Global Trend Forecast: Connected Devices Dominate Hardware Sector

SYNC.
Global investment themes: Telecoms, media and technology
Global Trend Forecast
Technology, Media & Telecoms
16 July 2014
Cyrus Mewawalla
Director of Research
cyrus@researchcm.com
+44 (0) 20 3393 3866
CM Research
56 Broadwick Street, London W1F 7AJ
www.researchcm.com
Authorised and regulated by the Financial Conduct Authority
Elgen Strait
Director of Sales
elgen@researchcm.com
+44 (0) 20 3744 0105

Global Trend Forecast: Technology, Media and Telecoms 2014/15 16 July 2014
www.researchcm.com 2
Contents
EXECUTIVE SUMMARY 3
HARDWARE 5
Connected devices 7
Servers, storage & networking equipment 8
Consumer electronics 9
Component makers 10
SOFTWARE 11
Application software 13
Infrastructure software and the cloud 14
Security software 15
Video gaming software 16
IT Services 17
INTERNET & MEDIA 18
E-commerce 20
Social Media 21
Advertising 22
Music, film & television 23
Publishing 24
TELECOMS 25
Telecom operators 27
Cable & satellite operators 28
ABOUT US 29

Executive Summary
Which technology investment themes will dominate the next 12 months? Who will be the winners and losers?
Hardware
In consumer electronics, the biggest product cycles – Wearable Tech, the Internet of Things, Internet TV – will be built around a particular
mobile operating system. Profits will flow disproportionately to Apple and Google. Microsoft, Alibaba and Amazon are the wild cards.
Samsung looks high risk. Lenovo is our long term favourite. In the telecom equipment sector, software defined networking (SDN)
technology represents a big threat: Cisco has the most to lose; Google the most to gain. EMC is one of our favourite long term plays.
Software
Applications software has become the technology sector’s innovation engine. Nuance, Splunk, Qlik and Tableau – all linked to the Big Data
theme – are our favourites. In the cloud infrastructure software market, a price war has just begun. Amazon may no longer remain the
dominant force. Google and Microsoft – possibly IBM – are likely to gain market share in 2015. Rackspace and Telecity may lose market
share. In cyber-security “unified threat management” is the buzz word. Check Point Software, Trend Micro, FireEye and Fortinet are our
favourites. In gaming, ecosystems like Facebook and Tencent are the safest bets. In IT services, where Big Data is the underlying theme,
we like Informatica above the larger players.
Internet & Media
As e-commerce goes mobile, domination of messaging, maps, mobile payments and mobile operating systems becomes critical. Google is
the clear leader. Apple, Amazon and Alibaba are close behind. Niche e-commerce plays like ASOS had better beware. In social media, the
“sharing economy”, “crowd-funding” and crypto-currencies” are the next fads. In ad-tech, the latest invention is the cross-media exchange,
a one-stop-shop for buying ads across multiple media, from the web to mobile to TV. Everyone from AOL to Facebook to WPP is in the
race to develop one. Criteo, Rocket Fuel and WPP are our favourite long term plays. Internet TV threatens to disrupt content owners’
business models. If a single internet TV platform dominates, content prices will fall. But If several competing TV platforms emerge (more
likely), content prices will be bid up. Time Warner, Disney and ITV should benefit.
Telecoms
Voice and messaging revenues are in terminal decline. Big Data, the Internet of Things and Software Defined Networking provide new
revenue opportunities, but telcos are likely to miss the boat. Conversely, net neutrality – if it collapses in the US – could send telecom
operator share prices up globally. Meanwhile, heavy bandwidth users like Netflix could see costs spiral.

