comm tech update ces reflections

8/8/2019 Comm Tech Update CES Reflections

http://slidepdf.com/reader/full/comm-tech-update-ces-reflections 1/10

BRIGANTINE ADVISORS Communications Technology

January 10, 2011 1

Comm Tech Update January 10, 2011

Kevin Dede, CFA

(415) [email protected]

PLEASE SEE PAGE 7 FOR IMPORTANT

DISCLOSURES.

CES 2011 Reflections:Wireless ConnectivityProves to be an AcuteNeed as the Dawn of aNew Decade Unfolds

Summary: The Consumer Electronics Association hosted its annual CES trade show last weekwhere some 130,000 unsuspecting yet good natured show goers proceeded to trip, push andshove each other in effort to fondle such goodies as Samsung's Galaxy Tab and HTC's HD7Windows Mobile 7 Series phone on T-Mobile's network. For the life of us, we'll never understandwhy these people just didn't stay home and play with the old toys in their local neighborhood cell

phone stores. Be that as it may, this year's show certainly stands as testament to the health of global consumerism. Could it be unscrupulous, irresponsible bureaucratic leadership and theresultant endless governmental money printing at major central banks around the world that ledto the overflowing halls of the Las Vegas Convention Center, closing in on the record 2007attendance of 143,695 at the height of the most recent bubble? While it stands to reason thatpeople are always going to want the coolest and the newest, all the newest and the coolest at thisyear's show was somehow, one way or another, wirelessly connected as never before.

Now your tablet can have a tablet. Some time ago, back in the dark ages before the VerizoniPhone, a select group of professional prognosticators working as analysts at CEA thought thatthere might be as many as 80 tablets shown at CES 2011. Clearly things can change quickly, and just about three months later on January 4, 2011, that same select group revised its standingestimate to perhaps more than 100 possible tablet introductions at CES. At the show last week,

we completely lost count. We'll admit that right up front. Companies we've never heard of, suchas Cody, were proudly displaying tablets; in fact, Cody had three versions of its new Kyros tabletin its booth last week, all of which run Android 2.1. But the segment ground breaker in our eyeswas Motorola's Xoom, the tablet all tablets want to be when they grow up. Running on Verizon's3G network in 1Q11, but upgradeable to 4GLTE in 2Q11, Xoom has a dual core 1 GHz processorfor a brain and in 2Q, arguably the fastest legs in the business. If those little features aren'tenough for you, how about Google's new Android 3.0 operating system affectionately known asHoneycomb, specifically developed to make tablet computers fun? Intuitive gestures on the touchscreen call up menus and display widgets in a new, cool way. While the device was on lock downand carefully monitored by a cadre of Motorola goons so no one outside of Motorola booth staff could touch it, we undauntedly subjected ourselves to the pre-programmed demo multiple timesto glean an understanding to what could ultimately be the way we all interact with computers in

the future. Sure, we're gluttons for punishment, but look, we actually see a trend unveiling itself.Think Tom Cruise in Minority Report. No, we're not saying Android 3.0 can anticipate crimesahead of the act, but we certainly believe large screen, multi-touch, multi-sensor driven inputs arecoming to mainstream computing, and it won't be long before most of us toss out our keyboards.Look to interactive gaming as a guide as well. Microsoft's Xbox Kinects uses optical sensors,Nintendo's Wii uses motion detectors, and the Razer Onza game controller uses, believe it or not,changes in magnetic fields to allow players to manipulate either their avatar or a device in acomputer game with one millimeter accuracy, and all while not in direct touch of the computer, its




January 10, 2011 2

screen, or a keyboard. Seeing all this in one place explains why we were in Vegas. Honeycombrequires a user to physically touch the screen, but it registers that sensation in a manner wemight expect French lovers to react. All sorts of unexpected things happen when you touch it theright way. Motorola wasn't the only OEM to be granted exalted status. LG introduced the G-Slatefor T-Mobile and it too sports Honeycomb. But at the time this went to press, that's the exclusiveHoneycomb list.

