4G/LTE Smartphone users Are 10 Times More Extreme in Their Data Usage

The tide of mobile data use continues to rise . . . fast.

A recent post by the Yankee Group had this to say . . . “A new study from JDS Uniphase’s Arieso unit finds that 4G/LTE’s fatter pipes are resulting in fatter usage patterns as well, and that just 0.1 percent of 4G/LTE users consume half of all downlink traffic vs. 1 percent of all 3G users who do so.  Total Telecom reports the study also found that iPhone users posted the most data consumption, and that those using Apple’s newest iPhone 5S consume seven times more data than those using 3G iPhones in developed markets and 20 times more than 3G users in emerging markets.”

4G/LTE changes consumer behavior.  Consumers are rapidly upgrading to 4G/LTE enabled smartphones (encouraged by novel and aggressive pricing by carriers).  Indeed, we seem to be at a tipping point.  The roll out of 4G/LTE in China to hundreds of millions of users and the scale launch of small cells in US are triggering the production of more smartphones at lower prices capable of driving even more mobile data usage.  Consumers are being educated by mass media.  They are in the “monkey see, monkey do” phase where 4G/LTE penetration is visibly sufficient to encourage later adopters to upgrade.  The carrier operating advantages for 4G/LTE and the opportunity to steal market share are driving increased marketing spending.  There is increasing urgency for them to find ways to harvest more ARPU through mobile data revenue such as ad supported activity, content, services and commerce.  The chart below shows Yankee Group’s forecast for global mobile data revenue to reach $559 billion by 2017.

The takeaways from the Yankee Group report are not just about network capacity constraints, they are also informative about the rate of change in patterns of video consumption, the advertising ecosystem around video, the continuing explosion in mobile app based entertainment and services and the inevitability of surging mobile advertising and commerce.  The Aberdeen portfolio is invested in numerous companies that benefit from the mobile data tide.  Jeb B. Terry, Sr.  January 26, 2014

Global mobile data rev forecast 1-25-14

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2014 earnings are estimated to rise faster than 2012 and 2013. Estimates for “as reported” earnings for 2014 have been raised 13% this month – this is good.

We are moving into the heart of the 4Q 2013 earnings season and hence there will be a great deal of focus on whether companies beat estimates and raised guidance.  So far, the collective estimates for S&P 500 earnings have been raised 13% just since year end.  Operating earnings are presently estimated to rise 13% in 2014 – an acceleration over the estimated 10.5% increase in 2013 and the ~1% increase in 2012.  There will be the requisite amount of blather about the P/E ratio.  While it can be said it is not low, it cannot be said it is unusually high.  That is of course unless you torture the numbers enough and ignore the margin enriching impact of the increasing weight of software related businesses on aggregate corporate earnings.  Aberdeen focuses on very high growth technology companies.  Our portfolio’s weighted average estimated revenue growth for 2014 is 37.5%.  This compares to the 2.5% estimated topline growth for the S&P 500.  Jeb B. Terry, Sr. Jan. 20, 2014

SP 500 est 2014 eps 1-20-14

Aberdeen Investment Management – a guide service for micro-cap technology investment

A New Year brings new forecasts – here is a chart of the continuing massive growth in smartphone and tablet shipments – 1.3 billion smartphones and 314 million tablets in 2014 . . . WOW!

The smartphones shipped in 2014 will be nearly 2X the number shipped in 2012.  There will be 2.4X more tablets shipped in 2014 than in 2012.  Those are HUGE numbers.  BI Intelligence has again provided an informative chart projecting smartphone and tablet shipments out to 2018.  We don’t need to tell you that the implications of that growth are far reaching.  Aberdeen has multiple investments that address aspects of this growth.  We are investing in hardware, software, security, content, advertising and platforms that all enable and benefit from this transformation.   Jeb B. Terry, Sr. Jan. 18, 2014

2014-2018 SP and Tablet shipment forecast Jan 2014

Aberdeen Investment Management – a guide service for micro-cap technology investment

Mobile Video is booming, regular TV – not so much. 2014 will see increasing shift in investment and ad dollars to address the young demographic who dominates everything mobile.

“The audience for video on a mobile phone is growing three times faster than that for time-shifted TV” says BI Intelligence in a recent report.  They used the following numbers from Nielsen:

  • In the third quarter of 2013, the audience for video on mobile phone grew 38% over the same quarter in 2012. The U.S. audience for video on a mobile phone is now 53.1 million people.
  • Over the same period, the audience for time-shifted TV – watching TV on-demand or on a DVR – increased 11%.
  • The audience for traditional TV was flat, while the audience for video on PCs declined 8%.

