to buy them two years ago it is possible a big player will still look to merge or acquire them.

Maxwell Technologies – MXWL – Growth has stalled but the market for ultracapacitors appears to still have major growth prospects.  Could be a great tuck-in for someone.

Nuance Communications – NUAN – Repeat from last year but the story stays the same. Move to recurring revenue should have been largely digested. Tremendous underperformance with the CEO on the hot seat. The pressure will be even greater on the company to get it together or get the company sold.

RadiSys – RSYS – Beaten down but appears to be turning the corner. Small market cap could make this easy to digest for a number of players.

Twitter – TWTR – Talk about a company not living up to its potential.  Management is basically loathed by almost everyone.  Still someone ought to be able to better leverage Twitter.  Maybe this year someone will. At a minimum how about a new management team?

Now onto the forecast for trends, technologies and products.

1 – Shadow IT – specifically the consumption of cloud services without any oversight – continues to grow putting many companies at risk – will put heat on the C-Suite and IT to do something constructive about the issue.

2 – AR/VR Hype turns to Reality – Augmented and Virtual Reality have yet to do much for the masses. Though I am down on Google Glass I am very excited about this space. With Oculus being bought for $2Billion, Facebook definitely thinks the space is worth having a seat at the table. Low cost, high bang-for-your-buck products such as MergeVR could entertain the masses – your kid could be asking you to buy one of these in the near future.  Higher cost products from Samsung and Oculus will help provide the marketing dollars to get this category noticed, but it is still way too early to pick a winner. Question is who can deliver in mass with a killer app in 2015?

3 – Security Issues - Internet of Things will have a host of new issues to deal with, as hackers look to exploit some of the early roll-outs. Wearables will become the next frontier for BYOD that a number of vertical industries will have to grapple with in order to leverage staff productivity.  Yet another area of data privacy and security issues to deal with.

4 – Mobility continues to push cloud adoption - Companies already have incorporated push mobile devices in mass, but what type of ROI are they getting?  Can they prove it?  With newly designed cloud applications available, recognizing the benefits of mobility and quantifying them is becoming much easier.

5 – Xiaomi – Haven’t heard of them yet?  You will as they have a huge war chest to try and invade the West.  Look for them to try and exert their muscle on the mobility front as they are skilled copyists just like Samsung a couple of years ago. Sound far-fetched?  Consider just 4 years ago this company wasn’t even on the map and now they are #1 in China. Here is the crazy part – they run Android but have made their phone look and behave more like an iPhone than Samsung has ever come close to doing.

6 – Skill shortage continues – The world economies will likely continue to face a number of issues keeping the labor market soft but key skills are in high demand.  Just try hiring a Senior Big Data Analyst or a Chief Marketing Technologist. Many other highly skilled positions will continue to be in high demand with many slots going unfilled for more than 12 months.

7- Samsung Out of Steam – Samsung helped lead the Android revolution as they have been great at copying features from everyone else and delivering a quality product. Given that they lost market share this year they will need to come up with something new. Can they finally innovate?  I am doubtful and feel they have likely hit a wall.  This is part of the reason I think Nokia and others have a chance to rebound this year.

8- Wearables – 2015 appears so far to be more of the same.  Lots of products coming out including quite a bit of cool technology.  Problem is that many of these lead to gadget fatigue.  It is still really hard to leverage all of the data.  Many products miss key features and to get everything you want, you would have to wear 10 products at once. Even then the overall benefits are minimal. Until someone really figures this out we won’t be able to see how disruptive this category could really be. Could Apple have the answer?

9 – Startups – Look for a couple of things this year.  Money should flow into a range of security related companies, as well-known breaches continue to make headlines throughout the year.  Also, look for more specialization around verticals.  Many companies will be created to attack vertical industries and continue to disrupt them.  Previously, potential customers for these products were stuck developing their own code or having to purchase a major vendor’s product before spending millions to customize it to their needs.  This will keep many of the big players on their toes and potentially looking for acquisition targets.

10 – Apple – You know I can’t leave this company alone.  OK here is it. Apple Watch is a hard sell. So far I have seen no compelling applications to make me want to buy one – at least not yet.  Factor in the faithful and they will probably still sell 7-10m of them in 2015.  Question is can this product get legs and really redefine a category? Will this product release define the post-Jobs era? For now prepare for disappointment. On to other things – how about an overhaul of the Mac Air and finally a new Apple TV.  The watch better not be the only new thing Apple is banking on to start building momentum beyond 2015.  Only caveat – show me a killer app and I might change my mind.

I hope you enjoyed this year’s forecast.  What did I miss?  What do you see happening big in 2015?

