Cantor Fiterzgerald analyst Brian J. White presents highlights from the second day of the Mobile World Conference (MWC) 2014.
Yesterday we attended Mobile World Congress (MWC).
MWC: F5 Networks ramping up a new growth driver
Yesterday at Mobile World Congress (MWC), we met with John McAdam (CEO) and Andy Reinland (CFO) of F5 Networks, Inc. (NASDAQ:FFIV). Our meeting focused on the opportunity in the Traffix diameter signaling market, and our discussion keeps us optimistic about this incremental growth driver for F5. With the ramp of 4G LTE networks around the world, which we believe will increasingly require diameter signaling technology, an average selling price that we estimate exceeds F5’s BIG-IP portfolio, and a rich margin profile that is typically associated with high software content, we believe F5 has a unique opportunity to tap into this new market. Earlier this week, F5 announced that Brazil-based service provider Oi SA (ADR) (NYSE:OIBR) selected the F5 Traffix Signaling Deliver Controller (SDC) on their 4G LTE network, and the company highlighted over 30 operators deploying this solution around the globe. Given the ramp of 4G LTE networks around the world and the early stage momentum with F5’s Traffix SDC portfolio, we believe this business is at an inflection point and could become a new growth driver for the company over the next 12-18 months.
MWC: Apple set up well in high-end market in 2014
At this year’s Mobile World Congress (MWC), we have been hard pressed to find significant innovation in the smartphone market, making us increasingly comfortable that Apple Inc. (NASDAQ:AAPL)’s future iPhone innovations have an opportunity to gain share in the high end of the market. For example, we found little in the way of innovation from companies such as Huawei Technology Co Ltd (SHE:002502), LG Electronics Inc. (KRX:066570) (OTCMKTS:LGEAF), Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and ZTE that would cause us any concern about the future growth opportunities for Apple’s iPhone. As we have previously discussed, we expect Apple to release 4.7-inch and 5.5-inch iPhones this year.
Internet of Things has major support at MWC
During the connected lifestyle keynote, the CEO of Deutsche Telekom AG (FRA:DTE) (ETR:DTE) (OTCMKTS:DTEGY) discussed the trends in what he described as the second phase of the Internet, including: 1) sensors everywhere; 2) Internet of Things; 3) Big Data; and 4) Cloud Digital Nomads. With these trends in mind, Deutsche Telekom believes the role of the telecom operator in the future will be to enable the digital ecosystem. In our coverage universe, Cisco has been the most vocal about the “Internet of Everything,” as they call this trend, and we believe the company’s aggressive investment in this area will begin to pay off over the next couple of years. As part of the connected lifestyle keynote, Ford Motor Company (NYSE:F) described cars as “the smartphones of the future,” and the new Ford Focus with SYNC 2 was released this week during MWC. We believe the increased connectivity of the automobile is a major trend and that leading mobile device platforms such as Apple will increasingly need to participate. Recent media reports suggesting that Apple could be interested in purchasing Tesla seem extreme to us; however, we believe that these stories do highlight the growing importance of the auto world to the leading mobile device platforms.