BI Intelligence believes “traditional media companies will increasingly look to acquire mobile-centric upstarts in order to bolster their digital video businesses, and fend off competition from media startups and on emerging video platforms.”  We concur.  Aberdeen has multiple investments that address aspects of this shift in audience.  Jeb B. Terry, Sr. Jan. 18, 2014

YoY Video Audience Growth 1-18-14

Aberdeen Investment Management – a guide service for micro-cap technology investment

The Yield Curve is steepening and this is GOOD! It’s a signal for strengthening markets.

I have refreshed some of my macro charts and am pleased to report that the yield curve as defined by the spread between the 10 yr Treasury rate and the Fed Funds rate has widened significantly.  As can be seen in the following chart – a rising yield curve has been a good signal for a strong gain in the NASDAQ (and other indices).  The level and rate of change in the yield curve is not unlike the moves seen in 2002-2003 and 2009.  The implication is the NASDAQ may continue to rise albeit at a slower rate until the yield curve flattens materially.   Jeb B. Terry, SR.  Jan. 13, 2014

Yield curve v NASDAQ 1-12-14

Aberdeen Investment Management – a guide service for micro-cap technology investment

The “January Effect” seems to have statistical merit. Up Januarys have tended to lead up years. Down Januarys are not conclusively bearish

Yardeni Research published a nifty scatterplot of the performance of the S&P 500
during each January and its full year from 1947 through 2013.  Over the past 67 years covered by the analysis, January and its full year have been up 55% of the time. During only four years (1966, 1994, 2001, and 2011) were up Januarys followed by full-year declines. Down Januarys aren’t necessarily bearish.  There were 11 down Januarys that opened 11 up years. There were 14 down Januarys followed by full-year declines.  My view is it’s more about the earnings and interest rate outlook than the calendar that determines the market.  Jeb B.Terry, SR.  Jan. 12, 2014

January effect scatter chart 1-12-14

Aberdeen Investment Management – a guide service for micro-cap technology investment

More new orders = more employment = rising market

The first chart shows the ISM Manufacturing index for new orders vs. the survey’s index for employment.  These have shown an encouraging pick up. The second chart shows how the S&P 500 has correlated to growth in nondefense factory orders (courtesy of Scott Grannis at Calafia Beach Pundit). Jeb B. Terry, SR.  Jan. 12, 2014

ISM Mfg new orders and employment index 1-12-14

Nondefense factory orders & SP500 1-12-14Aberdeen Investment
Management – a guide service for micro-cap technology investment

The private sector employment numbers are showing strength.

There was understandable surprise and consternation over the much lower than expected December employment growth.  The monthly addition of only 74k new employees is dramatically off trend and may be materially revised in coming months.  I prefer to keep focused on the numbers reported by ADP, the big payroll processing company.  ADP has hands on knowledge of actual payrolls.  Theirs is more of a counting exercise whereas the BLS reports are estimates based on surveys.  ADP is signaling more growth in the economy.  The private sector is doing far better than the public sector.  The following charts are revealing – more private sector and less public sector is good.  Jeb B. Terry, SR.  Jan. 12, 2014

ADP Dec 2013 employment charts 1-12-14

Pvt v Public sector emplyment growth index 1-12-14

Aberdeen Investment
Management – a guide service for micro-cap technology investment

Consumer confidence isn’t signaling a top

Sluggish employment and persistent fears of Obamacare may be to blame. Plenty of caution in the public’s sentiment.  This is not typical of a time when there is a peak in the economy or a major top in the stock market.   Jeb B. Terry, SR.  Jan. 11, 2014

Consumer confidence 12-7-13

Aberdeen Investment Management – a guide service for micro-cap technology investment

Tablets are rocking the world of hands on computing.

While it is no surprise to our friends and clients that we believe that tablet computers (e.g. iPads) are disrupting the personal computing world. The growth in tablets is the fastest of any electronic device on record, even faster than smartphones.  The chart below shows how tablets – both iPads and Androids – are taking share from PCs.  Aberdeen has a multi-faceted effort to participate in the tablet boom including components, software, bandwidth and niche markets.  Jeb B. Terry, SR.  Jan. 12, 2014

Tablets v PC growth chart 1-12-14Aberdeen Investment Management – a guide service for micro-cap technology investment