Disclosure – Position in LMOS and NUAN

Report Card – 2014 Themes and Forecast

report-cards-education1

Time to take a look back at the 2014 Forecast and Predictions and see how they turned out.  Overall 2014 had a number of hits along with some disappointments. Let’s start with a review of the companies that seemed like they could be M&A Targets along with one to sell and see how they did.

 

2014 Picks with Performance Data
Acquired Closing Price 1/6/2014 Last Trade 12/31/2014 Percentage of Change
Blackberry BBRY     No 8.01 10.98 37.08%
Fortinet FTNT     No 19.24 30.66 59.36%
Game Stop* GME     No 48.17 33.8 29.83%
Multi-Fineline MFLX     No 13.97 11.23 -19.61%
Nuance NUAN     No 15.05 14.27 -5.18%
Rackspace RAX     No 36.73 46.81 27.44%
Average Gain 21.49%
*- Recommended selling or could have gone short

Highlights of 2014 – On the Money

Amazon finally getting enough criticism to cause some customers and analysts concern around a number of their strategies.

Avoiding social media stocks such as Yelp, Twitter, LinkedIn, Facebook along with Amazon which had negative comments in the forecast would have served you well as a number of them were down sharply for the year and the basket would have left you with a loss even with an amazing performance from Facebook.

-The overall portfolio did well against market averages and easily beat them with a 21.49% gain for the year.

Microsoft was a tough call as they are still struggling with handset sales but they seem to have found a winner with the Surface.

- IoT was on target with a ton of interest and devices being introduced. A number of vendors are jumping in to figure out how to pull all of this data together and make it more useful.

Google Glass was welcomed to a lukewarm reception.  No “killer app” and high price were just a couple of reasons why the units are not flying off shelves.

Outsourcers and Integrators Disappearing seems to be gaining momentum as a wide range of businesses were either bought, merged or closed up shop in 2014. Many researchers are hot on this trend now.

Lowlights of 2014 – Off the Mark though perhaps some just delayed

None of the M&A stocks were acquired though there was some notable interest around at least one of the candidates.

Digital wallet while getting some traction still isn’t widely accepted enough to ditch carrying credit cards and alternate payment methods. Maybe next year especially with Apple’s visibility helping.

3D Printing crimes and legal issues were not major issues in 2014

Apple did not ship a TV or a wearable though one was announced this year.

What could happen in 2015?  Check out my next post coming out shortly and let me know if you agree or think I am missing something?

Get Schooled in Business…While Playing Basketball

Pickup BasketballMany of you know I am an avid basketball fan, but what you might not know is that I enjoy playing it as much if not more than watching it. Over the years I have played with friends or found a game to stay in shape, as it is much more interesting than running on a treadmill listening to music. Even if you are not a basketball junkie like me, stick with me as I think there is a valuable business lesson here.

Many people like to compare professional sports to business and there are some good analogies but there are some major differences. Pickup sports give you a much more likely crew of people you are likely to encounter in corporate America. You get to see a ton of people, old and young, all from different backgrounds. I am amazed at how well some people have taken care of themselves. While most of the groups I have played with are relatively young, occasionally I have played with people in their late 50’s and early 60’s and am amazed at how well they have stayed in shape. Perhaps I’m even more amazed that they can play at the level that they do. Talk about setting an example you would like to follow!

Over the years I have joked with friends about the different types of basketball players one encounters at most pick-up games as many of them have been stereotyped in movies and articles. I have come up with my own list and broken them down into 10 main categories below, though you could definitely come up with more, or combine some of these together.

 

1)     Young Buck - This kid has skills. He is often the smaller and perhaps the youngest one in the group. This guy lives off of speed and can handle the ball, which means team defense is normally needed to stop him. Since he is smaller, he has perfected driving to the rim and still getting his shot off by studying Tony Parker his entire life. When he gets hot he can often stroke it from deep, but offense is not the only thing he is good at. He disrupts the passing lanes, gets back on D early, gets a number of steals, is a better rebounder than you would picture, and is a general pest on the defensive end. He is still a bit raw and makes some bad decisions, but his athleticism and abilities cannot be overlooked.

2)     The Logo - This guy come to the gym in the best threads: he can be spotted with the newest sneakers, he often will wear an actual jersey from one of the flashiest players in the league such as LeBron, Westbrook or Bryant. These guys often look in shape so you’d think they probably should have some skills. This image all comes to a shattering halt when they launch their first shot that misses the rim by at least three feet! Don’t even get me started on defense, as they don’t believe in it. This guy falls under “Don’t judge a book by its cover.”

 

3)     Big Man - Every game has to have at least one player on the court who is considerably bigger than everyone else. Regardless of how good this player is in terms of skills, he has the ability to cause match-up problems, set picks, grab rebounds, alter shots, and pick-up garbage buckets.  He may have weaknesses, but in basketball you can’t teach size. If he is smart and has a good grasp of the game, he can dominate more on the defensive end.