Introduction
In this report, the fourth edition of our Global TMT Trend Forecast series, we identify the major disruptive technologies that we will see in
2014/15 and predict how they will impact the world’s largest technology, media and telecom (TMT) companies. To put things into
perspective, let’s first take a look at how the component parts of the global TMT sector performed in share price terms against the S&P 500
index since the 2007/2008 financial crisis. As the chart below illustrates, the best performers of the last six years have been e-commerce
and software companies. The worst performers have been telecom operators, publishers and consumer electronics companies.
Since the beginning of 2008, e-commerce and software companies have outperformed the S&P 500 index
Global TMT sector: Cumulative 6½ year share price performance
Hardware Software Internet & Media Telecoms
Source: Company data, FT, S&P Capital IQ, CM Research. Bars show the cumulative sector performance from 1 January 2008 to the periods ending 31 December 2008, 2009, 2010, 2011, 2012, 2013 and 14 July 2104 of a selection of stocks that we believe are bellwethers
for each sector aggregated on an equal weighting basis. Note: Whilst the performance of every sector is shown over a 6½ year period, the performance of social media is shown over a 2½ year period as most social media companies were not listed 6 years ago.
-100%
0%
100%
200%
300%
400%
500%
2008 2009 2010 2011 2012 2013 2014

Hardware

HARDWARE Trend Summary
Here is a summary of our dominant themes for the hardware sector over the next 12 months:
Connected Devices
Wearable technology, mobile payments and second screens (to control TV sets) will provide new revenue opportunities for the connected
device industry. Profits will flow predominantly to the most popular mobile operating systems: Apple and Google. Microsoft is the wild card.
Samsung looks high risk. Lenovo is our longer term favourite.
Servers, Storage and Networking
Software defined networking (SDN) technology represents the biggest risk to the server, storage and networking equipment markets.
Cisco has the most to lose. Ericsson is also under threat. Both have sensible long term strategies to embrace SDN, but neither can move
fast enough to avoid profit warnings in the medium term. HP looks more and more like a turnaround success story. EMC is one of our
favourite long term plays.
Consumer Electronics
Never have we seen such a cluster of concurrent consumer electronics product cycles on the cusp of launch: Internet TV, wearable
technology, med tech, robotics, artificial intelligence, automated cars, connected homes and the Internet of Things. Yet, never has it been
so easy to pick the overall winner. Google is likely to gain a disproportionate share of the profits from most of these technology cycles.
Component Makers
3D printing, robotics and software defined networking are the most disruptive threats to the electronics components industry. These
disruptions, coupled with the increasing dominance of Apple and Google’s software in more and more consumer electronics devices, will
make profitability in the components sector particularly volatile over the next 12 months.

Connected devices
Theme What’s happening? Our predictions Leaders Laggards
Wearable
technology
Smartwatches, fitness bands and med tech
devices are coming fast. Many are powered
by Android Wear, a tweaked version of
Google’s mobile operating system designed
for wearable tech.
Wearable devices create more opportunity
to collect personal data, benefitting the
apps that run it and the mobile operating
system that powers it.
Google, GoPro,
FitBit, Jawbone
Apple, Baidu,
Facebook, HTC, LG,
Microsoft, Samsung
Second
screen
Smartphones, tablets and now smartwatches
are gradually being used as a second screen
for the primary screen in a connected home –
the television. The aim of the second screen is
to replace the remote control as the main
gateway to the TV.
Apple and Google’s second screens use
Airplay or Chromecast to connect to the
TV wirelessly; Sony and Microsoft use
their gaming consoles as their TV
gateway; Amazon, Alibaba and others are
working on tailor-made devices.
Alibaba, Amazon,
Apple, Google
Baidu, BSkyB,
Comcast, Facebook,
Microsoft, Netflix, Pace,
Roku, Sony, Tencent,
Twitter
Mobile
payments
Mobile phones are not yet widely used as
iwallets because the technology is not yet
ready.
NFC is the contactless payment standard
backed by Google and most others, but
Apple may soon announce its own
standard based on iBeacon
Square, Alibaba Apple, Baidu, Bitcoin,
eBay, Facebook,
Google, HTC, ISIS, LG,
Stripe, Samsung,
Unbundling
of Android
Google is shifting critical functions out of
Android Open Source Project (AOSP) into
Google Mobile Services (GMS). For example,
stand-alone camera apps may soon be
available only in the Play store rather than as
an integral part of Android OS.
This gives Google more control of the user
data on Android devices whilst limiting the
ability of Android vendors to build any kind
of meaningful customer relationship. All
very reminiscent of what Microsoft
Windows OS did to PC vendors.
Google Alibaba, Amazon,
Apple, Asus, Baidu,
Blackberry, Facebook,
LG, Microsoft, Sony,
Samsung, Tencent
New mobile
ecosystem
entrants
New entrants continue to attempt to break the
Apple / Google duopoly in mobile operating
systems. COS, for example, is a Linux based
operating system backed by the Chinese
government.
Aside from operating systems, other entry
points into mobile ecosystems include web
browsers, messaging apps, mobile
payments or search platforms. Chinese
players are very active here.
Alibaba, Amazon,
Baidu, Easou,
Jolla, Huawei,
Mozilla, Opera,
Qihoo, UCweb
Apple, Google
Cheaper
smartphones
China accounted for 40% of the 281m
smartphones shipped in Q1 2014, according
to IDC. As Indian smartphone penetration also
rises from under 10%, prices will fall.
By virtue of the size of the domestic
market, Chinese smartphone makers will
gain global share, especially if COS, its
home-grown software, proliferates.
Coolpad, Huawei,
Lenovo, OnePlus,
Xiaomi, Yota,
ZTE
Apple, Blackberry,
Microsoft, Nokia, HTC,
LG, Samsung