Another potential winner from Motorola could be the Atrix, powered by a dual core 1 GHzprocessor. Slated to run on AT&T's network, the Atrix forms the path for handsets to replacedesktops in an enterprise setting. The power behind Atrix rivals desktop PCs a mere three yearsold, and with that kind of horsepower, why the heck not use it as a desktop or a laptop? Motorolasure thought so, so it built two Atrix docking stations, one for each computing venue. With allthat in mind, why not have your tablet power a tablet?

People are tired of cable companies. Everybody loves broadband, and with a sharp eyetoward the future perhaps one can see how MSOs evolve to mere purveyors of bandwidth goingforward as triple-digit cable bills tend to leave a sour taste in the mouth during these lean times.Last year, CES was all about 3D TV. This year, as hard as the big TV companies are trying tomake good on keeping the 3D investment alive, but perhaps reeling from the whopping 1.1 million

3D sets sold in the U.S. last year, the emphasis at CES changed a bit this year. Almost every,top-of-the-line large screen TV was deemed Internet-ready and most also had wireless networkingbuilt right in. The 802.11n Wi-Fi standard can handle multiple HD video streams simultaneously,and it appears that the TV OEMs realize that wireless connections are easier for consumers allaround; Cavium Networks stands as the biggest beneficiary we see as this technology moves tothe mainstream. That company made its CES debut last week touting its inclusion in OEMproducts. And much more this year than last year are companies willing to help consumers findand distribute Internet TV content, such as Vudu, Hulu, iGUGU, Roku, and perhaps assorted other'-u's and even some non-u's such as Boxee Box. We think the wirelessly networked, Internet-ready TV phenomenon had the most profound effect on us. From a networking hardwareperspective, TV's come with an assortment of hard line connections, including Cat5 cable input,HDMI and Ethernet RJ-45 jacks, and now even Wi-Fi. Yes folks, the world is going wireless.

Have we found the answer to the "killer app" question? Video, video, video is the killerapp, and we're bound to continue to repeat ourselves. Fast networks share bandwidth hungryvideo, and while video conferencing is nothing really new, available on ISDN H.323 some tenyears ago, it seems to have found more interest via Skype and Apple's FaceTime. Thecombination of display technology, network speeds, and 1080p HD video clarity pushing its way onto top-tier handsets is certain to propel video consumption further. Of the four new LTE handsetsVerizon showed off from Samsung, Motorola, LG, and HTC, two of them have mini HDMI ports thatcan connect directly to 1080p large screen TVs and provide that same HD experience. Perchedabove all handsets, in our mind, is Sony Ericsson's Xperia Arc also announced last week. Althoughnot yet available, we were able to get our hands on one at the show to personally witness theprowess of Sony's Bravia video engine applied to a 4.2 inch "reality" screen. We haven't seenanything portable display video like it. Powered by a 1GHz processor and running Android 2.3,this handset ranks with the best of them in our opinion, but we're uncertain of what version of HSPA+ the radio might support—this, of course, begs another question we address in the next

section of this paper. We certainly offer kudos to the crispness of Samsung's Super AMOLED Plusscreen debuting on its "4GLTE" handset for Verizon (and AT&T's Infuse handset) last week, butthe perceived depth of field presented in Sony's technology appears unparalleled. With no carrieryet announced for Xperia Arc, we see a great handset, and perhaps the greatest, not winning therecognition it deserves.

Lending credibility to our video killer app theme is the direction major semiconductor companies




January 10, 2011 3

are taking their research and development. Intel's introduction of its Sandy Bridge chip thatembeds graphic logic (GPU or graphics processing unit) and AMD's Fusion finally incorporating thegraphics capability acquired in the $5.4 billion ATI acquisition of 2006. In our opinion, Intelappears to be on the right course here for a few reasons: (1) for the past three years running,according the annual CEA survey, notebooks and laptop PCs have stood unchanged at the top of the most desired consumer electronics product list, above mobile phones, iPads, iPhones, and

assorted other items; and, (2) Intel's Sandy Bridge is coming on Intel's new 32 nanometerprocessing technology, offering superior performance per given unit of semiconductor real estate—

AMD's devices are leveraging the same technology to attack the same market—adding efficacy toour killer video thesis. Video consumption in handheld and portable devices on the back of Nvidia's Tegra 2 chip, sporting dual cores and sized smaller than a dime, implies delivering morevideo to the masses and again reaffirming video consumption standing as the killer application.

