Cantor Fitzgerald Managing Director Brian J. White takes a close look at Apple Inc. (NASDAQ:AAPL) in light of the recent MWC, commenting on possible effects of new tech developments.
Last week, we attended the 2014 Mobile World Congress (MWC) and met with a host of leading tech companies exposed to the mobile world.
When portfolio managers get started in the business, their investing style often changes over the years. However, when Will Nasgovitz bought his first stock when he was 12, he was already zeroing in on value investing, and he didn't even know it. Nasgovitz has been with mutual fund manager Heartland Advisors for almost 20 years, Read More
The Interest in NFV was Crystal Clear
The trend toward Network Functions Virtualization (NFV) that complements Software Defined Networking (SDN) was a key theme last week as carriers look to improve the efficiency of their networks with the benefit of increased software. In our view, the trend toward NFV could make application delivery networking (ADN) products more important in the carrier network and potentially open up expanded use cases for F5 Networks.
Constructive Tone Around Carrier Investment in 2014
We felt the tone around carrier spending for 2014 was constructive (including notable strength in wireless) with healthy trends in the U.S. market, more stable trends in Europe, and significant 4G TD-LTE investments in China. There was also initial discussion around 5G networks by the year 2020. In our coverage universe, Juniper Networks is the most exposed to carrier spending (65% of 4Q:13) and Cisco is the largest router vendor in the world with a product refresh that we believe will positively impact FY:15.
Leading IT Vendors Make Biggest Showing Ever at MWC
This year’s show also attracted leading IT vendors that have not shown much interest in MWC in the past. For example, International Business Machines Corp. (NYSE:IBM)’s Virginia Rometty (CEO, Chairman) was the first CEO of IBM to attend MWC, while EMC’s Joe Tucci (CEO, Chairman) and VMware, Inc. (NYSE:VMW)’s Pat Gelsinger (CEO) also participated in MWC keynotes. MWC veteran, Ericsson (ADR) (NASDAQ:ERIC), discussed the convergence of the network and IT stack, highlighting the company’s planned transformation to address this change.
No Major Smartphone Innovations to Impact Apple’s Larger-Sized iPhone Ramp
In the smartphone market, the big product introduction of the show was the announcement of Samsung’s Galaxy S5; however, the new device was not available for public viewing and we believe the specifications point to only an incremental upgrade. Additionally, we found no major innovations from other iPhone competitors. As we have previously discussed, we expect Apple Inc. (NASDAQ:AAPL) to unveil a 4.7-inch and 5.5-inch iPhone this year, which we believe could boost the company’s market share in the high-end smartphone market. In the low-end smartphone market, Mozilla’s Firefox mobile operating system seems to be showing early stage momentum and attracted much interest at MWC.
Big Data was a Big Deal This Year
The discussion around the Big Data trend and use cases increasing meaningfully at this year’s MWC. Keynotes from IBM, EMC, VMware and many others highlighted Big Data, while most of the leading tech companies discussed how they are supporting this movement. In our coverage universe, Splunk and Tableau Software are direct plays on Big Data, while we believe IBM and EMC are examples of larger tech companies positioned well to capitalize on this trend.
Lots of Buzz Around Wearables and iWatch Could be the Catalyst Needed
The buzz around the wearable market was intense this year with a focus on the wrist through fitness bands and smartwatches; however, we continue to believe that it will take a catalyst such as Apple Inc. (NASDAQ:AAPL) introducing the iWatch to get this new category moving, and we expect this to occur in 2014.