Servers, storage & networking equipment
Software
defined
networks
(SDN)
SDN is a new architecture for data networks
in which the emphasis shifts from hardware to
software. It will be hugely disruptive because
it fundamentally changes who controls the
telecom network.
SDN’s open hardware standards threaten to
commoditize networking hardware, which is still
largely based on proprietary systems. SDN allows
industry outsiders to program the network.
Alibaba, Amazon,
Apple, Facebook,
Google, Huawei,
IBM, Netflix,
Twitter, VMware
Cisco, Dell,
Ericsson, F5
Networks, HP,
Juniper
Networks, Nokia
WAN
optimization
Data centers are becoming increasingly
fragmented “wide area networks”, slowing
down data response times.
Companies that specialize in WAN optimization
technology (i.e. making data flow faster) will
address this bottleneck.
Brocade, Fusion-
io, Riverbed
Tech, SGI
Cloud
storage
Demand for storage is shifting from local
storage drives to network storage in the
cloud.
As a result, value is shifting from “storage drive
products” to “unified storage services”
EMC, NetApp,
Dropbox, Box,
Nimble Storage
Seagate,
Western Digital
SSD Within the physical storage market solid state
drives (SSD) are displacing hard disk drives
(HDD). SSDs are silent, faster and more
reliable than HDDs.
The leading HDD players – Seagate and Western
Digital – argue they have mitigating strategies, but
the speed of the technology shift could catch them
out.
Intel, Sandisk,
Toshiba
Seagate,
Western Digital
Mobile
moves to IP
4G is the first mobile standard to be all-IP.
Whereas 3G technology involved proprietary
standards, 4G is more open.
As mobile moves to IP, fixed IP networking giants
like Cisco and Juniper will find it easier to challenge
4G leaders like Ericsson.
Cisco, Huawei,
ZTE, Juniper
Networks
Alcatel Lucent,
Ericsson, Nokia
Trade wars The NSA spying revelations publicized by
Edward Snowden have escalated the trade
war in telecom equipment.
Over the last five years, Huawei and ZTE were
banned from bidding for major telecom equipment
contracts in the US and elsewhere on national
security grounds. Now the situation has turned and
Cisco is likely to lose sales as a result of the NSA
scandal.
Alcatel Lucent,
Ericsson, Huawei,
Nokia, ZTE
Cisco
Bluetooth
low- energy
(BLE)
BLE is a new wireless standard that improves
communication between mobile devices. BLE
can be used by high street retailers to send
their customers personalized, location-based
offers via an app as they walk into the store.
Apple’s iBeacon is on trial at Macy’s while
Qualcomm’s Gimbal is trialing at the Miami
Dolphins’ home stadium. BLE-powered systems
might even displace NFC as the de facto wireless
standard for mobile payments.
Apple, Qualcomm