4)     And One - You know this guy. Every play is a foul…especially when he misses his shot which happens often. He routinely drives into traffic out of control and proceeds to throw the basketball over his head. Before he even picks up his dribble to shoot he is beginning to yell “And One”. Bottom line the reason he believes he didn’t make it or turned the ball over is because someone had to have fouled him.

5)     JaG - This is “Just a Guy” that shows up to exercise or may claim to love hoops. He is not terrible but not really great at anything. He just doesn’t have the drive or the skill to make impact on a regular basis and makes little effort to improve. He may not lose the game for you but he certainly won’t win it for you either. Not the worst guy to have on your team by far but you are certainly not excited to be playing with him.

6)     The Assassin - This guy for a variety of reasons never made it big time, but he is silky smooth and may have played some college ball.  He is a match-up nightmare. The only good thing is that he normally plays at half speed as he is not trying to overly impress this group. He can fool you into complacency as he is more than willing to pass to an open man, but he can bust out a move at any time – often dropping a game winning 25 footer with nothing but net. Best signs for spotting an Assassin pre-game? While it can be hard to spot an Assassin until he starts playing a real game, he normally has a shot, and he’s often thinner or shorter than you would think they would need to be for the position he excels. Wearing high quality but older sneakers with a faded basketball camp T-shirt is a dead give-away. This guy often has more to give but you might have to coax it out of him.

7)     Cherry Picker - This guy is often out of shape. He rarely gets back on D, and often decides to head back down court any chance he can. He puts tremendous pressure on the rest of his team to cover for him on defense. In his own mind he is an incredibly valuable player, as he scores every game he plays, but he does it at the expense of others.

8)     The Hustler - This guy is all heart: Diving for balls, helping out on defense, runs the court, relentless on the glass, seems to have endless energy. His shot is hit or miss, but he gives you everything he has every game. Every team needs a guy like this. He is great at nothing but does a little bit of everything well, plus his energy is infectious.

9)     The Black Hole - This guy has enough skills that he has determined in his mind that he is the best player on the team, and feels he should take every shot. He is good enough that teammates want to get him the ball, but they often get frustrated as he misses cutters for layups, forces ridiculous shots in traffic, or pulls up on a 2-on-1 fast break for a 30 foot 3 pointer. You get the picture – he can’t control himself even though he would be much more valuable to the team and a much better player if he would do so. These guys are dripping with talent but can’t harness what they have to make everyone else better. In the NBA they are often labeled “Coach Killers.”

10)  The OG - This is the guy you hate playing against. You know you should be able to take him, but he is the only guy on the other team that actually plays defense every possession, understands the game, and is a bit crafty. He often doesn’t mind getting physical – you call it a foul but he grew up wanting to be one of the Piston’s Bad Boys. He never leaves you, as he is focused on holding you scoreless. Your teammates try and force you the ball as they see diminished athleticism due to the Cho-pats. Unfortunately you get your shot blocked or stripped, and while you sigh in frustration he beats you up court for a layup. You get ripped by your friends. He is often overlooked, but then becomes the player who ends up beating you. He is the most frustrating man in pick-up to play against – The Old Guy.

If you want to run the court all day, put together a Young Buck, a Big Man with skills, an Assassin, a Hustler, and an OG – this team will be hard to beat. There are a variety of combinations that will work, but the bottom line is that a mix of skills that complement each other is the best.

How does this tie into business? Re-read the types. Aren’t these the characteristics of people we work with each day? What is tricky about basketball is that it is a team game. No matter what your strengths are, one weak teammate can really hurt your ability to succeed. You can actually win some games with any number of these guys if everything goes right, but the better the competition, the more your weak links are exposed. Sometimes we get to choose who we play with, and sometimes we end up playing with who showed up. Which player are you? Who would you like to play with? Time to up your game? Time to improve your team?

What we’ve got here is failure to communicate…

luke posterNot only is this one of my favorite lines from a movie, it aptly describes a number of situations that severely limit people from reaching their goals. While failure to communicate can adversely impact our relationships with family, friends, coworkers and it can also spell doom for entrepreneurs and company leaders.

Over the past few years I have had the privilege to mentor or observe the actions of a number of extremely bright individuals attempting to inspire others to take action, buy into their vision, obtain sponsors, recruit or raise funds. A subset of this group has fascinated me; while they may have a great idea or a unique perspective or way of seeing things, they are challenged by expressing it clearly and effectively.

It’s hard to put an exact finger on why this subset struggles with expressing something about which they are so passionate. Is it nerves? Lack of training? Is it a language barrier? Lack of preparation? Underestimation of what’s at stake? Shyness? Unfamiliarity of presentation? Never told a camp fire story? Lack of reading? Missed out on bedtime stories? Missed out on class presentations? Not in their genetic make-up? You get the point, and it’s hard to pinpoint to make it addressable.

