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10 Predictions for M&A Deals, New Trends in Tech for 2013


Plus, the highlights and lowlights of last year's predictions.

With 2012 in the books, let's revisit last year's predictions (click here for 2012 forecast) and try to glean a few insights into what 2013 has in store for us.

2012 M&A Picks With Performance Data

Closing Price Last Trade or Price Percentage of
Acquired 1/6/2012 1/4/2013 Change
InterDigital IDCC No 42.07 44.12 4.87%
InterNAP INAP No 5.74 7.05 22.82%
Netflix NFLX No 86.1 95.98 11.48%
RIM RIMM No 15.34 11.95 -22.10%
Nokia NOK No 5.24 4.16 -20.61%
Sprint^ S Yes 2.19 5.92 170.32%
Riverbed RVBD No 25.77 21.14 -17.97%
ZIX ZIXI No 2.96 2.9 -2.03%
Tekelec* TKLC Yes 10.95 11
Average Gain 18.35%
* - Accidentally listed from the prior year as they had already agreed to be acquired
^ - Still trades but majority stake taken by Softbank

Highlights of 2012 – On the Money
  • M&A cooled a little but some very interesting deals got done. Your money would have done well in these stocks. Overall, if you held every stock absent Tekelec (NASDAQ:TKLC), your return on equal dollar positions in the other stocks would have netted you a return of over 18% for the year, beating the Dow (INDEXDJX:.DJI) and S&P 500 (INDEXSP:.INX) handily. Tekelec (which was removed from the portfolio in January 2012 as the merger was finalized) should have been omitted because it was a holdover recommendation from 2011, already in the stages of acquisition.
    • Sprint (NYSE:S) was a huge winner, nearly tripling in price on the purchase by Softbank (PINK:SFTBF).
    • Netflix (NADSAQ:NFLX) could have booked very big gains if you sold early in the year (which would have really juiced your performance as it reached a rapid high of $129 in early February). If you are still holding, keep in mind Icahn joined this party in the fall.
  • Dot-com valuations finally got caught in the hype for many firms. Facebook (NASDAQ:FB), Groupon (NASDAQ:GRPN), Zynga (NASDAQ:ZNGA), and Pandora (NYSE:P) all saw their shares drop precipitously before rebounding slightly.
  • Microsoft (NASDAQ:MSFT) shipped Windows 8 and sales have been lackluster at best for its desktop upgrade.
  • Online education gained major recognition in the media and from new users being introduced to the medium.
  • M2M gained major momentum and appears ready to catch fire. Networks of sensors with direct M2M connections now underpin connected health care and consumer-ready automotive telematics. Verizon (NYSE:VZ) is so hyped on this space that it went out and purchased Hughes Telematics (OTC:HUTC) to grab a share of this pie.
Lowlights of 2012 – Early Though Still Possible
  • M&A never happened for Research in Motion (NASDAQ:RIMM), Nokia (NYSE:NOK), or Riverbed (NASDAQ:RVBD). Their stocks were down quite a bit on the year before rallying. I am not a huge RIM fan, but surprised that it still hasn't been acquired by someone.
  • Apple (NASDAQ:AAPL) did not release the killer iTV product but more on that in a moment.
  • Microsoft tablets have done much poorer than expected. I believe this has to do with Microsoft deciding to leave its channel out of the mix, thus leaving behind its most critical asset in competing against Apple. Is it too late to correct?
  • Mobile payments have continued to advance but no thanks to Near Field Communications (NFC) which have failed to get enough chips deployed to have any serious impact.
Now let's take a look at what may be in store for 2013.