Consumer electronics
Internet TV Successive attempts by technology
companies to conquer the TV industry
have failed because new entrants
couldn’t quite piece together the 3
components needed to take on the
incumbents: software, content and
distribution.
But the TV sector is about to fall. In software, the
mobile operating systems are now good enough.
In content: the big internet companies are all
commissioning original programming and rapidly
acquiring content rights. In distribution, Google’s
Chromecast and Apple’s AirPlay disintermediate
traditional channels.
Alibaba, Apple,
Google, Microsoft
LG, Netflix, Nintendo,
Roku, Sony,
Samsung, LG,
Nintendo
Wearable
technology
Whether it’s the T-shirt that tracks your
heartbeat or the bra that tells you to eat
less, the value in wearable tech is all in
the internet ecosystem that collects the
data. That explains why Nike gave up
on its FuelBand just as Amazon
launched its Wearable Technology
Store.
Wearable tech is fast becoming a bolt-on
accessory for the big internet ecosystems. Once-
great electronics brands are being reduced to low
margin subcontractors for the likes of Apple,
Alibaba, Baidu, Google and Facebook.
Amazon, Alibaba,
Apple, Facebook,
Google, Microsoft,
Tencent
Acer, Asus, Canon,
GoPro, HTC, LG,
Nintendo, Panasonic,
Philips, Samsung,
Sharp, Sony
Robotics Consumer robots which care for the
elderly or perform household chores will
become more common.
Google is throwing billions of dollars at robotics
and artificial intelligence. Our guess is that it will
launch a series of consumer and industrial robots
running on a tweaked Android operating system.
iRobot, Google,
Honda, Rethink
Robotics
ABB, Fanuc,
Kawasaki, Kuka
Internet of
Things
The connected home of the future will
have fridges, heating systems and
washing machines that are controlled
and monitored remotely via the internet.
Home appliance makers should be worried. They
do not have the ecosystems or the Big Data
analytics to optimize performance and energy
efficiency.
Apple, Google Electrolux, Samsung,
Whirlpool
Automated
cars
Car makers are using less metal and
more silicon. In-car entertainment and
information systems that include music,
navigation, social media, apps and
other services may soon become the
norm.
Audi is reported to be developing such a system
based on Android software while Apple has
revealed some of the features of its CarPlay
software. Ultimately Google is aiming for
driverless cars which use artificial intelligence.
Apple, Google BMW, Ford, General
Motors, Mercedes
Benz, VW Audi

Component makers
Slaves to
the
ecosystem
As industry profits move from hardware to
software, component makers need to
position themselves accordingly.
Increasingly Apple, Google – and perhaps of
Alibaba – will be the most sought after supply
chains, rather than, say, Samsung.
Apple, Google Most component
makers
3D printing Until recently, 3D printing was used for
prototyping. Today it is used to directly print
component parts. The printing materials can
be plastics, metals or ceramics. In 2013, the
market for 3D printing worldwide grew from
$2.2bn to $2.9bn, according to Wohlers
Associates.
3D printing is not suited to mass production,
but for small production runs it can often print
parts that are stronger and cheaper than
traditional moulding or casting processes.
Component makers who fail to embrace 3D
printing early on may find it hard to catch up
later.
3D Systems,
Stratasys, Voxeljet,
Exone
Too early to say
Robotics As Chinese labor costs rise and industrial
unrest grows, more Asian component
makers will look to industrial robots to
control costs.
Hon Hai (Foxconn) leads the charge with its
plan to roll out 1m Foxbots.
Hon Hai Pegatron
Software
defined
networking
(SDN)
“IP networking” technology is giving way to
“software defined networking”. SDN is a
new architecture for telecom networks in
which the emphasis shifts from hardware to
software.
We are in the very early stages of the SDN
technology cycle, but it could commoditize a
number of components in the server, storage
and networking equipment sector.
Alibaba, Amazon,
Apple, Citrix,
Facebook, Google,
Huawei, IBM, Red
Hat, VMware
Too early to say
Flexible
displays
New display technologies will soon give us
screens that have rigid curves built into
them or that are bendable by the user.
So far Samsung appears to be the clear
leader, but others are catching up.
Samsung LG Display, Universal
Display
Server
interconnect
cabling
Higher data transfer speeds between
servers increases the efficiency of a data
network. Most servers are connected using
cables with 12-24 fibers in which each fiber
enables transfer speeds of 10Gbps.
Intel has combined its silicon photonics
knowledge with Corning’s optical fiber
knowledge to develop MXC cables with 64
fibers which each carry data at speeds of 25
Gbps. This will increase data speeds.
Corning, Intel Finisar, Mellanox
Internet of
Things (IoT)
More and more everyday objects like cars,
fridges and heating systems are getting
connected to the internet.
Makers of motion sensors and embedded
processors and other critical IoT components
will benefit.
InvenSense,
FreeScale

