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Trendspotting: The Smartphone Wars


A look at the next big opportunity for personal investors.

I hear drums in the jungle.

No, I'm not going nuts. I'm hearing the compelling drumbeat of the next big thing, the coming tsunami, the Holy Grail… Oh, mix your own over-heated metaphors.

It's the smartphone.

Anyone who was around during the Internet bubble of the late 1990s can see the trajectory this will take.

Like the Internet or the automobile, the smartphone is a real thing. It's a useful tool that millions are using and millions more will use soon, and then we'll all wonder how we got along without it.

But that's not what this is about. This is about the imminent arrival of the next big opportunity for personal investors. Most of all, it's about whether you and I are going to get suckered again, along with many others, or are going to get rich, as others inevitably will in the next couple of years.

The opportunities are wide-ranging, because of the multi-functional nature of the beast. It's a phone, but also an Internet-access device, a video player, a music player, and a camera. It can be used to create documents or send email. And that's before the creative types get to work producing an infinite number of applications.

It also depends on a wireless network, and there the opportunities are just as great. The use of smartphones already has strained existing capacity, infuriating users with dropped calls, service slowdowns, and even blackouts in major cities.

Meaning, to put it bluntly, smartphone service sucks now. And in this highly competitive market, the major providers are going to spend whatever it takes to fix that before it kills them.

Here's a look at some of the players in three key investing areas: 1) smartphone makers and the software they use; 2) the networks they run on, and, 3) the companies that are going to make the networks run better before they crash around their ears.

(This doesn't mean that any of these companies' stocks are recommended by Minyanville or by this writer. It means that they're in the smartphone business, and may be worth the research for their investment potential.)


There's no doubting the trend is real. The question is which companies will dominate the phone market. In the midst of a recession, 172 million smartphones were sold in 2009, according to a Gartner Group report. That's a record, and a 24 percent year-over-year increase, at a time when the overall mobile phone market stagnated, at 1.2 billion phones sold.

Nokia (NOK) was number-one, with a gargantuan 46.9 percent of the smartphone market.

And that makes Nokia a big sad loser.

How so? Because Nokia is losing market share to its rivals, and fast. The conventional wisdom (which often matters more than facts in the stock markets) suggests that this trend will continue.

So, the question for investors is, which shiny new smartphone will consumers buy in the months to come when they trade in their old Nokia mobile phone?
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Positions in JNPR and CSCO.
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