Professional Documents
Culture Documents
July 2013
Cyrus Mewawalla
cyrus@researchcm.com +44 (0) 20 3393 3866
www.researchcm.com
Authorised and regulated by the Financial Conduct Authority
CM Research
22 Upper Grosvenor Street London W1K 7PE
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Executive Summary
In this report, the third volume in our Global TMT Trend Forecast series, we identify the major disruptive technologies that we will see in 2014 and predict how they will impact the worlds largest technology, media and telecom (TMT) companies. Our objective is to offer investors and industry executives a comprehensive trend forecast for the global TMT sector over the next 12 months. To set the scene, the chart below shows the relative market performance of 17 TMT sectors since the beginning of 2008, benchmarked against the S&P 500 index. Future performance will be largely impacted by the trends outlined in this report. Over the last five years internet companies, software developers and data centres have been the most prominent outperformers whilst consumer electronics companies, telecom equipment makers, publishers and telecom operators have underperformed.
Global TMT sector: Cumulative 5 year share price performance
200% 150% 100% 50% 0% 50% 100% 2008 2009 2010 2011 2012 2013
Hardware
Software
Telecoms
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research. Bars show the cumulative sector performance from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013 of a selection of stocks that we believe are bellwethers for each sector aggregated on an equal weighting basis. Note: Whilst the performance of every sector is shown over a 5 year period, the performance of social media is shown over a two year period as most social media companies were not listed 5 years ago.
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Here are some of our conclusions: Consumer electronics: Wearable computing devices and internet TV will be the big consumer electronics products of 2014. Both are likely to strengthen the dominance of the bigger internet ecosystems run by Apple and Google. But the Asians are fighting back. Samsung may yet revive Bada and LG has bought HPs WebOS specifically for its smart TV offering. In addition, a host of new mobile ecosystems from Huawei, Jolla, UCweb and Mozilla have recently entered the market, threatening this cosy duopoly. Telecom equipment: Software defined networks (SDNs) will soon threaten the dominance of networking equipment leaders like Cisco and Juniper Networks. But as mobile technology moves to an all-IP environment, leading providers of fixed IP networking equipment such as Cisco will move into the wireless equipment market thus far dominated by Ericsson. Semiconductors: Cheaper smartphones and tablets will soon flood the market, many made in China, shifting the balance of power in the chip industry from expensive US chipmakers like Qualcomm to cheaper Chinese ones, like MediaTek and Spreadtrum. 3D printing: The market for 3DP services grew 29% in 2012 to reach $2.2bn worldwide. Whilst Foxconns Terry Gou describes 3DP as a gimmick, we believe it could transform manufacturing, hasten the onshoring of production and shorten product development cycles. 3D Systems and Stratasys have seen their shares rise already but CAD software firms like PTC and Autodesk could be next. Software: Apple and Google pioneered the internet ecosystem. Now the race is on to build software ecosystems that include ERP platforms, Big Data analytics, cloud and cyber-security. IBM, SAP, Oracle and Microsoft will be the main predators. Cloud: As IT infrastructure moves into the cloud, virtualisation products act as the gateway. Niche players like VMware and Citrix Systems will face fierce competition from Microsoft. Meanwhile, WAN optimisation players like Riverbed Tech help move data faster. E-commerce: Maps and mobile payments are the new battlegrounds in the war for supremacy of the mobile internet. Advertisers: Ads are going mobile. Google has a 55% share of the $16bn global mobile ads market. If Googles platform dominates internet TV as well, traditional advertisers will find themselves negotiating with the same near-monopoly in all their markets. Film & Television: TV doesnt work without content. As technology giants rush to develop their own versions of the next internet TV platform, they will bid up the price of popular content. Stellar performers like Disney and Time Warner may yet see more upside. Publishing: Whilst DMGT has shown how smart management can turn around an incumbent publisher in a declining industry, the overall outlook for publishers remains bleak. Cable & Satellite: Far more prepared for the digital world than telecom operators ever were, cable and satellite operators have a good chance of avoiding being eaten alive by Apple and Google by investing in independent platforms like FanTV. Telecom operators: As voice, messaging and internet access revenues decline, operators must act fast to avoid disaster. But we argue that competition, politics and the evolving scope of internet regulation will impact share prices more than operator strategies. www.researchcm.com 5
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Part I: Hardware
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Connected devices
Dominant theme: Wearable computing devices will be the next big thing to follow smartphones and tablets. Outlook: China is set to dominate shipment numbers for smart connected devices for several years, heralding an era of cheap phablets where Huawei, ZTE and Lenovo may edge out western rivals.
Whats happening?
Wearable connected devices such as Sonys SmartWatch, Google Glass and medical devices will be the next big product cycle after smartphones. The Apple business model of owning hardware, software and an apps-based ecosystem is being cloned by rivals. New entrants are invading the market for mobile ecosystems, challenging Apple and Googles dominant position. Chinas smartphone shipments hit 78m in Q1 2013, up by 117% compared to Q1 2012 and representing 36% of global shipments of 216m for the quarter. As Apple and Googles ecosystems grow, the risk of patent litigation and anti-trust litigation against them increases. Google and Microsoft have decided to enter the hardware market, creating conflicts for customers of their software.
