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VZ Does it


You can take the Telco out of Verizon, but you can't take Verizon out of Telco.


In 2005 Qualcomm (QCOM) announced a new chip technology that would allow for streaming video to cell phones. In January 2006 Qualcomm and Samsung announced a relationship to produce handsets with this technology at CES. Now it's one thing to talk about streaming video, it's another to hear about the full product. Simply put, this product has the potential to stream 16 channels of programming. 16 CHANNELS OF PROGRAMMING!! According to their site, it's 20 channels and 10 channels of stereo audio. They will demonstrate the technology in Las Vegas today at CTIA.

Now if you recall my original hypothesis: There is no television. There is no computer. There is no Internet or cable. What exist are input and output devices, delivery channels and digital information.

Input devices are keyboards, cell phone key-pads, remote controls, etc. Output devices are monitors, cell phone screens, etc. Delivery channels are currently cable, fiber and copper. Digital information is content. Now, I view the market in these buckets and I believe the leaders for each are:

  • Input and output devices: Samsung, Dell (DELL), Motorola (MOT), Logitech (LOGI) and Apple (AAPL).
  • Delivery channels: Level 3 (LVLT), Verizon (VZ), Time Warner (TWX) and Comcast (CMCSA).
  • My favorite content providers are Viacom (VIA), NewsCorp (NWS) and crawling its way back up the list is Disney (DIS).

In between these buckets are the technologies that make things work. Companies like Level 3, Texas Instruments (TXN), Scientific Atlanta (now Cisco) (CSCO), Samsung, Advanced Micro Devices (AMD), Intel (INTC), and Qualcomm.

The point I'm making here is that these are the companies to watch as the new media landscape explodes. These are the companies that will provide the next generation of communications. Most certainly there are multiple other companies in the marketplace that will innovate and deliver within these buckets.

Today, the most exciting of them all is Verizon. This is a company going through a transformation. They will be the first along with Sprint (S) to deliver 16 channels of video through a cell phone. They are aggressively running fiber to the home to compete against the cable companies.

You have to take Verizon out of the Telco category, but you can't take Telco out of Verizon. In my humble opinion, we might be seeing the emergence of one of the strongest communications companies. The biggest risk is their ability to fill the pipe fast enough to convert their cap-ex costs to profitability. A good article to read right now is a release on their site about cap-ex investments.

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