At a startup camp last year, I was coaching a young entrepreneur who was struggling with how to explain a good idea. I was shocked to learn that he’d been in debate for years and believed that expressing his thoughts was one of his strong suits. Yikes!

I have seen startups who are generating revenue and have a decent business model who botch a pitch so badly that they lose the confidence of everyone in the room. I have also seen a number of extremely bright and capable people struggle with landing jobs or investors due to a heavy accent which exacerbates poor communication, especially if the person speaks too quickly. I’ve witnessed this firsthand with a family friend who has consistently taken jobs beneath her ability due to the aforementioned issues.  One notable investor has pointed specifically to thick accents and failures in communication as spelling doom for startups in their investment thesis.

There are definitely exceptions to this rule, and some people may be willing to invest the time and effort to overcome it. But based on my observations the many will not. So what can be done?

Here are 7 suggestions all of us can use regardless of whether we are pitching or presenting:

  • Nothing beats practice.  Record yourself and watch/listen. Ask friends, mentors and outsiders to listen to your pitch. Make sure you ask for open feedback. Tell them, SHOOT ME STRAIGHT AND BE BRUTALLY HONEST WITH HOW I PERFORMED.  Ask, WHERE CAN I IMPROVE?  Then make needed adjustments.
  • Always prepare your material as you would a meal—core staples with a little spice to keep the dish interesting.
  • Don’t read your presentation from PowerPoint slides. Avoid endless reading of bullets and limit the usage. People who really know their stuff shouldn’t be too tied to any notes.
  • Be sure to explain unfamiliar terms and potential uses for your product. Over-familiarity with your industry can be a detriment when pitching to others who may fail to understand why what you have is even needed.
  • Nothing conveys conviction like emotion as citing facts and statistics are not enough.  Put some fire in your presentation or put the presentation in the fire.
  • Turn your presentation into a story.  Stories are easier to recount and more interesting to your audience especially when they tie in tightly with how your product or solution solves a major problem.
  • Role play with advisors so you can come up with real world objections, questions or interruptions that might throw you off. You will be better prepared to handle them. Nothing is as uncomfortable as pure silence, an incoherent response or failure to even acknowledge what was said.

Mark Cuban tells me “You have it on lockdown and will be revered!”

Image

Mark Cuban Action Figure

I truly wish I could say Mark said this while we were playing some pickup basketball—with me going off, raining 3s, blocking shots and passing out dimes—but rather, he said this about my business leadership.
 
Before I explain, what prompted this subject is the number of headlines on the web (like this one) that are meant to grab attention and gain readership. The titles are often catchy but sometimes quite a reach. At times I read these and walk away unsatisfied, similar to the way you feel a couple hours after eating a high-carb, fast food lunch. I’m going to try to avoid this empty outcome by making three points with my headline. Hopefully at least one of these will help a startup founder trying to get in front of a key person, an aspiring blogger angling for strong readership, or even a salesperson seeking a foot in the door.
 
First, whenever you are writing, whatever it may be, make sure there is a point to it! Humor me, make me think, or educate me in some way.  
 
Second, always provide the context of where your headline is coming from. The compliment from Mark Cuban was really nice, but should you believe it? I guarantee he didn’t in the context you may assume, but it was all said in good fun.
 
Here’s what happened:  I was testing out a new secure messaging application called Cyber Dust which allows users to send messages to someone else and then have them disappear without a trace. Because Mark is backing the company, I decided to message him for fun to see if or what he would respond. Since I love basketball, a business associate had given me a Mark Cuban action figure that I happen keep on a shelf in my office with some other basketball-related items. I decided I would send Mark a photo of his action figure and ask him, “What message is having this in my office sending to my team?”  He responded quickly with, “You have it on lockdown and will be revered!”  I definitely got a kick out of this exchange, and judging by the response I think he did, too.
 

So, the third point I want to make is to be relevant. If you’re trying to connect with someone, get a response or request assistance, then your appeal must be relevant to them. Perhaps Mark would have messaged me back on the application regardless of what I’d written. But without the relevance of that photo, it’s fairly unlikely I would have gotten such a humorous response. Keep this in mind the next time you reach out to someone you don’t know— find an interesting way to get their attention and make it relevant. That way, you and your audience are much more likely to get something valuable out of the encounter.

 

2014 Themes and Forecast

Last year’s “2013 Themes and Forecast” were on the money. It almost scares me to pick any M&A or rebound targets this year with the market having run up to a high point, and with the Fed claiming that tightening is coming. ‘Puts me in the nervous camp, but let’s go ahead and get started on some predictions for 2014.

