QCOM, CSCO, AAPL, SWKS TRIP Among Merrill’s Winners in 2013 LTE Extravaganza
In a longish (38 pages) group report, Tal Liani , Scott Craig and their colleagues at Merrill Lynch today write that the 4G cellular standard " long term evolution ," or LTE , which is found on the latest smartphones and tablet computers, will be "the key investment theme for 2013 " in technology, with implications for networking equipment, software, hardware, chips, the Internet, and semiconductor equipment companies. The authors link LTE to the general rise of mobility, including tablet computers, apps, and mobility itself: In our view, the advent of LTE will mark the beginning of a multi-year transition towards a new bandwidth-intensive economy. The increased adoption and use of mobile devices is causing significant growth in wireless traffic [...] We see the adoption of LTE as an accelerator to the concept of true mobility. In just three short years since the introduction of the first iPad, tablets have become a $50bl market with a forecasted growth rate of 35% in 2011-2014. The rapid adoption of tablets and smartphones has brought big changes to the $220bl+ PC industry and $280bl+ handset market, including the $300bl+ semiconductor market. The Apps economy has grown to over $10bl and is expected to reach $46bl by 2016, and the $400bl+ global ad market is seeing a big shift to mobile advertising. The $1 trillion global telecom service market is riding the big disruptive forces of mobility and LTE, with better economics and attractive ARPU dynamics balanced by growing cannibalization of previously important revenue streams (SMS, text). The authors see the U.S. as leading the world's rush to LTE but write that Europe and other places will start to come on line in 2013: The United States has been at the forefront of 4G deployments and adoption, with nearly 55% of global LTE subscribers located in the US. We expect carriers in Europe and Asia to aggressively follow the U.S. footsteps in 2013/14, which coupled with the availability of LTE enabled smartphones and tablets should be a catalyst for more widespread adoption of LTE. Among the investment ideas, the authors suggest the following:
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