Theme
Wearable devices
Leaders
Apple, Google
Laggards
Alibaba, Amazon, Baidu, Microsoft, RIM, Sony, Nokia, LG, Tencent Samsung, HP, Dell, LG, Sony, RIM, Acer, Asustek, HTC, Nokia Apple, Google
Apple copycats
Apple, Google, Microsoft, Baidu, Alibaba, Tencent, Huawei, Facebook, Amazon Jolla, Mozilla, Opera, Huawei, Baidu, Qihoo 360, Facebook, Tencent, Alibaba, Amazon, Easou Google, Samsung, Huawei, ZTE, Lenovo, Xiaomi
Litigation
Apple, Google
Conflicts of interest
Google, Microsoft
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Outlook Today the world has 2.8bn internet users. Of these, at least 1.5bn access the internet wirelessly. Thats up from 1.1bn a year ago. The next billion users are all likely to use their smartphone as their primary means to access the internet. Mobile now makes up 16% of all internet traffic. This internet traffic is monetised most effectively by those with the largest mobile ecosystems. So far Apple and Google dominate, with a joint 92% market share of the mobile operating system market. But with China set to remain the worlds biggest mobile internet market for the foreseeable future it is already home to 29% of the worlds mobile internet subscribers two things will change. Cheaper smartphones will flood the market, benefitting local manufacturers such as Huawei, ZTE and Xiaomi at the expense of dearer western rivals. And Google Androids hold on the low-end operating software market may be side-lined by home-grown software from the likes of Huawei, Tencent, Baidu or Alibaba. Connected devices: Cumulative 5 year share price performance
200% 150% 100% 50% 0% 50% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Consumer Electronics
Dominant theme: Internet TV is likely to be the next big consumer product, but there is no clear winner for investors as yet. Outlook: As with smartphones and tablets, consumer electronics hardware makers are seeing their profits sucked out by software ecosystems. Asia is fighting back: Samsung may yet revive Bada and LG has bought HPs WebOS.
Whats happening?
No technology company has yet mastered the three pre-requisites for (enjoyable) internet TV: a simple electronic program guide, a low latency user experience, a vast back-catalogue of licensed content. Consumer electronics are fast becoming bolt-on accessories for the internet ecosystems controlled by the second screens of Apple, Google and Microsoft. A new generation of consumer products based on robotics is emerging, including driverless cars, hands-free vacuum cleaners and personal companion robots. More technology companies are onshoring manufacturing of their latest high tech products. Apple assembles iMacs in the US; Google will manufacture Glass in California and the Moto X in Texas. While Samsung and LG have massively overspent on developing OLED displays Sony has invested more cautiously in 4K technology.
Theme
Internet TV
Leaders
Apple, Google, Microsoft, Fanhattan, Roku, Boxee
Laggards
Sony, Samsung, LG, Nintendo
Amazon, Alibaba, Apple, Facebook, Google, Microsoft, Netflix iRobot, Microsoft, Apple, Google
Robotics
On-shoring
Apple, Google
Screen technology
Sony
Samsung, LG
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Outlook As the share performance chart below aptly illustrates, only two of the worlds leading consumer electronics companies are trading at higher valuations than five and half years ago. They are Apple and Samsung. The consumer electronics sector has become polarised by the internet. The big mobile internet ecosystems Apple, Google, Microsoft, Baidu and Tencent are sucking all the profits out of hardware manufacturing, reducing hardware-only makers to low-margin producers of commodity products. The next big product cycle for the industry is internet TV. Here too the lions share of the profits is destined to go to internet ecosystems rather than hardware makers. Samsung, the most profitable hardware-only maker, owes its manufacturing prowess to a strategy of relentless hardware innovation. It is likely to hold that lead with its new hardware innovations such as flexible screens or eye-scrolling technology. But without its own software ecosystem it tried and failed with Bada it is doomed to fail ultimately. LG Electronics, conscious of this dilemma, purchased WebOS from HP for use in its smart TV platform. If it makes the most of this opportunity LG could become the first Asian player to compete successfully on a software level with Apple, Google and Microsoft, giving it a slim chance to claim a decent slug of the profits of the internet TV market. Consumer electronics: Cumulative 5 year share price performance
200% 150% 100% 50% 0% 50% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Component Makers
Dominant theme: 3D printing could lead to the democratisation of manufacturing, changing how we design, manufacture and repair virtually everything we use today from medical devices to aircraft parts to houses. Outlook: Consumer electronics devices are increasingly controlled by two dominant operating systems: iOS and Android now account for over 90% of smartphones and tablets shipped worldwide. Successful component makers will need to align their businesses more and more to these software ecosystems.
Whats happening?
In 2012, the market for 3D printing products worldwide grew 29% to$2.2bn, according to Wohlers Associates. Used primarily for prototyping, 3DP could soon be used for manufacturing components. New display technologies will soon give us screens that have rigid curves built into them or that are bendable by the user. Apple is diversifying its supplier base away from Samsung. It is also playing a divide and rule game between its top two assemblers Hon Hai and Pegatron. As Chinese labor costs rise and industrial unrest grows, more Asian component makers will look to industrial robots to control their cost base. As industry profits move from hardware to software, component makers need to position themselves accordingly.
Theme
3D printing
Leaders
3D Systems, Stratasys
Laggards
Too early to say
Flexible displays
Samsung
Robotics
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Outlook Five years after the start of the financial crisis, two thirds of the component makers in our stock universe below are still trading at valuations below those at 1 January 2008. As profits in the consumer electronics industry shift from hardware makers to internet ecosystems, the profitability of component makers will be linked more and more to how successfully they compete for coveted places in the supply chains of the leading operating software developers such as Apple and Google rather than the leading hardware manufacturers such as Samsung. AAC Technologies which makes miniature microphones used in the iPhone and iPad is a case in point. Component makers: Cumulative 5 year share price performance
350% 300% 250% 200% 150% 100% 50% 0% 50% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Theme
Software defined networks (SDNs) Cloud
Leaders
VMware, Netflix, Amazon, Google Samsung, Asustek, ARM, Quanta, Lenovo, Google Apple, Google, Samsung, Lenovo, Asustek OCZ, Stec, Intel, Sandisk Backblaze, RedHat
Laggards
Cisco, Juniper Networks Intel, Microsoft
Microsoft
Seagate, Western Digital EMC, NetApp, HP, Dell, IBM, Oracle Intel
ARM
WAN optimization
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Outlook In Q1 2013, PC shipments declined 14% year on year, much worse than expected, and largely down to the poor reception for Windows 8. Lenovo fared better than any other PC maker. In the short term, Microsofts troubles may give hardware makers slightly more competitive power as they play Microsoft off against Google Android Indeed Samsung and Asustek have already started, by releasing dual operating system tablets. IHS expects hard drive (HDD) sales to fall 12% in 2013 to $32.7bn as solid-state drives (SSDs) march ahead. Last quarters worldwide enterprise expenditure figures for the storage services sector generally have also been lacklustre. Looking ahead, we see continued turmoil in the PCs, Servers, Networking and Storage sectors. Storage market leaders like EMC and NetApp will see threats both from open source and a host of new entrants into the sector. But one problem that remains in the networking and storage sectors is data latency. Niche players in networking technology who can make data flow faster stand to benefit. Three names immediately spring to mind: Brocade, Riverbed Technology, and Fusion-IO. PCs, Servers, Storage and Networking: Cumulative 5 year share price performance
150% 100% 50% 0% 50% 100%
2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Telecom Equipment
Dominant theme: As mobile technology moves to an all-IP environment, leading providers of fixed IP networking equipment such as Cisco will move into the wireless equipment market thus far dominated by Ericsson. Outlook: The near term outlook for telecom equipment will be dominated by an increasingly vicious US-China dispute over state-sponsored cyber-attacks. Trade embargos and subsequent retaliation measures are likely to impact Huawei more than Cisco and Ericsson.