Nuance – Is clearly a leader in voice recognition. You would think with the explosion of Siri and other voice-related systems this stock would be on fire. Unfortunately, the company has made a number of blunders and is in the midst of changing their business to a recurring subscription model which will further impact earnings. With a number activists pressuring the company to get their act together, and Icahn buying more shares at depressed prices, I like the risk/reward that the company gets it together or gets taken out.

Rackspace – Is a leader in cloud computing. However the company has been bashed due to reports of Amazon price cutting, execution errors, missing features, slower growth than many expected and their big bet on the OpenStack ecosystem. Rackspace also has one of the poorest partner programs in the industry which sends droves of opportunities to a number of their competitors. So what’s to like? Long-term, OpenStack has some prospects and the stock got a boost from the recent RedHat announcement of it being a big growth driver. With the stock down well over 50% from its high earlier this year, the valuation is much more appealing and there is pressure mounting on management to get it right. I see this company becoming part of a bigger organization in the long run.

Fortinet – Stays on this year’s list as I still think the installed base and valuation is appealing. There’s still too much overlap in this space which makes it ripe for consolidation.

Multi-Fineline Electronix – The company has an X in its name so you know I like it already.  MFLX is another one of these turnaround stocks as it trades below book and has been hammered due to bad news. With much of this linked to Apple and Blackberry, the company has worked hard to reposition itself for a rebound or possible acquisition. One kicker with Apple poised to launch new products is that they could potentially benefit from any new announcements.

Game Stop – Is one stock to sell. Of all stocks in the market today, I’m not sure any scare me as much as Game Stop, though it has rebounded like crazy from the XBOX news that they would stop allowing games to be resold. Long-term, games will be distributed digitally. Software is where the margin is, so I just don’t see how Game Stop will be able to reinvent itself. It seems they will suffer much the way Blockbuster did, yet the stock is near all-time highs. I hope they prove me wrong as I’ve enjoyed perusing their stores for many years.

Blackberry  – I still believe these guys may get taken out or that the company will be split into a couple pieces. There are some great assets in the company but they need to move quickly.

In general I expect more consolidation in the cloud space.  I am also worried about social media stock valuations as they are once again beginning to concern me.  Twitter, Yelp, Facebook, LinkedIn and others are beginning to look quite expensive as we begin the new year.

Now on to the non-stock specific outlook.

Leather Wallet Goes Away, Almost – After years of battling technologies, it appears Bluetooth has begun to chip away at the payments space. If this happens, we could reach a point where we need to carry little more than a phone. There are a number of winners and losers if this comes to pass.

Microsoft Mobility – As smart devices are linked to the cloud, they are one of the easiest devices to replace. This actually works to Microsoft’s benefit as they eat into Samsung and Apple sales ever so slightly. The big question over the next couple years is whether Microsoft’s enterprise offerings are strong enough to drive sales of their mobility products that offer full integration. This will largely depend on the focus of Microsoft’s new CEO.

Amazon – Finally faces backlash as a number of companies finally wake up to the realization of the great threat Amazon poses to their ongoing survival. The list of companies at risk of extinction or severe retrenchment due to Amazon’s competitive positioning is so large that Wall Street is putting up with Bezos’ spending and results because the endgame is so huge. This is a fact that Rackspace and the OpenStack movement must capitalize on before it’s too late.

IoT – Becomes more seamless. Connecting all of the wearables and appliances in the world may be cool, but if they require separate apps, charging, maintenance, logins, portals—and the list goes on—they will be more cumbersome than they’re worth. Single collection and coordination of this information becomes critical for many of these technologies to achieve mass adoption. Manufacturers must get this right or risk burnout.

Breaches on Mobile Devices – Become more common, forcing companies into modifying BYOD requirements and enforcing MDM.

Outsourcers and Integrators Disappear – Most of this will be driven by two factors. Companies that haven’t invested enough to compete on their own will be acquired for their customer bases or will go out of business. Companies that are growing, offer unique value adds, and are versed in new technologies and business models will be acquired by companies attempting to catch up or solidify their positions.

Encryption – Finally goes mainstream. Let me sum it up in two words: Snowden and China.

Google Glass – Was finally released to a lukewarm reception.  I saw someone with a pair on the other day and I can’t see someone wearing these on a daily basis. There just isn’t a killer app today for the general population as there are too many flaws. Perhaps down the road this will change. Anyone remember the Newton? Sometimes you’re just a little too ahead of your time. I can see vertical usage with the device for mechanics, travelers and other specialized fields.

Smarter Software and Machines Everywhere – IBM now claims they can identify your personality by reading as few as 200 of your tweets. Technologies to analyze every bit of data created are exploding, and we are just seeing the tip of the iceberg.

