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10 Tech Themes and Forecasts for 2012


2012 will likely see M&A cool down, voice-recognition software infiltrate business, and Smart Wallet technology gain momentum -- to name just a few of the coming tech trends.

The past few years I have stuck my neck out on the line and come up with Themes and Predictions for the upcoming year. 2011 was no different. I not only hit on different technology trends, but also tried to predict which companies would and would not be taken over this past year. I had a lot of fun doing this and it is almost scary how well things worked out for these selections. You can go back and read my 2011 Themes and Forecast if you like, but for now, take a look at the stocks I removed from the M&A possibilities list and notice that not only was every single stock not acquired, but all of them except Fortinet (FTNT) was down on the year with the average loss being much worse than the market at -17.3%. This was a really good basket of stocks to have avoided as they were overpriced. This prediction was on the money.

Of the eight companies I mentioned that were likely to be acquired, five had either been acquired, merged or signed agreements to be acquired before the end of 2011. One company split itself into two pieces and I believe the other two are still in play to be acquired. If you would have purchased this basket of stocks, you would have scored a 21.3% gain, easily beating the market in general by a wide margin. If you could have somehow purchased shares of Skype or MySpace on the secondary market or simply avoided Sprint (S), which was the real stinker of the group, you could have done much better. Take a look at how the M&A list performed below:

So to recap the highlights of last year's forecasts M&A was definitely hot in 2011, the economy muddled along with uncertainty being a dominant theme, Apple (AAPL) did obtain the largest cap in the world shortly before the passing of Steve Jobs, smartphones and tablets continued to invade corporations at a rapid pace and Microsoft (MSFT) got it right with Lync being a breakout product for the company.

So what about 2012? Here we go, beginning with M&A.

1. M&A
I think M&A will cool down some after the blistering pace of 2011. Most likely we will see smaller deals done as tuck-ins to round out the portfolios of larger entities. The market is definitely ripe for IT service provider consolidation, security related entities, wireless players and for some more strategic cloud acquisitions where I expect the carriers to be active.
  • InterDigital (IDCC) – If you haven't heard of InterDigital before don't feel bad as it is not a household name, however, many of the brands you know and love have to utilize its patents. With so many companies being taken off the board in 2011 including the acquisition of Motorola (MMI) by Google (GOOG), the InterDigital wireless portfolio looks mighty impressive and the stock is trading just a little above its lows for the year.
  • Nokia (NOK) – See a pattern beginning to emerge here? Here is another undervalued wireless play. This is also a major partner of Microsoft trying to compete with the market leaders Apple and Google. This stock is trading close to or slightly below book value. I think this stock could head lower first since Lumia has not done well, but keep an eye on them.
  • Research in Motion (RIMM) – I will not stoop to insulting diehard Blackberry users as I still have one or two friends that love them. The problem for RIM is that one or two diehard customers here or there is not going to help it recover quickly enough. But there is some good news. Even though Apple and Google have been declared winners of the smartphone wars, this will not stop Microsoft and others from continuing to try. The market is just too big for them to walk away from. Just look at Hewlett-Packard's (HPQ) ill-advised purchase of Palm not so long ago. Sooner or later Microsoft, HP, Oracle (ORCL), IBM (IBM), Amazon (AMZN), Dell (DELL) or someone else will decide that the market is just too big not to have a player in the game, and with the market cap getting smaller by the day and no debt, there is a good possibility that someone finally makes a play for the company this year.
  • Here are a few more names that have good potential to be taken over in 2012: InterNAP (INAP), Netflix (NFLX), Sprint, Riverbed (RVBD), Zix (ZIXI), and Tekelec (TKLC).

2. Dot-Com Implosion 2.0?
Though having real products, many of the Web 2.0 companies we know, love and hate have seen stratospheric growth and valuations. While these are real companies unlike what we saw 10 years ago, we now have some very big expectations to fill. There are a number of high-profile companies readying to come public and one has to wonder if the valuations that are being thrown around are realistic. Just looking at the performance of recent IPOs in this space has to make one cautious at this point. Perhaps the Facebook IPO will tell the story.

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Positions in IDCC and TKLC
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