Whats happening?
4G is the first mobile standard to be all-IP. Whereas 3G technology involved proprietary standards, 4G is more open. Telecom equipment is the first line of defense in cyber-warfare. Huawei and ZTE are increasingly banned from bidding for western telecom contracts on national security grounds. By 2014, mobile traffic will account for 30% of total internet traffic, up from 12% in 2012, according to StatCounter. New technologies that allow seamless roaming between 4G and Wi-Fi will allow offloading of heavy data users from expensive 4G networks to cheaper Wi-Fi networks. Many Western telecom equipment makers are nursing heavy losses and may be forced to sell assets. Spurred by Apples patent war, the value of the industrys patents is rising.
Theme
Mobile moves to IP Trade wars
Leaders
Cisco, Huawei, ZTE, Juniper Networks Alcatel Lucent, Ericsson, Nokia Siemens, Cisco
Laggards
Ericsson, Alcatel Lucent, Nokia Siemens Huawei, ZTE
LTE/Wi-Fi integration
Ericsson
M&A
Patents wars
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Outlook Much of the telecom equipment sector, as the chart below illustrates, is still trading at pre-2008 valuation levels. Note that Huawei the largest telecom equipment player in the world by revenues does not feature on our share performance chart below because it is privately owned. As 4G (OFDM) technology proliferates, Huaweis lead is likely to increase for two reasons. First, the biggest problem with 4G technology is call handover from CDMA (3G) and TDMA (GSM) technology. The best way to ensure seamless handover is to buy handsets and network infrastructure from the same vendor. Huawei is the only vendor that currently provides an end to end product range. Second, since 4G is an all-IP platform, Huawei, a low-cost manufacturer of fixed IP equipment, has yet another advantage. All this is bad news for Cisco, Ericsson, Alcatel Lucent and Juniper Networks. But politics may change the balance of power. The US has started a trade war, pointing its finger at Huawei and its alleged military connections. Depending on how this war of words unfolds, western equipment players may be handed an advantage in western markets. Telecom equipment: Cumulative 5 year share price performance
200% 2008 150% 100% 50% 0% 50% 100% 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Semiconductors
Theme
Cheaper smartphones
Dominant theme: Cheaper smartphones and tablets are entering the market, many made in China, switching demand for chips from expensive US chipmakers like Qualcomm to cheaper Chinese ones, like MediaTek and Spreadtrum. Outlook: Chinese wireless chipmakers are best positioned for the rush to mass market phablets.
Whats happening?
Smartphone penetration in China has passed 15%. It should reach 50% by 2015. Huawei, Xiaomi and ZTE are likely to gain global market share as a result. As more devices from fridges to cars to hospital patients are monitored on the internet, the number of sensors around us will explode. Apple is reshuffling its supply chain away from Samsung, its main smartphone/tablet rival. Intel is the market leader for PCs and servers because of its unrivalled processing power. ARM designs dominate the mobile devices sector because of their low power consumption. But Intel and ARM are invading each others markets. ARM and Intel are incorporating graphics capability within their core chip designs. Chinese chipmakers are also entering the fray.
Leaders
MediaTek, Spreadtrum
Laggards
Qualcomm, Marvell, Broadcom
Internet of things
Microchip Tech, Freescale, Asia Optical, Infineon, Micronas, Omnivision TSMC, Avago, Cirrus Logic, Omnivision, TriQuint, Skyworks Too early to say Samsung
Graphics chips
MediaTek, ARM
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Outlook In 2013, Gartner estimates that 2.35bn IT devices will be shipped. Of these, 305m will be PCs and laptops, 201m will be tablets and 1.8bn will be mobile phones. Within the mobile phone category, smartphone shipments are expected to reach 958m units this year, up from 722m last year. With connected devices being the most lucrative end market for chips, it is not unsurprising that the fortunes of many chip companies are tied to the most profitable IT device maker, Apple. Chip companies in Apples supply chain like Cirrus Logic, Skyworks Solutions, Omnivision, Avago and ARM saw their share prices rise with Apples until mid-September 2012, when Apples shares peaked. Now, during the next phase of the smartphone cycle when smartphones go mass market, particularly in China it is the turn of Chinese chip makers to rise. MediaTek and Spreadtrum are closely integrated with the supply chains of Huawei, Xiaomi and ZTE and are likely to benefit as Chinese smartphone penetration grows from 15% to 50% (the steepest section of the typical S-shaped growth curve) over the next three years. Semiconductors: Cumulative 5 year share price performance
600% 500% 400% 300% 200% 100% 0% 100%
2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Applications Software
Theme
Software ecosystems
Dominant theme: Apple and Google pioneered the internet ecosystem. Now the race is on to build software ecosystems that include ERP platforms, Big Data solutions, cloud services, cyber-security and search functionality. Outlook: Large software groups, unable to innovate fast enough, will continue to acquire smaller application software houses.
Whats happening?
Internet companies such as Apple and Google pioneered the internet ecosystem. Now it is the turn of software companies to build their own ecosystems. Smaller screens and lower customer patience levels mean that desktop applications have to be re-designed from scratch to have any hope of working well on the mobile internet. The success of Adobes Creative Cloud subscription model makes it more likely that software will move from a licensing model to a cloud-subscription model. The 3D printing market was worth $1.7bn in 2012 and is growing at 30% p.a., according to Wohlers Associates. So far no software company has even come close to analyzing large amounts of unstructured data in a quick and meaningful way.