Software

SOFTWARE Trend Summary
Here is a summary of our dominant themes for the Software and IT Services sectors over the next 12 months:
Applications software
Since February 2014, the application software sector saw the brunt of the technology sell-off, with some down 30%. But applications
software has become the technology sector’s innovation engine. Going forward, expect a period of creative destruction where the sector
rallies on a continued M&A boom. Nuance, Splunk, Qlik and Tableau are our favourites.
Internet infrastructure software and the cloud
A vicious price war in the cloud infrastructure market has just begun. Amazon may no longer remain the dominant force in cloud
infrastructure. Google and Microsoft – possibly IBM – are likely to gain market share in 2014. Rackspace and Telecity may lose market
share.
Security software
The move to the cloud increases cyber-security risk. At the same time, zero day exploits are rising, making traditional security products a
liability. A new wave of artificial-intelligence-based security products – commonly referred to as unified threat management – is likely to sell
particularly well over the next 12 months. Check Point Software, Trend Micro, FireEye and Fortinet offer the best earnings prospects, but
only the first two are trading at sane valuations.
Video game software
Gaming is now a critical part of digital life, based on time spent. But earnings visibility for many video games developers is poor. Many, like
King Digital, remain one-hit wonders. Others, like Activision Blizzard, are in transition from high margin console games business to the
online equivalent. Safer, in our view, to invest in the emerging technology platforms: Facebook and Tencent.
IT services
Big Data and cyber-security are likely to be the two big revenue spinners for IT services firms over the next 12 months. Informatica is our
preferred play on the first and the “unified threat management” companies mentioned above our preferred way to play the second. Longer
term, the IT services sector risks becoming irrelevant as cloud services companies cut out the middle man and offer IT services directly via
the cloud.

Application software
Mobile-first,
app-centric
start-ups
The next generation of multi-billion-dollar
software companies is starting life today as
mobile apps. Emerging categories include
fitness tracking apps, sharing apps and
payments.
The sharing economy – where people rent
out underused assets – will see most growth
over the next 12 months. Examples include
room-sharing apps like Airbnb or car sharing
ones like Lyft and Uber.
Airbnb, Didi
(Tencent), Kuaidi
(Alibaba), Lyft,
ParkJockey, Square,
Uber
Amazon, Apple,
Baidu, Facebook,
Google, Tencent
Big Data The bottleneck in the Big Data value chain
is real-time analytics. Two types of
analytics firms are emerging: business
intelligence and data resellers.
The new breed of business intelligence
companies (e.g. Splunk) take in any kind of
unstructured data and churn out real-time
analysis. By contrast, the new data resellers
try to corner the market for certain types of
data. (e.g. Experian in credit)
Acxiom, Experian,
Equifax, Qlik, Splunk,
Tableau
Apple, Microsoft,
Oracle, SAP
Artificial
intelligence
(AI)
Rapid advances in machine learning and
natural language processing (NLP) are
threatening the jobs of middle-class,
educated professionals.
Large sums will be invested in “cognitive
computing” projects such as IBM’s
supercomputer Watson. “AI” will become the
“mother of all software” and those that own
the leading AI platforms will have tremendous
competitive advantage
Google, IBM, Nuance,
Verint Systems
Cloud The success of Adobe’s “Creative Cloud”
subscription model makes it more likely
that software will move from a licensing
model to a cloud-subscription model.
During the transition to a cloud business
model, many traditional software companies
may be forced to issue profit warnings as,
initially, revenues may fall.
Citrix, Facebook,
Google, NetSuite,
Red Hat, Salesforce,
VMware, Workday
IBM, Microsoft,
Oracle, SAP
Computer
aided
design
software
Automation of more processes – 3D
printing, robotics and AI – increase the
importance of CAD software and product
life cycle management (PLM) software.
More industries will require CAD and PLM
software. These products are complex and
the established players will see their
competitive position strengthened.
Ansys, Autodesk,
Dassault Systemes,
PTC
Software
ecosystems
Three industry shifts are making life
uncomfortable for traditional software
companies: the move to app platforms, to
the cloud and to mobile.
Large software groups, unable to innovate
fast enough, are responding to these shifts by
acquiring applications they are unable to
develop themselves. The M&A boom will
continue.
Targets: small &
medium sized
application software
companies
Acquirers: Alibaba,
Amazon, Apple,
Baidu, Facebook,
Google, Microsoft,
IBM, Oracle, Tencent

