Manufacturing new orders are booming – reliable sign of improving employment and eco. growth

The Institute of Supply Management just released the August index for manufacturing activity.  The reported diffusion index level of new orders was 63.2, the highest since April 2011.  More importantly, the rate of improvement in the index as expressed as the increase over the trailing 6 month average was the best since the big economic recovery in early 2009 and before that February 2002 and June 1991.  The point here is that a sharp recovery in the new orders index as we have just seen is very uncommon and has tended to lead to accelerated economic growth in the coming months – and a rising stock market.  Since 1980, the S&P 500 has been up 4 out of the five times we have experienced similar new order action.  It rose an average of 4.8% in the following quarter.  It has been up an average of 9.6% in the 4 positive quarters.  BTW – employment also accelerates.  Sounds good to me . . . Jeb B. Terry, Sr. Sept. 4, 2013

Mfg New Orders and Emp 9-3-13

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An epitome of “disruptive innovation” – smartphones take down the CEO of Microsoft. Are there more heads going to roll across the “old” tech establishment? You bet!

The CEO of Microsoft, Steve Ballmer, shocked the markets with his recently
announced “retirement”.  There is the normal speculation one would expect when the CEO of an iconic enterprise announces his departure.  Microsoft is a $278
billion market cap behemoth with $77.8 billion in revenue and $76 billion in
cash.  So why was he asked to leave (of course he was asked)?  Consider the
following chart of PC sales versus smartphone sales and you will begin to be
able to formulate an answer. (Courtesy of Business Intelligence here)

PC unit sales vs smartphones 9-2-13

Microsoft has been left in the dust of the wireless aka smartphone revolution.  It is a classic example of disruptive innovation (see Clayton Christensen’s web site here ) where . . . “an innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost are the status quo. Initially, a disruptive innovation is formed in a niche market that may appear unattractive or inconsequential to industry incumbents, but eventually the new product or idea completely redefines the industry.”  The “disruptor” Microsoft is itself “disrupted”.

What now?  That is the more interesting question.  Microsoft may be like a crazed beast now desperate to reassert its market leadership.  They have money – $76 billion in cash – scale and talent.  I suspect they will buy companies and launch products.  The message is clear to all incumbent CEOs of “old” tech companies – no one’s job is safe. You better get a wireless strategy working and fast.  I suspect we will see elevated M&A activity.  That wouldn’t be all bad for valuations of small tech companies such as ours –eh?  Jeb B. Terry, Sr. Sept. 2, 2013

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There is a surge in IT spending on the way . . . are you ready?

Credit Suisse has recently published research stating that IT spending should take off in 2014.  I agree.  Here is some of what they had to say . . .

“Corporate investment in technology is now farther below trend growth than it has been at any point in the last 50 years, despite the fact that American non-financial corporations are sitting on an enormous cash pile of nearly $1.5 trillion. In fact, as a percentage of GDP, corporate spending on technology peaked at 4.6 percent in 2000, but by last year, it had declined to 1995 levels at about 3.4 percent of GDP.  But all that is about to change.  Credit Suisse’s technology analysts are forecasting a boom in technology spending over the next four years as corporations finally open their wallets again to buy new software, servers and even the endangered species of the technology world – PCs.”  (You can see their report here.)

An “boom in technology spending” can include 1) massive PC upgrades as Windows XP reaches its end of life and will no longer be supported by Microsoft after April 2014, 2) spending on servers and data storage to accommodate cloud based services, and 3) the continuing wireless revolution.  Aberdeen is daily involved in the hunt for ways to leverage the awakening of the IT giant.  Jeb B. Terry, Sr.  Sept. 2, 2013

Growth in enetrprise IT spending - Credit Suisse 9-2-13Aberdeen Investment Management – a guide service for micro-cap technology investment

Time spent on mobile devices is exploding. Expect more tailored media and more ad spend geared to mobile – soon.

Only Mobile has shown an increase in media consumption since 2009.  The following chart was published by Business Intelligence in a recent study which you can see here.  Mobile is critical to the survival of all legacy media players – no mobile strategy => no business.  Ad dollars are shifting to multiple mobile platforms and formats.  Aberdeen
has multiple investments positioned to benefit from the shift in consumer media attention toward mobile devices.  Jeb B. Terry, Sr. Sept. 2, 2013

US Consumer Media Consumption Share 9-2-13

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Tablets are being rapidly adopted – faster than smartphones and mostly by consumers. Expect enterprise adoption to accelerate.

According to Pew Research, (see report here) a third (34%) of American adults ages 18 and older own a tablet computer like an iPad, Samsung Galaxy Tab, Google Nexus, or Kindle Fire—almost twice as many as the 18% who owned a tablet a year ago.  In May 2010, just 3% of adults said they owned a tablet computer.  It is important to note that 56% of households with $75k+ in annual income already have a tablet.  Deep penetration of upper income households suggests to me we will see more content and ad spend addressing the tablet form factor.  It also suggests we will not have to wait long until we see significant price discounting to push adoption by lower income brackets as well as in emerging markets.  Businesses are lagging in adoption.  Expect much more business adoption as apps and tablet models are developed to address enterprise caliber specs and needs. The annual number of tablets being sold already exceeds the number of PCs being sold.  The purchasing by businesses is rising.  The following chart displays Forrester’s estimated growth in tablet sales.  It was prepared in early 2012.  Actual tablet sales are already nearing a 250 million unit annual run rate.  Aberdeen is focused on the rise in business grade tablet hardware and software.  Jeb B. Terry, Sr. Sept. 2, 2013

Tablet unit sales forecast Forrester 5-2012

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