Leaders
Targets: small/ medium sized application software companies Twitter, Jolla, Amazon, Mozilla, UCWeb, Opera
Laggards
Acquirers: IBM, Oracle, SAP, Apple, Google, Yahoo, Microsoft, Baidu Apple, Facebook, Google, Baidu, Tencent
Adobe, Salesforce, NetSuite, Apple, Google, Red Hat, VMware, Citrix, EMC PTC, Autodesk, Dassault Systemes
SAP, Oracle
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Outlook Three industry trends are making life uncomfortable for many traditional software companies: the move to app platforms, the move to the cloud and the move to the mobile internet. In addition to these new dimensions, there are a myriad of emerging technology cycles including 3D printing, robotics, software defined networks, smart TVs, cloud computing and mobile payments that are all software based. All of this is heralding a new golden age for applications software. Large software groups, unable to innovate fast enough, are acquiring specialist software houses. The M&A timeline charts on pages 50 and 51 illustrate the scale of the upheaval taking place in the software industry: software companies account for just 11% of the market capitalization of the global TMT sector, by our estimates, but made up 55% of M&A transactions, by value, in the TMT sector over the last three years. With the exception of IBM, SAP and Oracle, many of the application software companies listed below are likely to become takeover targets as the sector consolidates further. Applications software: Cumulative 5 year share price performance
300% 250% 200% 150% 100% 50% 0% 50% 100%
2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Dominant theme: As IT infrastructure moves into the cloud, virtualisation products act as the gateway. Niche players like VMware and Citrix Systems now face fierce competition from the bigger software houses like Microsoft. Outlook: Infrastructure software stocks are the most susceptible to a dramatic fall in value during an economic downturn.
Whats happening?
Virtualization allows computing resources (e.g. infrastructure, operating software or storage solutions) to be deployed as and when required, cutting corporate IT costs. Emerging cloud-only companies are attacking ERP incumbents IBM, Oracle and SAP who are encumbered by legacy systems which cant easily switch to cloud. OpenStack is the open cloud standard used by Rackspace, HP, Dell and others. Proprietary cloud platforms include Citrixs CloudStack, VMwares vCloud, Amazons AWS and Microsofts Azure. Software defined networking (SDN) is an emerging architecture for data networks. SDNs allow software to control the network path along which data packets flow. In theory, this would reduce network hardware to commodity boxes. Mobile networks are increasingly offloading heavy data users onto Wi-Fi.
Leaders
Microsoft
Laggards
VMware, Citrix
Cloud ERP
Open source
Google, VMware
Wi-Fi offloading
Aruba Networks
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Outlook In the short term, the big trends likely to impact investors in communications infrastructure stocks are the cloud and, particularly, virtualisation. Microsoft, VMware and Citrix are fighting it out in the virtualization market. Meanwhile, Oracle, IBM and SAP are fighting cloud-only ERP platforms like Salesforce, NetSuite and WorkDay by making cloud acquisitions of their own. The incumbents legacy product base of expensive, difficult-to-implement, semi-redundant ERP systems turn customers away. In the longer term, software defined networks (SDNs) could have a far more profound impact than the cloud. Just as internet protocol (IP) standards made proprietary telecom equipment makers like Lucent and Nortel less relevant, so SDNs may turn todays leading IP networking equipment makers like Cisco and Juniper Networks into commodity box makers, with all the power to control data flows resting with software developers, using standards like the Open Flow protocol as the communication medium between these boxes. The winners will be the communications infrastructure software companies who will be able to program the networking equipment boxes to carry their traffic efficiently without having to invest in expensive hardware boxes. Infrastructure software and cloud: Cumulative 5 year share price performance
800% 700% 600% 500% 400% 300% 200% 100% 0% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Security Software
Dominant theme: Our interviews with executives in the insurance industry confirm that board level of awareness, understanding and accountability for cyber-threats is low. As a result, corporations have long underinvested in cyber-security assets. Outlook: When a respected CEO gets fired for mishandling cyber-risk market sentiment will change: boards will be forced to increase expenditure on cyber-security services, lifting earnings prospects for the cyber-security industry.
Whats happening?
Several countries have launched national security initiatives to raise cyber-security awareness at board level, with banks and critical infrastructure seen as the most at risk sectors. Apple pioneered the internet ecosystem. Now IBM, Oracle and SAP are building their own software ecosystems. Telecom equipment is the first line of defense against a cyber-attack. Telecom equipment companies may soon be viewed as strategic military assets. Financial fraud is on the rise. Criminal gangs are targeting banks to access credit or loans on the back of stolen identities via the internet. Regulators may force greater corporate disclosure of cyber-related issues (e.g. cost to shareholders) for listed companies.