3D Printing – Creates an entire new economy. Over time, the technology will decimate old business models while generating new ones. People are just figuring out how to use these tools, so ethical implications and the potential for infringement will be high. If you thought theft of online music and movies was a problem, wait ‘til you see how criminals leverage 3D printing.

Apple – I’ve been wrong on Apple the past couple years so what do I know. I do think Apple still has some tricks up its sleeve. This has to be the year they come with a wearable and/or a TV (or should I say home entertainment system?). Expectations will be incredibly high due to the delayed shipment of these products. Apple has no margin for error—they will have to be measurably better than what is on the market today or they’ll have to define a new category. My guess is that they get at least one of these right.

Disclosure – I am currently long Rackspace and Nuance.

REVIEW OF 2013 THEMES & FORECAST

For a number of years now, I’ve tried to make some educated, annual guesstimates on what will happen in the tech world. At the end of the year, I look back to see how I fared with my predictions. This has made for good conversation with a number of people I’ve encountered, so I look forward to your feedback this year, too.

With 2013 nearly a wrap, it’s time to revisit last years’ predictions and surprises. Let’s start with a review of stocks that were mentioned as M&A targets, plus Facebook, which I forecasted to rebound.

2013 M&A Picks with Performance Data
Closing Price Last Trade or Price Percentage of
Acquired 1/8/2013 12/24/2013 Change
Adtran ADTN No 20.72 26.38 27.32%
Brocade BRCD No 5.36 8.68 61.94%
Dolby Labs DLB No 29.67 38.57 30.00%
Facebook FB No 29.06 57.96 99.45%
Fortinet FTNT No 19.09 18.9 -1.00%
Groupon GRPN No 5.2 11.84 127.69%
NetApp NTAP No 32.5 40.38 24.25%
Palo Alto PANW No 47.63 56.85 19.36%
RIM BBRY No 11.91 7.73 -35.10%
Travel Zoo TZOO No 19.68 21.82 10.87%
Yahoo YHOO No 19.66 40.85 107.78%
Average Gain 59.07%

Highlights of 2013 – On the Money

  • Though none of this portfolio of particular stocks were actually acquired in 2013, they hummed along, crushing the market averages with a greater than 59% annualized return for this chosen portfolio of stocks.
  • Facebook mounted a huge comeback and gained back the faith of many of those whom it had disappointed in 2012.
  • Marissa Mayer is on a mission and did not disappoint investors as she made huge strides at Yahoo in 2013. Can she keep it up?
  • Smartphone cameras improved greatly and were key features in many new models.
  • The Blackberry phone was not a game changer and BBRY quickly popped back up as an M&A target.
  • Cloud War is in full progress as Amazon continues to cut prices and Wall Street seems to buy the strategy damaging many competitors in the process.
  • Laws—or lack thereof—slowing cloud adoption were commonplace. Imagine the even more impressive growth the cloud would have if businesses weren’t scared of compliance, case law and spying, for example.
  • Microsoft released their new XBOX and made some positive steps on the mobile front.
  • Crowdsourcing is now seen in tons of applications and has definitely hit the mainstream.

Lowlights of 2013 – Early Though Still Possible

  • Blackberry still didn’t get a deal done. I really thought they would seal a deal in 2013 in order to escape the drama that has so publicly haunted the company, and so they can focus on product development (even if it means killing their device business).
  • Apple has blown my mind by not releasing anything worth highlighting except the iPad Air and an offering of a free OS upgrade. I really thought Apple would do something noteworthy on the mobile device or television front. It seems Samsung read Job’s comments about a smart TV and took the lead on making televisions easier to control. Tim Cook keeps teasing us that there are exciting items in the funnel and that 2014 will be a big year. Let’s see if he is right.
  • No M&A – Not a single company in the list was taken over. The value of several of these companies was evidenced by their shares rebounding greatly, but I still believe many of them cannot continue to stand alone much longer. At this point, it may take another downturn or a technological advance to get the valuations compelling enough for a deal to happen.

What could happen in 2014? Check out my upcoming blog “2014 Themes and Forecast” and let me know where we agree or disagree.

Products That Get You Thinking

We can become so completely engrossed in what our business is doing today that we fail to know much about the rest of our industry, much less adjacent or completely unrelated fields. However, I enjoy scouting for new products and services as a means of inspiration. Innovative new products, and those about to come to market, help me stay current and stimulate ideas that might help the businesses in which I am involved. They often get me thinking about how to apply technology or solutions differently, or help me personally in some way. The following are several that have got me thinking recently. Hopefully they will do the same for you.

After being blown away by “The Boy Who Harnessed the Wind” (a must read) some time ago, I’ve been fascinated by technologies that many of us take for granted. Electricity and lighting are things we rarely give pause to, but the absence of these technologies in many countries effects well over a billion people. Twenty-one percent of the world’s population does not have access to reliable electricity. Many still use kerosene for light. That is why I was amazed at the simplicity and execution of the GravityLight. The product is now in production.