Infrastructure software and the cloud
Cloud
infrastructure
price wars
In March 2014, Google Cloud started a price
war, slashing the cost of its cloud storage to
$0.026/GB, well below Amazon Web
Services’ standard rate of $0.36/GB.
Amazon and Google are both going for market
share at the expense of profits. This may push
smaller, more commercially minded rivals –
like Rackspace – into losses.
Amazon,
Google, IBM,
Microsoft
BT, CenturyLink,
Cisco, Dropbox,
Fujitsu, Dell, HP,
Oracle, Rackspace,
Verizon, VMware,
Software
defined
networks
IP networking technology – the hardware
standard for data networks – is being
replaced by software defined networking
(SDN). Networking hardware will be
commoditized. Value will move to the
software controller.
SDN will speed up the transition to the cloud
by making cloud services work faster and more
efficiently. Amazon, Google, Salesforce and
other cloud infrastructure providers may soon
be able to programme data networks to
enhance their web services.
Amazon,
Facebook,
Google, IBM,
Microsoft,
Netflix,
VMware
Akamai, Cisco,
F5 Networks
Virtualization As IT infrastructure moves into the cloud,
virtualization products act as the gateway.
VMware, the market leader, is losing market
share to big-pocketed latecomers like
Microsoft, Google and Oracle.
Citrix, VMware Microsoft, Oracle,
Red Hat
Open source OpenStack is the most popular open cloud
computing standard. It competes with
proprietary cloud platforms such as Amazon
Web Services, Microsoft Azure, Google
Cloud, Citrix CloudStack and VMware
vCloud.
With big names like Dell, HP, IBM, Oracle and
Rackspace now using OpenStack, there is a
risk that niche players like VMware and Citrix
may be squeezed between the big proprietary
players (Amazon and Google) on one side and
OpenStack on the other.
Amazon, Google Citrix, VMware,
Microsoft, Rackspace
Security
concerns
The NSA Prism scandal has raised security
fears over US-hosted cloud services to a
new level. Many companies are considering
deferring a move to the cloud, especially to
the public cloud – where Amazon, Google
and Microsoft primarily operate.
Cloud companies may lose billions in
revenues, especially in the public cloud space.
Cyber-security companies will benefit from the
proliferation of these fears and should see a
ballooning demand for their products,
particularly in “unified threat management”.
Check Point,
FireEye, Fortinet,
Nice Systems,
Palo Alto,
ProofPoint, Trend
Verint Systems
Internet of
Things
Clothes, fridges, cars and many other
“things” will soon be connected to the
internet, enabling the automated economy.
Who will run the “control room” for the
automated home, the driverless car and
wearable technology? Apple and Google lead
so far.
Apple, Google Car manufacturers
Home appliance
manufacturers
Electronics makers