Theme
Corporate awareness levels
Leaders
Check Point, Sourcefire, Symantec, Qihoo, Verint, Websense Fortinet, ProofPoint, Targets: Fortinet, ProofPoint, Palo Alto, Sourcefire, Verint Alcatel-Lucent, Cisco, Ericsson, Intel
Laggards
Banks, stock exchanges, telecom operators, power grids Acquirers: IBM, SAP, Oracle, Salesforce, Apple, Google Huawei (unlisted), ZTE
Credit fraud
Experian, Equifax
Regulation
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Outlook Recent technology trends have triggered new cyber-security risks for corporations: the bring-your-own-device (BYOD) trend coupled with the fact that mobile workers travel all over the globe mean that corporate IT managers have to protect corporate data across more IT platforms at a time when budgets are tight. The explosion in personal data online makes it easier for criminal gangs to steal identities and fraudulently access bank accounts. The proliferation of third party apps has led to a dramatic rise in reported malware. In 2012, the number of malicious web links grew by almost 600% worldwide, according to Websenses 2013 Threat Report. As IT infrastructure and software move to the cloud, physical security gets replaced by cyber-security but a worldwide skills shortage means that many IT managers are out of their depth when it comes to cyber security. In the longer term, the move to software defined networks is the most worrying trend: as network hardware becomes a commodity, cyber-security risk which is currently contained in the top four layers of the 7-layer OSI protocol stack (applications, presentation, session, transport) spreads to the bottom three layers (network, data, physical) as well. Boards arent taking cyber-security seriously. The catalyst is just around the corner. When a respected CEO gets fired for being asleep at the wheel during a cyber-attack, boards will be forced to spend more on cyber-security and market sentiment will change in favour of the cyber-security sector. Cyber-security software: Cumulative 5 year share price performance
700% 600% 500% 400% 300% 200% 100% 0% 100% Ahnlab CheckPoint Software F5Networks FSecure Gemalto NiceSystems Sourcefire Symantec TrendMicro VerintSystems Verisign Websense 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Theme
The platform effect
Leaders
Amazon, Apple, DeNA, Google, Gree, Facebook, Tencent Gameloft, Gamevil, Activision, EA, Netease, Ubisoft, NCsoft
Laggards
Perfect World, Zynga, Activision Blizzard, EA, Ubisoft, Zynga Apple, Google, Microsoft
HTML5
Motion sensors
Nintendo
Smart TV strategy
Tencent
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Outlook Sales of console games worldwide peaked at $32bn in 2008, according to PwC. By end 2012 they had fallen 15% to $27bn. PwC expect console game sales to start rising again, but we believe they will continue to decline. The online gaming market was worth $19.5bn last year, up 80% on 2008, and is expected to increase another 60% by 2016 China accounts for 37% of this market. The mobile games market was worth $10bn last year, up 73% on 2008, and expected to increase another 44% by 2016 Korea, Japan and China account for 22%, 17% and 10% respectively of this market. Whilst the online and mobile gaming sectors are growing, a sizeable chunk of the industrys profits are likely to gravitate towards the big platforms Apple, Google, Facebook and Tencent. Meanwhile, as Microsoft, Sony and Nintendo see their customers move towards cheaper gaming platforms, they are working hard to adapt their games consoles to become the digital hub for home entertainment, though with limited success so far. For now, however, the mobile games developers like Gameloft and Gamevil seem to be in the sweet spot. Gaming software: Cumulative 5 year share price performance
600% 500% 400% 300% 200% 100% 0% 100%
2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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IT Services
Dominant theme: The IT services industrys business model is changing: the typical customer is now the Chief Marketing Officer rather than the Chief Technology Officer; its key partnerships are shifting from ERP vendors to cloud services vendors; most importantly, its future as a middleman in a world where cheap, cloud-based services can be bought directly is threatened. Outlook: The IT services sector faces significant downside risk.
Whats happening?
Traditionally, databases and business intelligence tools were purchased separately. Now they are being combined into Big Data appliances. Increasingly, it is the marketing executives of multinationals rather than IT executives that are becoming the key accounts of IT services companies. Businesses are learning to cut IT costs by shifting in-house Capex to outsourced Opex in the cloud. Traditional relational databases are not capable of handling unstructured data. Many next generation database platforms like Hadoop are open source. IT services companies risk being disintermediated by the big software ecosystems just as book shops have been disintermediated by Amazon.
Theme
Big Data
Leaders
Amazon, IBM, Oracle, Google, Facebook, SAP, Microsoft Acxiom, Marketo, Constant Contact, ValueClick, Responsys Amazon, EMC, NetSuite, Red Hat, Salesforce, Teradata Red Hat
Laggards
Accenture, Atos, Capgemini, Infosys, TCS, Tieto, WIPRO, Apple, HP, Dell,
Digital Marketing
Cloud services
Accenture, Atos, Capgemini, IBM, TCS Tieto, Infosys, Wipro HP, Oracle, IBM, Microsoft, Progress Software, SAP
Software ecosystems
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Outlook The IT services sector is in a digital transition phase that, in many ways, resembles the retail sector. It risks becoming irrelevant as internet services companies cut out the middle man and offer IT services storage, data analytics, ERP systems directly via the cloud. Ironically, Amazon who destroyed much of the retail sector is now taking direct aim at the IT services industry with its enterprise cloud offering. Revenue models for IT services companies are changing. One-off fees for expensive, large-scale ERP systems implementations are being replaced by monthly subscription fees for Infrastructure-as-a-service (IAAS). That could reduce revenues in the short term and raise upfront costs (because IT services companies would have to invest in their own infrastructure). Oracles partnership with Salesforce, announced last month, is an admission that Salesforces cloud-based strategy is the future. On 12 March 2013, we issued a Sell note on the Indian IT services sector. Since then there have been profit warnings not only from Infosys but right across the industry from IBM, SAP, Oracle, and Tieto. We may be witnessing the start of a painful industry restructuring. IT Services: Cumulative 5 year share price performance
200% 150% 100% 50% 0% 50% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Internet (e-commerce)
Theme
Map wars
Dominant theme: Maps and mobile payments are the new battlegrounds in the war for supremacy of the mobile internet. Outlook: A host of new mobile ecosystems are coming onto the market, threatening the dominance of Apple and Google.
Whats happening?
Knowing where your customer is located and which direction hes heading is critical to selling him something. Cloud-based solutions are displacing Near Field Communications (NFC) as the likely global mobile payments standard. Google Wallet is the most prominent NFC failure. Now that we know investing in big internet ecosystems are the best way to make money, new entrants are piling in, both by way of new mobile web browsers and new mobile operating systems. Internet services companies tend to pay considerably less tax than their peers in other industries. The political will to address this anomaly is strengthening worldwide. The internet of things refers to the identification of objects via sensors in order to monitor them or share information about them via the web.