4G, myth or legend? Can it leap tall buildings in a single bound as Nvidia's CEO, Jen-HsunHuang, intimates? Is it Apple's latest iPhone? Is it Sprint's WiMAX? Perhaps the most confusingissue in consumer electronics today is the definition of 4G. We won't bring peace in this time of the 4G wars, but hopefully we can explain away some of the confusion. T-Mobile claims 4G isabout network performance. Performance means many things in and of itself: upstream and

downstream speeds as well as latency. Speeds are self explanatory, and latency, a synonym fordelay experienced on networks, is an expression of how much time it takes for a packet of data toget from one designated point to another. Measuring networks based on these characteristics is,we think, the optimal way to measure "performance."

Meanwhile, the ITU (International Telecommunications Union), an organization revered for manythings among them defining things telecoms related, revised its former definition of 4G in aDecember 6 press release that included the following passage: "…IMT-Advanced is considered as"4G", although it is recognized that this term, while undefined, may also be applied to theforerunners of these technologies, LTE and WiMax, and to other evolved 3G technologies providinga substantial level of improvement in performance and capabilities with respect to the initial thirdgeneration systems now deployed…" implying that performance improvement is a fair way to

judge 4G networks. Okay, we can now agree that performance is the ultimate criterion, but how

to look at performance improvement?

T-Mobile Explains HSPA Upgrade Path at CES Press Event

Source: CNET

A metaphor representing just how fuzzy consumer recognition of 4G is, the lack of clarity in thepicture above didn't deter our mission to illustrate the path to greater speeds leveraging existing




January 10, 2011 4

HSPA technology (based on CDMA), and T-Mobile believes its network covering 200 million popswith 21 Mbps HSPA+ qualifies as 4G. Certain geographies of its network are slated to upgrade to42 Mbps as 2011 progresses. While theoretical measures of speed are one view, actualexperienced network speeds are another and are often a function of how much load the network isbearing. AT&T and its iPhone experience through the 2008 and 2009 time frame is a fantasticexample of total network degradation. Performance became so bogged down in both New York

City and San Francisco in the fall of 2009, that AT&T removed the iPhone from its website in boththese selling geographies. Verizon claims its LTE network should continue to support 5 to 12 Mbpsdownlinks as the network loads up with subscribers, while common experience on Sprint's WiMAXis in the area of 2 to 3 Mbps; these networks use an entirely different technology called OFDMA,which is completely removed from the underlying CDMA technology of HSPA. Prior to aconvention born from common discussion, 4G was expected to come only from OFDMA-basedtechnologies, but that has obviously changed.

Finally, perhaps the most over looked characteristic, is the phone or device's own modem. Giventhat there are so many variants of wireless technology, it is difficult to know for certain whichphones support what technology version, exactly. We found this issue carried throughout theshow floor last week with many people at booths unfamiliar with exactly what data speedsparticular phones could support. On this point, we caution consumers to carefully check exactlyhow fast the modems incorporated in their phones are prior to purchase, especially whileoperators are engaged in formidable 4G warfare. This issue is particularly germane to AT&T andT-Mobile's network as many phones on those networks are probably running a slower version of 3G at 1.8 Mbps or perhaps even slower, and importantly, there are far more deployed variants of the technology these networks support, hence greater potential confusion. The next step fromWCDMA 1.8, its most rudimentary form, is 3.6 Mbps. From there, its HSDPA at 5.76 Mbps andthen HSUPA (the first version of HSPA) that supports 7.2 Mbps. This is the technical spec of theiPhone 4G on AT&T's network. The next step from here is HSPA+, which supports 14.4 Mbps.And finally comes what T-Mobile is calling the 4G version of HSPA+ at 21 Mbps. Sprint andVerizon are easier to classify. Verizon and Sprint both support the same CDMA version called EV-DO Rev A, which has technical specs of 2.45 to 3.1 Mbps. We sometimes see 1.2 Mbps peak onSprint's data network as anecdotal evidence of the user experience. Where Sprint and Verizondiffer is on their choices of 4G; Verizon has chosen LTE, and Sprint has chosen WiMAX, the speedsof which we've mentioned above, but both use OFDMA as the core wireless technology.