Security software
Zero day
exploits
There is a rise in zero day attacks (i.e.
hacking of new vulnerabilities that the target
has zero days to prepare for). Traditional
security software does not address this risk.
Threat management software, which contains
complex algorithms to help contain targeted
attacks (a.k.a. APTs), is becoming the new
must-have security product.
Check Point,
FireEye,
Fortinet, HP,
IBM, Splunk,
Trend Micro
EMC, Symantec,
Tibco Software
Artificial
intelligence
Natural language processing (NLP) and
artificial intelligence (AI) technologies can
help cyber-analysts “deep scan” highly
complex text, audio and video files more
comprehensively.
These “deep data exploration” techniques will
soon become a vital part of the cyber-security
sector. Companies with NLP and AI products
will benefit.
Apple, Facebook,
IBM, Google,
Microsoft, Twitter,
Nuance, Verint
Systems
Alibaba, Baidu,
Tencent
Corporate
awareness
levels
Target, a US retailer, suffered a cyber-attack
in December 2013 in which 40m payment
card numbers were stolen. This month, its
CEO took full responsibility and resigned.
Board awareness is rising and will translate
soon into higher corporate spending on cyber-
security products, benefitting most cyber-
security stocks.
Barracuda, Check
Point, FireEye,
Fortinet, Imperva,
Palo Alto, Qualys,
Trend Micro
Qihoo 360, NQ
Mobile, ProofPoint,
Symantec
Software
ecosystems
The big four enterprise software companies
– IBM, SAP, Oracle and Microsoft – are busy
building cloud software ecosystems. Their
weakness is cyber-security.
We see continued M&A in the sector with the
big software houses strengthening their cyber-
security capability, especially in network
security and enterprise firewalls.
Targets: Check
Point, Fortinet,
Palo Alto, Qualys,
Proofpoint
Acquirers: Apple,
EMC, HP, IBM,
Microsoft, SAP,
Oracle, Salesforce
Mobile
device
management
(MDM)
As employees access more corporate data
from their smartphones and tablets, IT
managers must manage data flows between
more clouds, more operating systems and
handle data in different formats.
Blackberry was once the king of MDM. But
managing multiple platforms is more difficult.
The new leaders are private companies like
MobileIron, Good Technology and AirWatch –
recently acquired by VMware.
Citrix, IBM,
Trend Micro,
MobileIron, Good
Tech, AirWatch
(VMware)
Blackberry, Intel,
Symantec
NSA scandal Details of US intelligence agencies’
surveillance operations leaked by Edward
Snowden have hit sales of US telecom
equipment companies, like Cisco.
An escalation of trade wars in the networking
equipment market – and possibly cloud
software – is likely.
Alcatel-Lucent,
Ericsson, Huawei,
Lenovo
Samsung, ZTE
Cisco, Google,
IBM, Juniper
Networks
Credit fraud Financial fraud is on the rise. Criminal gangs
are targeting banks to access credit or loans
on the back of stolen online identities.
As online personal data balloons, credit checks
will involve more complex Big Data algorithms.
Niche credit profilers will benefit.
Experian, Equifax

Video gaming software
Home hub Measured by time spent, video games are the
most important digital activity. And gamers
often play using the TV screen. So
technology companies, eager to enter the
lucrative internet TV market, are using games
consoles as a potential entry point.
Microsoft and Sony already lead with their PS4
and Xbox consoles respectively. Nintendo’s
Wii U has been an abject failure. In China,
Alibaba and Huawei are copying this strategy.
But Apple and Google are launching home
automation software products controlled by
their smartphones.
Apple, Google,
Microsoft, Sony
Alibaba, Amazon,
Baidu, Facebook,
Huawei, NetEase,
Nintendo, Tencent
Cross-
platform
games
Native apps offer a better user experience,
but are expensive to maintain across multiple
platforms. HTML5 technology allows
developers to build web-based apps that run
on any smart device using a standard web
browser. But this is clumsy. Cross-platform
platforms could become the new norm that
allows games to run on iOS, Android,
Windows, etc.
In the West, Facebook leads the cross-
platform games trend with their new AppLinks
platform. In China it is Tencent. If cross-
platform games take off, the implication is that
games-based traffic – including lucrative user
profile data – will flow through Facebook’s and
Tencent’s ecosystem rather than Apple’s and
Google’s.
Facebook,
Tencent
Alibaba, Amazon,
Apple, Baidu,
Google, Microsoft,
Sony
Gaming
consoles in
China
Just as the world shifts from expensive
console games to cheaper online games,
China is doing the reverse. China’s 14-year
ban on games consoles was lifted in January
2014. But all foreign-created games will still
be subject to regulatory review before
release.
Microsoft Xbox is expected to be the first
games console made by a foreign company on
sale in China by September 2014. Sony and
Nintendo will likely follow. This could be the
biggest disruption China’s gaming industry has
ever seen.
Microsoft,
Sony, Nintendo
Too early to say
Artificial
intelligence
Facebook’s $2bn acquisition of Oculus,
heralds a new era in virtual reality gaming.
Artificial intelligence technology will transform
the next generation of gaming platforms.
Facebook’s Oculus headset and Google Glass
look like early leaders.
Facebook,
Google
Apple, Alibaba,
Amazon, Apple,
Baidu, Microsoft,
Nintendo, Sony,
Tencent