Leaders
Google, Nokia, Tomtom
Laggards
Apple, AOL, Baidu, Microsoft, Yahoo, Facebook, Tencent Amazon, Apple, Google, Facebook, VeriFone Alibaba, Baidu, Huawei, Jolla, Microsoft, Mozilla, Tencent, Easou, Ubuntu, UCweb Amazon, Apple, eBay, Google, Facebook, Renren
Mobile payments
Mobile ecosystems
Tax avoidance
Internet of Things
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Outlook Global B2C e-commerce sales hit $1.04tn in 2012, up 22% on 2011, according to eMarketer. In 2013, they are expected to grow by 17% to $1.22tn. The US accounts for 32%, China 14% and Japan 10% of the global total. But China is catching up fast. Whilst the US and Japanese markets are expected to grow this year by 12% and 7% respectively, Chinas will grow by 65%. In our last TMT Trends report (CM Research, 24 September 2012) we concluded that profits would gravitate towards the leading internet ecosystems Apple, Amazon and Google in the west and Baidu, Tencent and Alibaba (whenever it listed) in China. Now the story has moved on. There are far more entrants offering competing internet ecosystems and there is certainly room for five or six ecosystems to coexist in each market. Investors should watch Huawei, Jolla, Microsoft, Mozilla, Opera, Qihoo 360, Tizen, Ubuntu, UCweb and Yahoo. Internet (e-commerce): Cumulative 5 year share price performance
1500% 1300% 1100% 900% 700% 500% 300% 100% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Theme
Crowd-funding
Leaders
Kickstarter, Lending club, Wonga Waze, Yelp, TripAdvisor, Pinterest, Instagram, Tumblr, Foursquare Apple, Google
Laggards
Banks and insurance companies Facebook, Linked In, Renren, Sina, Gree, DeNa Microsoft, Yahoo, Facebook
Apple, Google, Microsoft, Fanhattan, Roku, Boxee Alibaba, Amazon, eBay, Facebook, Monitise, Square, Tencent, Bitcoin
Virtual currencies
Data privacy
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Outlook A year ago, many analysts including us expressed concern that the big social networks would have trouble moving to mobile. Smaller screens, fewer keyboard strokes and shorter attention spans made it harder to monetize mobile social networkers. By Q1 2013, those concerns had evaporated as Facebook and Google both saw mobile ad revenues rise steeply. Facebook reported that 30% of its revenue base that quarter had come from mobile. But now we have bigger concerns. The world has 2.8bn internet users, half of whom already use social media, according to eMarketer. The next billion internet users will likely be poorer, less literate and live in conflict zones. Most will use social media and most will do so via mobile. What these users will want of social networks will differ markedly from the wants of their current user base. The nature of social networks is such that they are constantly under threat from the next big thing. Current threats include virtual currencies, crowd-funding, wearable devices, internet TV and, of course, regulators. We expect high volatility over the next 12 months in the social media sector as these trends unfold, taking some of the established leaders by surprise. Social networks: Cumulative 1-year share price performance
Note: Social networks simply havent been around for long enough for us to show 5 year share price performance data
250% 200% 150% 100% 50% 0% 50% 100% Baidu Demand Media DeNa Facebook Google Gree Groupon Linkedin Mail.Ru Mixi Netease NHN Renren Shutterfly Sina Tencent TripAdvisor Yahoo! Youku Tudou 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the year-to-date share price performance for a selection of large cap stocks in this sector from 1 January 2012 to 30 June 2013. Where companies have floated during this 1 year period, the share price performance is shown since the IPO date.
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Advertising
Dominant theme: As advertising expenditure moves away from TV towards mobile, advertisers fortunes will be tied ever more closely to the technology platforms that control internet TV and mobile advertising. With respect to internet TV, a winning platform has not yet emerged. But with respect to mobile advertising, Google already commands over half the global market. Outlook: Traditional advertisers probably have about a year before disruptive forces in the TV advertising market hit them.
Whats happening?
The range of direct digital threats is expanding. Cloud-based marketing software from the likes of Marketo and Contact Contact is one; so are price comparison sites like moneysupermarket, social shopping sites like Groupon, and content generators like Demand Media. TV advertising still accounts for 35% of the global advertising market. It remains the core market for traditional advertisers. Traditional advertisers are not just competing with digital marketing agencies. They are competing with IT companies who are busy building software ecosystems which include advertising modules as part of the package... Mobile internet ad revenues are expected to quadruple worldwide from $4bn in 2011 to $16bn in 2013. Google should account for 55% of this market in 2013, Facebook 12% and Twitter 2%.
Theme
Leaders
Targets: Marketo, Constant Contact Demand Media Groupon, inContact Millennial Media Moneysupermarket Responsys Apple, Baidu, NHN, Google, Microsoft, Facebook Oracle, SAP, IBM, Microsoft
Laggards
Acquirers: Dentsu, Havas, Interpublic, Publicis, WPP
Digital marketing
Internet TV
Dentsu, Havas, Interpublic, Omnicom, Publicis, WPP Dentsu, Havas, Interpublic, Omnicom, Publicis, WPP
Software ecosystems
Mobile Internet
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Outlook For the last decade a third of advertising revenues have come from TV broadcasting. In 2012, the TV advertising market was worth $200m, double the internet advertising market. If you believe the TV industry is about to be hit by a new wave of disruptive technologies spearheaded by Apple and Google, then expect the advertising industry to undergo a bumpy ride. Apple, Google and Microsoft will almost certainly integrate their existing mobile operating systems and ad platforms with their forthcoming internet TV offerings. Without regulatory intervention, they will suck the profits out of the TV advertising industry as they have done in so many other old media industries. Simply generating a third of their revenues from digital marketing services will not be enough to secure WPP, Havas and Publicis future because those digital market services will be sold to a duopoly of advertising platforms who will dictate pricing terms. More broadly, it is interesting to note from the chart below that many new media digital marketing companies have not done much better than the traditional media advertising agencies they have supposedly usurped. . Advertising: Cumulative 5 year share price performance
250% 2008 200% 150% 100% 50% 0% 50% 100% 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Theme
Third screens
Leaders
Fanhattan, Apple, Google, Microsoft, LG Cisco, Ericsson, Intel, Pace, TiVo, Roku, Netflix, Amazon, Samsung, LG, Sony
Laggards
HTML 5
BSkyB, CBS, Disney, Time Warner, Zee Viacom, Comcast, News Corp BSkyB, CBS, Comcast, Disney, Discovery, Lions Gate, News Corp, Time Warner, Viacom, Zee
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Outlook The clumsy smart TVs sold today are just the precursor for what is to come. True internet TV will allow the customer to access any content live sports, broadcast TV, catch-up TV or on-demand programming through a single electronic programming guide (EPG) without the latency one gets today. But we are still in the very early stages of this technology cycle streamed TV content still represents less than 2% of the pay-TV market. Internet TV offers big prizes. At $200bn, the TV advertising market is still double the size of the internet advertising market. Soon your smartphone or tablet will be the second or third screen used to control your television. Apple, Google and Microsoft are well positioned to win in this market. Several other players Cisco, Intel, Ericsson, Sony, Samsung, LG, BT, Netflix, Facebook and Amazon are lining up to play too. Start-ups like Zeebox and Fanhattan offer platforms that are independent of Apple or Google and so appeal to the broadcasters. But their products will never sell in the high street unless they include access to a wide range of content. So in the short term owners of popular content will remain in the driving seat. Film and Television: Cumulative 5 year share price performance
300% 250% 200% 150% 100% 50% 0% 50% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Publishing
Dominant theme: Like the music industry before it, the publishing industry finds itself outmanoeuvred by the internet. Outlook: Whilst DMGT has shown how smart management can turn around an incumbent in a declining industry, the overall outlook for publishers remains bleak.
