Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close

How to Profit From 2013′s Top Tech Trends: Part 1

By Chad Fraser on December 26, 2012

Print Friendly

Consumers and businesses around the globe will pour a combined $2.1 trillion into new computers and related gadgets in the coming year, up 5.7% from 2012. That’s according to IT research firm IDC, which recently came out with its tech sector forecast for the coming year.

The IDC report also highlighted other trends that will shape the IT business in the coming 12 months. We’ll look at two of these below, including ways that investors can profit. Tomorrow, we’ll look at two more.

2013 Tech Trend #1: Mobile Device Dominance Continues

IDC says mobile devices will continue to be a huge component of tech spending growth next year. The firm sees smartphone and tablet sales rising 20% from 2012. In all, they will account for 20% of total IT sales. If you strip out mobile devices, next year’s forecast growth in IT spending shrinks from 5.7% to just 2.9%.

There are a wide range of companies that will continue to benefit from skyrocketing mobile device sales. The most obvious ones are Apple (NasdaqGS: AAPL), maker of the iPhone and iPad; Google (NasdaqGS: GOOG), creator of the Android operating system and owner of Motorola Mobility; and even beleaguered Research in Motion (NasdaqGS: RIMM), if it is able to successfully launch its long-awaited BlackBerry 10 devices early in the year.

However, there are lots of other ways to profit, as well. For instance, you could buy shares of companies that make components for these ever-popular gadgets. One firm with strong growth prospects is Qualcomm (NasdaqGS: QCOM).

The company operates through two divisions: Qualcomm CDMA Technologies designs and sells chipsets that are used in a wide variety of devices, while Qualcomm Technology Licensing owns patents for mobile communications.

In its latest quarter, Qualcomm’s revenue rose 18%, to $4.9 billion from $4.1 billion a year ago. Earnings per share jumped 18%, to $0.73 from $0.62. Without unusual items, the company earned $0.89 a share. Both figures topped analysts’ estimates of $0.82 a share of earnings on $4.7 billion of revenue.

As Investing Daily’s John Persinos pointed out in the December 12, 2012, issue of Personal Finance, the company recently said that it expects to grow its revenue and EPS at a combined annualized growth rate of 10% over the next five years.

2013 Tech Trend #2: More Users Look to the Cloud

IDC sees a continued move toward cloud computing—where applications are stored on centralized servers and accessed through a network (often the Internet).

Cloud computing offers a range of benefits. For example, by farming out data services to a cloud provider, businesses save the cost of building and maintaining costly IT resources themselves. As well, the cloud lets companies make better use of their resources because they can purchase applications on an as-needed basis. Cloud computing can also reduce IT issues that can lower productivity.

One trend that IDC highlighted in the report is the growth of software-as-a-service (SaaS) companies, which it sees grabbing big slices of most of major software markets by 2015. SaaS firms provide software to customers over the Internet; users typically access it on a subscription basis through their web browsers. One of the best-known SaaS providers on the business side is Salesforce.com (NYSE: CRM).

The growth of cloud computing, along with overall increased investment in corporate data centers, will be a big growth area for networking companies like Cisco Systems (NasdaqGS: CSCO). The company is one of the world’s biggest makers of Internet-based networking products, including switches and routers.

Cisco continues to report improved results. In its latest quarter, revenue rose 5.5%, to $11.9 billion from $11.3 billion a year ago. Earnings increased 17.7%, to $2.1 billion, or $0.39 a share, from $1.8 billion, or $0.33. On an adjusted basis, Cisco earned $0.48 a share. The latest results beat the Street’s forecast of $0.46 a share in earnings on $11.77 billion of revenue.

The company is also a frequent buyer of its own stock: in the latest quarter, it spent $1.8 billion to repurchase 108 million shares at an average price of $16.62. It still has $5.9 billion remaining on its current authorization. Quarterly dividends of $0.14 a share yield 2.8% on an annualized basis.

Tomorrow, we’ll take an in-depth look at two more major tech trends for 2013, as well as the stocks that are set to reap the greatest benefits.

What do you think of this article? Please post your feedback in the “comments” section below!

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • Use Social Connect
  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.