2013 Tech Themes and Forecast

1. M&A for 2013
I expect quite a few mergers of necessity. This doesn't mean they will take place at the most advantageous price for purchasers or shareholders.
  • Fortinent (NASDAQ:FTNT) – Let's start with a former pick, Fortinet. This stock has gone nowhere in a couple of years and needs a partner. If the stock trends lower there could be takers.
  • Dolby Laboratories (NYSE:DLB) – Dolby Labs has some investors concerned due to patents expiring and Disney's (NYSE:DIS) ownership of THX. That said, Dolby has a wild card that isn't talked about much-the patents to NFC. If you believe NFC is finally going to gear up in 2013 or 2014, then Dolby could be a great buy for any number of companies. With the stock nearing its five-year low, it is definitely one to keep your eye on.
  • Research in Motion – I know there is hype on the new operating system, but the odds of this truly being a game changer are extremely slim. The RIM faithful, hoping this might finally be the device that saves the company, will be out in force so look for the stock to bounce. That said, I still believe the company will be taken out later this year when the hype dies down.
  • Palo Alto Networks (NYSE:PANW) – Palo Alto Networks is a leader in the security space having pioneered Next Generation Firewalls. Though the business is growing quickly, it has seen its results lag behind expectations, putting the stock under pressure. The valuation is still on the high side. For someone like Cisco (NASDAQ:CSCO) that needs to do deals in 2013, a better deal may be had in the near future than before the company went public.
  • Groupon (NASDAQ:GRPN) – We know about the problems, but it still has a large active user base. I liked it better before the run-up, but I think someone will take it out (though it may need to go lower first).
  • Travelzoo (NASDAQ:TZOO) – With all of the consolidation in the travel space and the stock under pressure, Travelzoo could find itself taken by a larger player in the industry.
  • Yahoo (NASDAQ:YHOO) – Marissa Mayer has gotten the attitude turned around and brought some swagger back. Can you sense it? Perhaps it doesn't need to be acquired at this point, but wouldn't it be funny to see Microsoft come back now that the company is turning? Don't forget it still owns a good-sized stake in Alibaba (PINK:ALBIY).
2. Apple Has to Do Something New, Right?
While I could talk about why an iTV type of product still seems likely, I am going to switch my focus to personal M2M. Just walk into an Apple store and what do you see? All sorts of devices that communicate with your PC/smartphone/tablet via Bluetooth or the Internet. What do these devices do? Some of the early models analyze how well you sleep, give you a high level display of alerts on your wrist, track how many steps you take, how much exercise you are getting, etc. Even Nike (NYSE:NKE) has gotten into the fray. In December 2012, the FDA approved a heart rate monitor for the iPhone. In 2013, Apple will jump into this space with a wrist-based device to gather and share data. The new Apple Nano should have been this product, but we will have to wait.

3. Facebook Comeback
Facebook has its hooks in everything, and in 2013 its monetization of those inroads will become more evident as the stock works back to the IPO price with a few detours along the way.

4. Smartphone Cameras
Smartphone cameras are now a given, but the quality is still lacking. Sure, it is acceptable for posting to Instagram, but in most cases just not quite good enough to replace dedicated portable cameras. This year we see a number of major improvements that will widen usefulness.

5. Cloud War
There are just far too many services in the cloud, so expect mergers, failures, and new product launches. Apple, Google, Amazon (NASDAQ:AMZN) and Microsoft all have strengths and weaknesses in the cloud today. Look for this war to heat up in 2013 as we haven't seen anything yet. There are a number of platforms and products ripe for the picking. Pinterest or Yelp (NYSE:YELP), anyone?

6. Crowdsourcing Goes Mainstream
This trend was identified in 2011 and has grown greatly. With the public and mainstream media finally getting wise, we will see it everywhere in 2013.

7. Microsoft
The company finally makes some headway with its Windows Phone 8 and launches a new Xbox. By the way, the prediction that Lync would be a huge success two years ago has continued to hold true. UC strategists are stating that Cisco now views Lync as its top threat even above Avaya. Lync will make even further inroads in 2013, hurting Cisco and Avaya in the process.

8. Laws Slow Cloud Adoption for Large Companies
There are still many questions. How would an Internet kill switch possibly affect enterprise customers? Even outside of a black swan event such as this, there are still too many gray areas that risk-averse companies just can't get around. For big companies, there is still little case law and precedents to reference. Look for consumers and small businesses to continue marching into the cloud, eyes wide shut.

9. Platform as a Service (PaaS) to Explode
These offerings have been limited, but as businesses get more involved this segment should start getting more action. Note: Oracle (NASDAQ:ORCL) recently took a stake in Engine Yard to get a foot in this space.

10. Flexible Displays
New materials will allow new form factors for a variety of displays. Samsung (PINK:SSNLF) is already rumored to be preparing a smartphone that will use this technology.

What do you see happening in 2013? Post your comments and thoughts below.

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