Whats happening?
Print revenues are falling at a rate of 20% per annum for some publishers. But digital revenues are not rising fast enough to counter this. In March 2013, Germanys parliament passed a Google tax law, forcing Google to pay royalties to newspaper publishers for providing excerpts of their news articles in its search results. Google is creating the worlds largest digital books library, with over 25m books already scanned. The problem is that it faces multiple copyright-infringement claims from authors who did not give their permission to Google to publish their copyrighted works. The US Dept. of Justice has taken Apple to court over allegations that it conspired with five publishers to raise e-book prices. All the publishers involved have now settled, but Apple has chosen to fight the case.
Theme
Business turnaround models Google news tax
Leaders
DMGT, Pearson
Laggards
Most newspaper and magazine publishers
Hachette (Lagardere), HarperCollins (News Corp), Macmillan (Holtzbrinck), Simon & Schuster (CBS), Penguin (Pearson)
Amazon
Apple Hachette (Lagardere), HarperCollins (News Corp), Macmillan (Holtzbrinck), Simon & Schuster (CBS), Penguin (Pearson)
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Outlook The publishing sector is in the thralls of a downward spiral. Take the global newspaper market. It has shrunk by 14% since 2005 because of the internet. Yet by end 2012, the industry had only managed to convert 0.5% of its circulation revenues to digital format. Magazine publishing tells a similar story. With books, things are even worse. In the US and Europe over 15% of book sales are digital and 90% of the market is cornered by Amazon. Moreover, the big five book publishers have all reached a settlement with the US Department of Justice on a price fixing scam originally engineered by Apple. Daily Mail & General Trust and Pearson stand out as two companies that have braved this new world and come out on top. Each has a focused digital strategy and each is leaving its traditional print publishing businesses to die. But they are exceptions to the rule. For now, we expect more carnage in the publishing sector. Publishing: Cumulative 5 year share price performance
150% 100% 50% 0% 50% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Dominant theme: The optimum business model is one that combines in-house content with in-house distribution. But the weakness in these cable and satellite ecosystems is the lack of a common software platform. Outlook: Apple, Google and others are using software to enter these tightly guarded ecosystems. One day they will succeed.
Whats happening?
Many cable and satellite operators realized they would become dumb pipes unless they built integrated ecosystems which packaged in-house content with their distribution platform. The missing bit of most cable ecosystems is software. If sufficiently user-friendly, internet TV software developed by industry outsiders may cause cracks in Cable-TV business models. TV viewers are increasingly dualscreening: interacting with their TV via their PC or mobile device, talking about live TV content on social media, or using their mobile device as a remote control. Telecom operators have found it difficult to sell IPTV to cable customers. By end 2012, Korea Telecom was one of the most successful with 6m IPTV subscribers (almost a quarter of households). But Verizon FiOS TV had just 4.7m; BT Vision just 0.7m and SingTel mio TV just 0.4m.
Leaders
BSkyB, Comcast
Laggards
Software
Dual screening
Amazon, Apple, Facebook, Google, Netflix, Zeebox, Fanhattan BT, PCCW, Chunghwa Telecom, SingTel, Korea Telecom, Verizon
IPTV
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Outlook Many cable and satellite operators realised several years ago that they would become dumb pipes unless they built integrated ecosystems that packaged in-house content with their distribution platform. But the missing element from most cable ecosystems is software. Industry outsiders are looking to exploit this weakness and invade the pay-TV market by developing internet TV software that is as user friendly as current electronic programming guides (EPGs). Technology companies like Apple and Google are further down the line in terms of developing TV operating systems. But the missing element of their internet ecosystems is content, especially live TV content. Both industries can help each other fill in the gaps in their business model, but neither is likely to let the other into their domain. For cable and satellite operators, the best strategy appears to be to acquire technology platforms built by start-ups like Fanhattan and stream their content to connected TVs via web-based apps. Comcast and BskyB are investing in such technologies. The cable and satellite operators have a hell of a fight ahead of them, but they are more prepared than the telecom operators ever were and some of them might even win. Cable & satellite operators: Cumulative 5 year share price performance
200% 150% 100% 50% 0% 50% 100% 2008 2009 2010 2011 2012 2013
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Telecom Operators
Theme
Internet of Things
Dominant theme: The Internet of Things, mobile payments, Big Data, software defined networks, internet TV and cloud services all present potential new revenue streams for operators as voice, messaging and internet access revenues decline. Outlook: As long as operators sit on the regulated side of the internet, they are unlikely to substantially increase profits.
Whats happening?
More and more objects are being connected to the internet from heating systems to engine parts to enable them to be controlled centrally and managed more efficiently. A geopolitical fault line is developing that pits emerging markets against the USA. Outside the US, the internet is becoming more regulated. But this means different things in different countries. In the West, the big regulatory issues are net neutrality, price capping and data privacy. In developing markets, it tends to mean political censorship of the internet. Operators failed to profit from the first round of the mobile internet. Many see mobile payments as their second chance to ride the mobile commerce wave. SDNs transfer the intelligence currently held in a network equipment box to a software layer, enabling the network to be centrally controlled.