Verizon holds attendees hostage! CES' day one opening keynote was hosted by VerizonWireless, and in a brazen act of piracy, the company took upon itself to dominate the entiresession subjecting the innocent to what came across as the longest running advertisement we'veever seen assault an audience. While we're unsure of exactly how it came to pass, the Verizondebacle remains the gravest under-reported story of the show. With our military workingdiligently defending freedom across the far corners of the earth, who may protect us fromegregious key note terrorism here at home? And how much a company pays the CEA for the firstday keynote advertising session of similar duration, the world may never know. Certainly afterthat experience, we prudently decided to sidestep Microsoft CEO Balmer's keynote, and based on

other attendee's reports on that bore fest, we remain content with that decision.

A shout out to The Hershey Company. While CES has always been about consumerelectronics, the show and the international attention it now garners, attracts the consideration of other consumer facing companies, as our esteemed colleague Ramesh Misra noted in Ford's choiceof the Las Vegas venue to introduce its new all-electric Focus, perhaps to the chagrin of attendeesof the North American International Auto Show in Detroit starting a only week later, where anintroduction of that significance would normally be made. And although 'Hershey's next big thing'(the product's tag line) is completely wireless, we tried hard by sampling many bags, but could




January 10, 2011 6

For a full discussion of risks associated with investing, please reviewindividual companies' 10K statements filed with the SEC.

Companies Mentioned in this Report:

Advanced Micro Devices, Inc. (AMD; $8.83) not rated Apple Inc. (AAPL; $336.12) Buy rated AT&T Inc. (T; $28.85) not rated Cavium Networks, Inc. (CAVM; $43.38) not rated Dell Inc. (DELL; $13.98) not rated Ford Motor Company (F; $18.27) not rated Google Inc. (GOOG; $616.44) not rated

Hershey Co. (HSY; $48.14) not rated Intel Corporation (INTC; $20.66) not rated Microsoft Corporation (MSFT; $28.60) not rated Motorola Mobility Holdings, Inc. (MMI; $33.06) not rated Nvidia Corporation (NVDA; $19.87) not rated Qualcomm Incorporated (QCOM; $51.73) not rated Samsung Elect Ltd. (SSNLF; $830.00) not rated Sprint Nextel Corp. (S; $4.68) not rated Smith Micro Software, Inc. (SMSI; $16.13) Buy rated Sony Corporation (SNE; $36.04) not rated Verizon Communications Inc. (VZ; $35.93) not rated




January 10, 2011

IMPORTANT DISCLOSURES:

Brigantine Advisors is a division of Fagenson & Co., Inc.,60 Broad Street, New York, NY 10004, 212-422-1993

Analyst: · The analyst does not serve as an officer, director, or advisory board member of thesubject company.· The analyst or a member of the analyst's household does not have a long position inshares or derivatives of the subject company.· The analyst or a member of the analyst's household does not have a short position inshares or derivatives of the subject company.· Fagenson has not acted as an investment banker for the company(s) mentioned in thisreport in the past.

Receipt of Compensation:

The research analyst responsible for preparation of this report has not received anycompensation from the subject company in the past 12 months.

Fagenson & Co., Inc. Member of the New York Stock Exchange, FINRA, and SIPC (the “Firm”) does not make markets in securities. Analysts receive no direct compensation inconnection with the firm’s investment banking business. All Fagenson employees,including the analyst(s) responsible for preparing this research report, may be eligible toreceive non-product or service specific monetary bonus compensation that is based uponvarious factors, including total revenues of Fagenson and its affiliates as well as a portionof the proceeds from a broad pool of investment vehicles consisting of components of thecompensation generated by directors, analysts or employees and may affect transactions

in and have long or short positions in the securities (options or warrants with respectthereto) mentioned herein.

