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The 6 Tech Stocks to Watch, 11 Trends to Expect in 2014


What will go mainstream? Who will be the sector leaders? Here's your cheat sheet to the next 12 months of tech investing.

Last year's themes and forecast were on the money. It almost scares me to pick any M&A or rebound targets this year with the market having run up to a high point, and with the Fed claiming that tightening is coming. It puts me in the nervous camp, but let's go ahead and get started on some predictions for 2014.

The Tech Names to Watch

Nuance Communications (NASDAQ:NUAN): Nuance is clearly a leader in voice recognition. You would think with the explosion of Apple's (NASDAQ:AAPL) Siri and other voice-related systems that this stock would be on fire. Unfortunately, the company has made a number of blunders and is in the midst of changing its business to a recurring-subscription model, which will further impact earnings. With a number of activists pressuring the company to get its act together, and Carl Icahn buying more shares at depressed prices, I like the risk/reward that the company gets it together or gets taken out.

Rackspace (NYSE:RAX): Rackspace is a leader in cloud computing. However, the company has been bashed due to reports of Amazon (NASDAQ:AMZN) price cutting, execution errors, missing features, slower growth than many expected, and its big bet on the OpenStack ecosystem. Rackspace also has one of the poorest partner programs in the industry, which sends droves of opportunities to a number of its competitors. So what's to like? Long-term, OpenStack has some prospects, and the stock got a boost from the recent Red Hat (NYSE:RHT) announcement of it being a big growth driver. With the stock down well over 50% from its high earlier this year, the valuation is much more appealing, and there is pressure mounting on management to get it right. I see this company becoming part of a bigger organization in the long run.

Fortinet (NASDAQ:FTNT): Fortinent stays on this year's list as I still think the installed base and valuation is appealing. There's still too much overlap in this space, which makes it ripe for consolidation.

Multi-Fineline Electronix (NASDAQ:MFLX): The company has an X in its name, so you know I like it already. Multi-Fineline is another one of these turnaround stocks as it trades below book and has been hammered due to bad news. With much of this linked to Apple and BlackBerry (NASDAQ:BBRY), the company has worked hard to reposition itself for a rebound or possible acquisition. One kicker with Apple poised to launch new products is that it could potentially benefit from any new announcements.

GameStop (NYSE:GME): GameStop is one stock to sell. Of all stocks in the market today, I'm not sure any scare me as much as GameStop, though it has rebounded like crazy from the Microsoft (NASDAQ:MSFT) Xbox news that the company would stop allowing games to be resold. Long term, games will be distributed digitally. Software is where the margin is, so I just don't see how GameStop will be able to reinvent itself. It seems it will suffer much the way Blockbuster did, yet the stock is near all-time highs. I hope it proves me wrong as I've enjoyed perusing its stores for many years.

BlackBerry: I still believe this company may get taken out, or that it will be split into a couple pieces. There are some great assets in BlackBerry, but it needs to move quickly.

In general I expect more consolidation in the cloud space. Social media stock valuations are once again beginning to concern me. Twitter (NYSE:TWTR), Yelp (NYSE:YELP), Facebook (NASDAQ:FB), LinkedIn (NYSE:LNKD), and others are beginning to look quite expensive as we begin the new year.

Now, on to the non-stock-specific outlook.

Tech and Digital Lifestyle Trends

Leather Wallet Goes Away... Almost After years of battling technologies, it appears Bluetooth has begun to chip away at the payments space. If this happens, we could reach a point where we need to carry little more than a phone. There are a number of winners and losers if this comes to pass.

Microsoft Mobility As smart devices are linked to the cloud, they are some of the easiest devices to replace. This actually works to Microsoft's benefit as thw company eats into Samsung (OTCMKTS:SSNLF) and Apple sales ever so slightly. The big question over the next couple years is whether Microsoft's enterprise offerings are strong enough to drive sales of its mobility products that offer full integration. This will largely depend on the focus of Microsoft's new CEO.

Amazon Backlash Gains Momentum, and So Does Amazon The company faces backlash as a number of companies finally wake up to the realization of the great threat Amazon poses to their ongoing survival. The list of companies at risk of extinction or severe retrenchment due to Amazon's competitive positioning is so large that Wall Street is putting up with Jeff Bezos' spending and results because the endgame is so huge. This is a fact that Rackspace and the OpenStack movement must capitalize on before it's too late.

Internet of Things (IoT) IoT becomes more seamless. Connecting all of the wearables and appliances in the world may be cool, but if they require separate apps, charging, maintenance, logins, portals -- and the list goes on -- they will be more cumbersome than they're worth. Single collection and coordination of this information becomes critical for many of these technologies to achieve mass adoption. Manufacturers must get this right or risk burnout.

Breaches on Mobile Devices Breaches on mobile devices will become more common, forcing companies to modify BYOD (bring your own device) requirements and enforce MDM (mobile device management).

Outsourcers and Integrators Disappear Most of this will be driven by two factors. Companies that haven't invested enough to compete on their own will be acquired for their customer bases or will go out of business. Companies that are growing, are offering unique value adds, and are versed in new technologies and business models will be acquired by companies attempting to catch up or solidify their positions.

Encryption Encryption finally goes mainstream. Let me sum it up in two words: Snowden and China.

Google Glass Glass was finally released to a lukewarm reception. I saw someone with a pair on the other day and I can't see someone wearing these on a daily basis. There just isn't a killer app today for the general population as there are too many flaws. Perhaps down the road this will change. Anyone remember the Newton? Sometimes you're just a little too ahead of your time. I can see vertical usage with Google's (NASDAQ: GOOG) device for mechanics, travelers, and other specialized fields.

Smarter Software and Machines Everywhere Big Blue is ahead here: IBM (NYSE:IBM) now claims it can identify your personality by reading as few as 200 of your tweets. Technologies to analyze every bit of data created are exploding, and we are just seeing the tip of the iceberg.

3-D Printing This will create an entire new economy. Over time, the technology will decimate old business models while generating new ones. People are just figuring out how to use these tools, so the ethical implications will be debated, and the potential for infringement will be high. If you thought theft of online music and movies was a problem, wait until you see how criminals leverage 3-D printing.

Apple Improves on Wearables Or... I've been wrong on Apple the past couple of years, so what do I know. I do think Apple still has some tricks up its sleeve. This has to be the year it comes out with a wearable device and/or a TV (or should I say home-entertainment system?). Expectations will be incredibly high due to the delayed shipment of these products. Apple has no margin for error -- it will have to be measurably better than what is on the market today or it will have to define a new category. My guess is that it gets at least one of these right.

See also:

CES: Intel Plays Well With Others, Especially the Ultra-Mobile

Editor's Note: This article was originally published on Liquid Networx.
Position in RAX
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