Report Card – 2014 Themes and Forecast

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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?

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

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.

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.

Top Five Things Not to do on LinkedIn

While a tremendous amount has been written about how to leverage the web with social media, there hasn’t been nearly enough written about what NOT to do… and even if there has, there are not nearly enough people listening. Here are the top five taboos I see people try on LinkedIn.

  1. Overuse of “Visionary” – If you have to describe yourself on LinkedIn as a “visionary” you are most likely not one. Let someone else call you this, and don’t post it on your profile.
  2. Bad Photo Selection – Because it’s your professional profile, don’t post a picture of your child, car or some other confusing image. The imagesize is small to begin with, and if I’m trying to remember who you are (especially if I only recently met you), I’d prefer to see a picture of good enough quality that I can actually recognize you.
  3. Self-Aggrandizing Thought Leaders – See “visionary” above.
  4. Unsuitable Recommendations Requests – Don’t ask for undeserved recommendations, particularly when a) you barely know them, b) they really didn’t do anything with you worth recommending, or even worse c) when they actually have a poor opinion of your work product. Talk about an awkward request!
  5. Connection Collectors – People who connect to people they have never met and have nothing to share are far too common. They often send a connection request with no explanation whatsoever or even worse they claim to have worked with you previously while you have no clue who they are.

What are your top 5 things not to do with LinkedIn or social media in general?