Although the statements of fact in this report have been obtained from and are basedupon recognized statistical services, issuer reports or communications, or other sourcesthat the firm believes to be reliable, we cannot guarantee their accuracy.

All opinions and estimates included constitute the analyst’s judgment as of the date of this report and are subject to change without notice. The firm may affect transactions asagent in the securities mentioned herein.

This report is offered for information purposes only, and does not constitute an offer or

solicitation to buy or sell any securities discussed herein in any jurisdiction where suchwould be prohibited.

Additional information available upon request.

Brigantine Advisors Ratings System:




January 10, 2011

The Brigantine Advisors Stock Rating System consists of three separate ratings: Buy,Hold and Sell.

The appropriate rating is based off the estimated total return of the stock over a forward

12-month period, including both share appreciation and anticipated dividends. Buy ratedstocks included a published 12-month price target. The price target represents theanalyst’s best estimate of the market price in a 12-month period. Brigantine Advisorscautions that price targets are based on assumptions related to the company, industryand investor climate. As such, price targets remain highly subjective.

The definition of each rating is as follows:

Buy - The stock is expected to deliver a total return of 15% over a 12-month investmenthorizon.Hold - The stock is expected to deliver less than a 15% positive return or less than a10% negative return, over a 12-month investment horizon.

Sell - The stock is expected to deliver a negative total return of 10% over a 12-monthinvestment horizonNR: Not RatedSP: Suspended

Stocks rated Buy are required to have a published 12-month price target, while it is notrequired on stocks rated Hold and Sell.

Charts

Date Rating Price Target

Initiation 1.4.11 Buy $400.00




January 10, 2011

Source: MSN Money.

Date Rating Price TargetInitiation 11.10.10 Buy $18.00

Additional Significant Risk Factors and Investment Considerations

The securities or trading strategies discussed in this report may not be suitable for someinvestors. Investors must independently evaluate each issuer, security, or instrumentdiscussed in this report and consult independent advisors where necessary.

1. Past Performance is not indicative of future results.2. Market Risk: Securities may decline in value due to factors affecting securities marketsgenerally or particular industries. The value of a security may be worth less than the

original investment.3. Concentration risk: Investing a substantial portion of assets in securities within asingle industry or sector of the economy may be subject to greater price volatility oradversely affected by the performance of securities in that particular sector or industry.4. Leverage Risk: Fluctuations in interest rates on borrowings or the dividend rates onpreferred shares as a result of changes in short-term interest rates may reduce thereturn to common shareholders or result in fluctuations in the dividends paid on thecommon shares. There is no assurance that a leverage strategy will be successful.5. Foreign Investment Risk: Investment in foreign securities (both governmental andcorporate) may involve a high degree of risk. In regards to debt securities, such risksmay impair the timely payment of principal and/or interest.6. Short selling involves an inordinate amount of risk including the theoretical potential

for unlimited losses and losses that can greatly exceed the principal amount invested. Incontrast, the potential gain from short selling is generally limited to the principal amountinvested. Short sellers can have their stock called away by the lender of the sharesshorted, subjecting the short seller to incremental risk. Short sellers by definition mustborrow shares, subjecting short sellers to margin risk. The risks cited here with respect toshort selling are not all inclusive and investors should consult with their independent




January 10, 2011 1

advisors prior to engaging in any recommended short selling strategies, including, if applicable, the short sale recommended in this report.

The risks detailed above are not inclusive. Other significant risk factors not identified heremay be equally or more important to any particular investor in terms of assessing the

overall risks associated with these securities.

The information contained herein is illustrative and is not intended to predict actualresults, which may differ substantially from those reflected herein.

Investors should consider this report as only a single factor in making theirinvestment decision.

comm tech update ces reflections

Documents