Leaders
NTT, KT, China Mobile, KPN, Telefonica
Laggards
Regulation
Situation fluid: Regulators all over the world are debating net neutrality, data privacy, internet censorship
Mobile payments
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Outlook Voice and messaging revenues have peaked for many operators. Indeed, instant messaging apps like WhatsApp which now has 250m users is destroying operators messaging revenues faster than anyone expected only a year ago. Internet access services are becoming less profitable because data traffic is rising at a rate of 100% per annum prompting higher capex, but competition and regulatory controls make it difficult for operators to raise prices in line with higher investment costs. If operators do not find new revenue streams soon, their profitability levels will decline rapidly, especially in mobile. Operator strategies on how to combat this decline differ: BT is trying to move into the TV market with its live sports channels. AT&T, Verizon, PCCW and many others are doing the same. SK Telecom has been the most active operator in the world in selling OTT services such as mobile TV and online games over its advanced LTE network. Telefonica, Verizon and China Telecom are moving into cloud services. China Mobile is investing in a platform supporting the Internet of Things but is also using its political clout to force internet companies like Tencent (whose WeChat service generates a lot of network traffic) to pay more. North American telecom operators: Cumulative 5 year share price performance
60% 2008 40% 20% 0% 20% 40% 60% 80% 100% AT&T CenturyLink Clearwire FrontierComms Level3 RogersComms SprintNextel Telus USCellular Verizon Windstream
Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
2009
2010
2011
2012
2013
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Source: Company data, FT, Bloomberg, S&P Capital IQ, CM Research Bars show the cumulative share price performance for a selection of large cap stocks in this sector from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012 and 30 June 2013.
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Q2 2013
Q1 2013
Q4 2012
10 15 20 Acquisitionprice(US$bn)
25
30
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Global Mergers and Acquisitions in Technology, Media and Telecoms: Two year transaction history (cont.)
RedPrairieacquiresJDASoftware(Applicationsoftware(supplychain PricelineacquiresKayak(Onlinetravel) CiscoacquiresCaridien(Networktrafficmanagementsoftware) CiscoacquiresMeraki(Cloudnetworking) VerintSystemsacquiresComverseTech(cybersecurity) IBMacquiresKenexa(HRsoftware) CarlyleacquiresGettyImages(Distributorofstockphotosandvideos) AT&TacquiresNextWave(wirelessspectrum) ZayoacquiresAbovenet(Telecomoperators) ConsolidatedCommsacquiresSurewest(Telecomoperators) CiscoacquiresCloupia(Datacentresoftware) OracleacquiresInvolver(Socialmediamarketing) CicsoacquiresNDS(Videoandcontentdeliverysolutions) GoogleacquiresFrommers(travelguides) OracleacquiresXsigo(datacentrenetworkingvirutalisation) GoogleacquiresWildfire(socialmediaadsolutionsprovider) AppleacquiresAuthentec(FingerprintID,mobilepayments) VmwareacquiresNicira(Networkefficiency) DentsuacquiresAegis(Advertising) SonyacquiresGaikai(Cloudgaming) OracleacquiresCollectiveIntellect(Cloudbasedsocialintelligence) MicrosoftacquiresYammer(Socialmedia) LamResearchacquiresNovellus(Semiconductorequipmentmaker) AgilentTechacquiresDakoDenmark(Lifesciencediagnosticstools) Salesforce.comacquiresBuddyMedia(socialmedia) DellacquiresQuestSoftware(Softwaremanagement) FacebookacquiresKarma(Socialmediaapp) OracleacquiresVitrue(Socialmarketingplatform) 0
Source: Company data, CM Research
Q4 2012
Q3 2012
Q2 2012
2 3 4 Acquisitionprice(US$bn)
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Global Mergers and Acquisitions in Technology, Media and Telecoms: Two year transaction history (cont.)
LinkedInacquiresSlideshare(Socialmedia) SAPacquiresAriba(ecommerce(enterprisesoftwareforprocurement)) StratasysacquiresObjet(3Dprinting) FacebookacquiresInstagram(Photosharingservice) WesternDigitalacquiresVivitiTech(formerlyHitachiGlobalStorage Zayoacquires360networks(Telecomoperators) YouKuacquiresTudou(onlinevideosite) OracleacquiresTaleo(HRsoftware) SingTelacquiresamobee(providerofmobileadvertisingservicesto 3DSystemsacquiresZCorp(3Dprinting) AT&TacquiresSpectrumfromQualcomm(mobilespectrum) AppleacquiresAnobitTechnologies(Flashmemorymaker) SeagateacquiresSamsungElectronicsHardDisk(Harddiskdrives) VerizonacquiresAWSspectrumfromComcast,TimeWarnerCableand SAPacquiresSuccessFactors(OnlineHRsoftware) BlinkxacquiresPrimeVisibilityMedia(Digitaladvertising) HuaweiacquiresHuaweiSymantecJV(50%)(Cybersecuritysoftware) OracleacquiresRightNow(Cloudcomputing) PermiraacquiresGenesys(Callcentreservices) SKTelecomsacquiresHynix(21%)(Chipmanufacturing) BroadcomacquiresNetlogic(Wirelesschips) IBMacquiresAlgorithmics(Riskmanagementsoftwareforbanks) HPacquiresAutonomy(Searchengine) GoogleacquiresMotorolaMobility(Technologypatents) Apple,RIM,MicrosoftacquiresNortelNetworks(Technologypatents) TeradataacquiresAsterData(Dataanalysissoftware) VodafoneacquiresVodafoneEssar(33%)(telecomconsolidation) HTCacquiresS3Graphics(Mobilephonepatents) eBayacquiresZong(Mobilepayments) 0
Source: Company data, CM Research
Q2 2012
Q1 2012
Q4 2011
6 8 10 Acquisitionprice(US$bn)
12
14
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Search for emerging technology trends Spot global investment themes Screen for local companies affected
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About CM Research
CM Research is an independent research provider with a blue chip list of institutional clients. We analyse emerging trends in the technology, media and telecom sectors and develop them into global investment themes, highlighting the winners and losers. At a time when many of our competitors have had their reputations mired by conflicts of interest, we fiercely guard our independence. Our business model is based on independence, exclusivity and experience. CM Research is a member of the European Association of Independent Research Providers (EuroIRP). CM Research is authorised and regulated by the Financial Conduct Authority.
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