Pong Case – A new phone case, so what’s the big deal? This one definitely makes you wonder if they can back up their claims – increased outbound signal by 44%, increased range by 20%, reduced SAR exposure by 82%, built-in antenna that instantly pairs with iPhone 5s when snapped on, and can take six-foot drop. All this with a 60-day, money-back guarantee. Does this product live up to even half its claims? I intend to find out when mine is delivered later this week.

A cardboard bicycle made for only $9? I had been following this story for some time and was amazed at the possibility of a functional cardboard bicycle which could be made for $9-12 and sold for around $60-90. With bicycles providing a major form of green, economical and practical transportation for people worldwide, I was interested to see what would come of this. Check out one of the stories from earlier this year on the cardboard bike.  Unfortunately after gaining some early momentum this crowd-funded project hit some potholes especially in light of the much higher than expected price. Regardless of what comes of this, and if or when we ever see a cardboard bike come to market, it’s an amazing demonstration of how powerful crowdsourcing can be from a variety of perspectives.

Another concept that fascinates me are wearables—computer-powered devices that can be worn—as we’re only just beginning to scratch the surface of this space. While many of these technologies need time to be refined, it’s interesting to see how vertical a device might be, such as a watch made for the hard of hearing or deaf. On the other hand, some of these applications have endless uses such as Bluetooth Tracking Stickers. These have mixed reviews but I am definitely intrigued by the idea.

Did any of these products resonate with you?  What gets you thinking about new ideas? Where do you look for inspiration? I would love to hear from you if you come across an interesting solution or product that is still out of the mainstream.

Planning to Attend SXSW Next Year?

Here’s what you should prepare for…

The Down-Low
Long lines waiting to get into sessions. Many people turned away from key sessions, instead watching in satellite rooms with a video feed. Trying to get overpriced food in the rain in a tent too small to call comfortable. Being crammed into venues not really designed to handle the number of participants. More than 30,000 people from 56 countries all in one city. 1800 speakers hosting more than 1000 sessions. Constantly trying to geo-locate the building for your next session. High hotel rates and difficulty finding a room. Lots of walking and shuttle rides. Sore feet.

The Upside
Meeting smart and fascinating people from around the world. Hearing some of the most interesting authors elaborate on their cutting-edge research. Learning about the projects that startups are working on, and seeing application of new technologies. Getting a feel for what’s coming next. Feeling the excitement of being around so many enthusiastic people. Feeding off the collective energy.

What That Reminds Me Of…
Bottom line? SXSW reminds me a lot of attending my first COMDEX show with my dad in the 1980s. There just wasn’t enough infrastructure in Las Vegas at the time to support what was becoming a wildly popular event. Today is a different story, but back then, exhibit halls in Vegas were strung across the city in hotel after hotel, using any available convention or meeting space, inelegantly tied together by shuttles. Early on at COMDEX, there was a buzz of excitement as it was rarely known what awaited you at each stop. Already, there were vendors from around the world. In the early days when the PC began to take off, there was a similar sense of excitement and potential. Granted, there are some major differences from SXSW, but also a number of noteworthy similarities when it comes to assembling such a massive gathering in Austin.

2013 SXSW Highlights

  1. Elon Musk – It was great to hear him speak. I walked away thinking he’s not only a very smart person but incredibly skilled at marketing himself and his companies. Don’t know the name? Here is some quick info: co-founder of PayPal and Tesla Motors; CEO, CTO and Founder of SpaceX; and Chairman of Solar City. Has been compared to Henry Ford and provided the inspiration for Tony Stark of Iron Man movie fame. During Q&A he was asked “What was your biggest mistake?”  And his humble response, “I don’t know… I have made so many of them.”
  2. Al Gore – His writing style may be a bit choppy but he loves to study, read and research. Some of the pieces he has compiled lend heavily from travel, networking, board meetings, and the variety of experience which leads to some interesting insights. My key takeaway included some of his points on biotechnology regarding the increasing manipulation of DNA to produce not only organisms with novel features, but new materials and fuels as well.
  3. Bre Pettis – Co-founder and CEO of Markerbot, Bre had an enthusiastic presentation on the opportunities created via affordable 3D printing. My favorite moment was when he described the use of this technology to help children without hands to have a prosthetic made otherwise cost prohibitive. If you weren’t already excited about 3D printing, this presentation got the wheels turning.

Here’s hoping Austin and SXSW figure out a better, more effective way to handle the crowds next year. In the meantime, I definitely appreciated the benefit I derived from the chaos. Let me know if you will be there next year!

