Dave: Good, but tough, question! I've been trying to figure out what some tech themes for 2001 might be, but it sure is tougher looking ahead to 2001 than it was to look ahead for 2000, when there were a number of obvious candidates (fiber, B2B, consumer wireless, genomics).
Here are a few themes I've been working with, although I'd be the first to say that I don't know if any of them will actually hit big in 2001. With both capital and consumer spending in decline, it's extremely difficult to see where scarce dollars will wind up going.
Nonetheless, here are some ideas. In the discussion below, I mention some individual companies. They obviously aren't the only plays in these areas, just some that interest me and which I'm considering with a limited amount of risk capital.
(1) "Last-mile" delivery of broadband services: the fiber buildout has focused heavily on long-haul infrastructure; however, we still encounter significant bottlenecks when long-haul hands off to local infrastructures. A company like ONIS looks interesting because it provides a fiber solution for the metro and regional infrastructure. I'm also interested in broadband wireless solutions, because this addresses the last-mile problem without requiring expensive and inconvenient fiber-laying. CAMP, especially after getting hit on the satellite-business warning, looks promising to me. FON has been moving aggressively to build out its fixed-wireless infrastructure, so it might be a way to capitalize on this trend, also (although fixed-wireless obviously is just a small part of FON's overall business, so it's a pretty diluted way to play this trend).
(2) 3G mobile wireless: 3G services will go live in Japan in early- to mid-2001, with Europe to follow in 2002 and North America probably in 2003. QCOM and ERICY are the heavies in this field, and they obviously have a lot of their upside priced in already. I'm taking a close look at IDCC, which was a hot-money favorite from last spring. They've been on the standards committee for 3G and claim to have embedded intellectual property into the standard. They've also had a partnership with NOK to develop 3G technologies, although it is hard to tell exactly what's going to come of that. (NOK recently lost a case against QCOM where NOK was trying to create 3G products that bypassed QCOM patents. It appears that the NOK-IDCC partnership was designed in part to help NOK get around QCOM's licensing fees, and that effort seems to be failing at this point.) Unfortunately, it requires substantial technical expertise and a degree in patent law in order to sort out the issues that underlie IDCC's real prospects. <G> I'm also eyeing VOXX as a very cheap handset provider that may benefit from an upgrade cycle when 3G goes to market.
(3) Organic Light Emitting Displays (OLEDs): This is a new family of display technologies and materials that, over the next several years, will come to market and replace existing displays (computer monitors, handheld screens, etc.) The total market for these displays is $40 billion annually. I'm especially intrigued by PANL, which has a substantial patent portfolio of its own and recently gained access to MOT's OLED portfolio through a deal that gives MOT an equity stake in PANL. What's hard to determine here is the real value of PANL's intellectual property. Obviously, a number of companies are developing technologies in this field -- EK is a major big-cap player -- so there's lots of competition. Also, as with IDCC above, the technology issues are highly esoteric, and placing a valuation on IP always requires an appreciation of patent law.
(4) Broadband Applications: What I have in mind here are network-based applications that really are only viable in high-bandwidth contexts; it'd be a play on the fact that global high-speed networks are making the transition from buildout to light-up and on the last-mile integration that I'm anticipating. One obvious application, which I think has tremendous cost-saving potential for businesses, is conferencing: integrated electronic workspaces that bring group communications, application-sharing, and data-sharing capabilities together. CTRA is the company that has really caught my attention in this space, largely because it's run by a bunch of old Lotus Notes refugees (smart people!). I also think the Application Service Providers (ASPs) might give it another try as a broadband-rich world makes remote application delivery increasingly practical.
(5) Client-side Network Security: The great weakness in our network architecture is that it's really impossible to be sure who is tapping into a network from any given device (computer, handheld, appliance) on the network. This is a significant problem because many promising network-based applications require that we know exactly who's involved in the transaction: for one example that's been on all of our minds, Internet voting. The need is to embed technologies in the "client" devices (our PCs, cell phones, PDAs, etc.) that allow us to identify ourselves uniquely. WAVX is a small, highly speculative company that has developed a very cool programmable chip that resides in the client and helps manage security; it's compatible with card readers, thumb scanners, retina scanners, etc., etc. The company is run by credible folks -- old NSM bigwigs -- and has some promising partnerships (with ATML, for instance). The big problem is that client-side security will require industry standards, and it'll be tough for a small-fry like WAVX to carry the influence needed to get written into the standards.
(6) Video-game makers: The PlayStation supply problem made the rollout a dud for many game companies. I'm hoping they will get hit with lower-than-expected results, because it may be worth accumulating some of these companies on the inevitable ramp-up of PlayStation (as the supply issues resolve themselves) and the media frenzy that'll surround next year's release of the MSFT X-Box. ERTS is the clear leader here, but I'd also look at THQI and TTWO to get more potential leverage.
(7) Genomics: We might get a pop going into the publication of major research from CRA and the Human Genome Project next February. A substantial move to the upside would, I think, be a good opportunity to short them again. I'd be cautious about building a heavy short position before February 2001, because I'd expect the major releases of new data from CRA and the HGP to be a high-profile event. CRA would seem to be especially vulnerable since the HGP is providing data free of charge. CRA has to prove that it adds enough value to be worth doing business with. |
