After the new year opened on the wrong foot, with a negative January effect, the correction came in February, and the indices shot up by 4-5%. The Nasdaq index led, with a rise of 5%, among other things thanks to Internet giant Facebook (FB), which rose by more than 9% last month, and has risen by 25% so far this year.
Last week, Facebook, which was floated on Nasdaq less than two years ago, posted a new peak, remarkably enough after the news of the $19 billion acquisition of WhatsApp, of $71, meaning a market cap of $180 billion. This is equivalent to the market caps of Intel (INTC) and HP (HPQ) combined, and is close to overtaking the market cap of IBM.
The Mobile World Congress in Barcelona ended without any exciting announcements, just like the Las Vegas Consumer Electronics Show earlier in the year. Apple (AAPL), as it has done since the days of Steve Jobs, absented itself from both events, where Samsung had a large presence. But it appears that only the former will demonstrate later in the year that it is still a pathfinder, while the latter, as usual, only responds to Apple's innovations, as happened last week with the unveiling of its Galaxy S5 telephone.
At Barcelona and Las Vegas there were numerous applications, some more interesting than others, but there were no announcements of amazing smartphones, perhaps because what we already hold in our hands is good enough. What are really lacking are more infrastructures for high-speed broadband, that is, fourth generation networks (LTE) and for application storage centers advanced technologies for rapid connectivity and low latency.
It's no coincidence that applications with hundreds of millions of users, mainly for video sharing, crash every few hours, as happened to WhatsApp last week, and their response times are slow. At Barcelona, there was a great deal of talk about the race for cheap LTE handsets, mainly for the Chinese market, where massive investment in LTE networks began in late 2013, and will continue for several years.
In many developed countries where subscribers already have LTE-enabled smartphones, such as in Israel, there are still no LTE networks, and they have only recently started to talk about constructing such networks, a long way behind Japan, Korea, and the US. Several Israeli companies that I hold in my portfolio here should gain from the great race to LTE in telecommunications infrastructures and handsets that will last several years.
Ceva Inc. (Nasdaq:CEVA); LSE:CVA), which has its DSP solutions in, among other places, some of the LTE-based smartphones of market leader Samsung, can be expected to receive substantial royalties next year from producers of LTE base stations as well. In China, ZTE, which has about a quarter of the market, is a Ceva customer.
China Mobile (CHL), the mobile carrier with the highest number of subscribers in the world (772 million), plans to complete the deployment of 500,000 base stations in 340 cities in China by the end of this year. The company also estimates that by the end of the year it will sell 100 million LTE handsets, most of them cheap ones costing around $160, to be launched in the second half of the year. Ceva has an important customer in cheap smartphones in China in the shape of mobile processor company Spreadtrum, recently bought by a state-owned company.
Equipment manufacturer ZTE is also the largest customer (15% of sales in 2013) of EZchip Semiconductor Ltd. (Nasdaq: EZCH; TASE:EZCH), which provides it with advanced network processors for high-speed routers. It can be assumed that, starting this year, routers will be sold in ever increasing quantities to the Chinese mobile giants, as part of the large investments that, as mentioned, are planned there in LTE network infrastructures.
Another Israeli company in LTE infrastructures that hopes to return to growth and profitability by the end of the year at the latest is Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT). Last week, at Barcelona, analysts who spoke with the company's managers said that it was negotiating large deals for LTE infrastructures with major European mobile carriers, deals that will have a material impact on sales late this year and next year.
This week, as we enter the final, and usually most important, third of the first quarter, many companies will be presenting at investor conferences in the US, which usually makes waves on the stock market. Senior managers of SanDisk Corporation (Nasdaq:SNDK), for example, are at two important conferences today, with the company's share price close to the all-time peak of nearly $80 that it reached intraday, eight years ago.
A few days ago, SanDisk disclosed in its extended annual report that Apple was its largest customer, accounting for 20% of 2013 sales, which represents substantial growth over the previous year, thanks to sales of SSDs for Mac computers. Another company that it will be interesting to hear from is Mellanox Technologies Ltd. (Nasdaq:MLNX) , whose senior managers are at investor conferences today, tomorrow, and next Wednesday.
The writer serves as a consultant and investor in securities, and advises the Pia Select Nasdaq fund. This column should not be seen as advice or a recommendation to buy or sell securities, including securities mentioned in the column. Anyone who acts in reliance on the column is exclusively responsible for any damage or loss they may incur.
Published by Globes [online], Israel business news - www.globes-online.com - on March 3, 2014
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