2013 Tech Themes and Forecast

Here is a look at this years Themes and Forecast.  To see how last year turned out you can read the 2012 Themes and Forecast or check the results.

  1. M&A for 2013 – I expect quite a few mergers of necessity. This doesn’t mean they will take place at the most advantageous price for purchasers or shareholders.
    1. FTNT – Let’s start with a former pick, Fortinet. This stock has gone nowhere in a couple of years and needs a partner. If the stock trends lower there could be takers.
    2. DLB – Dolby Labs has some investors concerned due to patents expiring and Disney’s ownership of THX. That said, Dolby has a wildcard that isn’t talked about much—the patents to NFC. If you believe NFC is finally going to gear up in 2013 or 2014, then Dolby could be a great buy for any number of companies. With the stock nearing its five-year low, it is definitely one to keep your eye on.
    3. RIMM –  I know there is hype on the new operating system, but the odds of this truly being a game changer are extremely slim. The RIM faithful, hoping this might finally be the device that saves the company, will be out in force so look for the stock to bounce. That said, I still believe the company will be taken out later this year when the hype dies down.
    4. PANW – Palo Alto Networks is a leader in the security space having pioneered Next Generation Firewalls. Though the business is growing quickly, it has seen its results lag behind expectations, putting the stock under pressure. The valuation is still on the high side. For someone like Cisco that needs to do deals in 2013, a better deal may be had in the near future than before the company went public.
    5. GRPN – We know about the problems, but they still have a large active user base. I liked it better before the run-up, but I think someone will take them out (though it may need to go lower first).
    6. TZOO – With all of the consolidation in the travel space and the stock under pressure, Travel Zoo could find itself taken by a larger player in the industry.
    7. YHOO – Marissa Mayer has gotten the attitude turned around and brought some swagger back. Can you sense it? Perhaps they don’t need to be acquired at this point, but wouldn’t it be funny to see Microsoft come back now that the company is turning. Don’t forget they still own a good-sized stake in Alibaba.
    8. Other possible companies that could be acquired in 2013 include Brocade, Adtran and NetApp.
  2. Apple Has to Do Something New, Right?  – While I could talk about why an iTV type of product still seems likely, I am going to switch my focus to personal M2M. Just walk into an Apple store and what do you see? All sorts of devices that communicate with your PC/Smartphone/Tablet via Bluetooth or the Internet. What do these devices do? Some of the early models analyze how well you sleep, give you a high level display of alerts on your wrist, track how many steps you take, how much exercise you are getting, etc. Even Nike has gotten into the fray. In December, the FDA approved a heart rate monitor for the iPhone. In 2013, Apple will jump into this space with a wrist based device to gather and share data. The new Apple Nano should have been this product but we will have to wait until 2013.
  3. Facebook Comeback – Facebook has their hooks into everything and in 2013 their monetization of those inroads will become more evident as the stock works back to the IPO price with a few detours along the way.
  4. Smartphone Cameras – Smartphone cameras are now a given but the quality is still lacking. Sure, it is acceptable for posting to Instagram but in most cases just not quite good enough to replace dedicated portable cameras. This year we see a number of major improvements that will widen the usefulness.
  5. Cloud War – There are just far too many services in the cloud so expect mergers, failures and new product launches. Apple, Google, Amazon and Microsoft all have strengths and weaknesses in the cloud today. Look for this war to heat up in 2013 as we haven’t seen anything yet. There are a number of platforms and products ripe for the picking. Pinterest or Yelp anyone?
  6. Crowdsourcing Goes Mainstream – This trend was identified in 2011 http://www.liquidnetworx.com/2011/01/ and has grown greatly. With the public and mainstream media finally getting wise, we will see it everywhere in 2013.
  7. Microsoft – The company finally makes some headway with their Windows Phone 8 and launches a new Xbox. By the way, the prediction that Lync would be a huge success two years ago has continued to hold true. UC strategists are stating that Cisco now views Lync as their top threat even above Avaya. Lync will make even further inroads in 2013, hurting Cisco and Avaya in the process.
  8. Laws Slow Cloud Adoption for Large Companies – There are still many questions. How would an internet kill switch possibly affect enterprise customers? Even outside of a black swan event such as this, there are still too many gray areas that risk-averse companies just can’t get around. For big companies, there is still little case law and precedents to reference. Look for consumers and small businesses to continue marching into the cloud eyes wide shut.
  9. Platform as a Service (PaaS) to Explode – These offerings have been limited but as businesses get more involved this segment should start getting more action. Note: Oracle recently took a stake in Engine Yard to get a foot in this space.
  10. Flexible Displays – New materials will allow new form factors for a variety of displays. Samsung is already rumored to be preparing a smartphone that will use this technology.

What do you see happening in 2013?

Disclosure – I am currently long Facebook.