IT Services
Distributed
computing
Traditional relational databases have
typically coped with expanding data flows by
scaling up vertically (i.e. by adding more
CPUs or more memory to the database). But
that approach has limits. It is more efficient
to scale out horizontally (by adding more
nodes to the database network).
Distributed computing is associated with two
technology standards called NoSQL and
Hadoop (which is open source). Amazon,
Yahoo and Google invented these
technologies. IBM, SAP, Oracle and Microsoft
are belatedly adopting them. The transition will
be painful for their legacy database units.
Informatica, Red Hat IBM,
Oracle,
SAP,
Microsoft
Cloud
business
model
Businesses are cutting IT costs by renting IT
infrastructure, platforms, and applications in
the cloud. On-premise IT installations are
going out of fashion. This threatens
companies that sell hardware or implement
large-scale IT integration projects.
ERP database systems are likely to be the first
to fall. IBM, SAP and Oracle are embracing the
cloud (by acquisition), but cloud revenues are
unlikely to increase as fast as legacy ERP
system sales fall, resulting in profit warnings.
Amazon, EMC,
Google, Workday,
Red Hat, NetSuite,
Microsoft, Salesforce,
Cornerstone
IBM,
Oracle,
SAP
Big Data Across every industry, every CEO knows that
tomorrow’s most successful companies will
be those who make best use of Big Data to
increase sales and reduce costs. So demand
for Big Data products will rise.
IT services companies are exposed. Internet
companies like Amazon and Google – who
currently use their Big Data knowhow internally
– may soon offer stand-alone Big Data product
offerings.
Alibaba, Baidu,
Amazon, IBM,
Google, Facebook,
Twitter, Splunk,
Tableau
Accenture, Atos,
Cap Gemini, Dell,
HP, Infosys,
Microsoft, Oracle,
SAP, TCS
Mobile
device
management
(MDM)
The scale of the BYOD (bring your own
device) trend has made MDM a bottleneck in
IT management. As employees access more
corporate data from their smartphones and
tablets, IT managers must manage data
flows between more clouds, more operating
systems and handle data in different formats.
Blackberry used to be the leader in MDM.
Today the leaders are MobileIron, Good
Technology and AirWatch (acquired by
VMware). It is possible that a new group of
companies – called cross platform platforms –
will emerge to combat the MDM problem.
Facebook’s AppLinks is an example.
Citrix, IBM, Trend
Micro, MobileIron,
Good Tech, AirWatch
(VMware)
Microsoft ,
Oracle, SAP
Digital
marketing
Increasingly, it is the marketing executives of
multinationals rather than IT executives that
are becoming the key accounts of IT
services companies.
IT services companies risk being
disintermediated by a host of new ad-tech
companies that are intent on cutting out the
middleman.
Acxiom, Criteo,
Rocket Fuel, Rubicon
Project
Accenture, Atos,
Cap Gemini,
Tieto

Internet & Media

INTERNET & MEDIA Trend Summary
Here is a summary of our dominant themes for the Internet and Media sectors over the next 12 months:
E-commerce
E-commerce is going mobile. Success will come to those who dominate the four pillars of mobile: messaging, maps, mobile payments and
mobile operating systems. Google is the clear leader. Apple, Amazon and Alibaba are close behind. Niche e-commerce plays like ASOS
had better beware.
Social media
The current social media fad is “messaging apps”. The next one could be the “sharing economy” or “crowd-funding” or crypto-currencies”.
As with messaging, the big social networks will have to go on an acquisition spree. Smart investors will put their money in sharing apps,
crowd-funding sites and crypto-currencies. Many of these companies, such as Uber, are unlisted.
Advertising
The latest ad-tech invention is the cross-media exchange, a one-stop-shop for buying ads across multiple media, from the web to mobile to
TV. Such an automated exchange does not exist yet, but everyone from AOL to Facebook to WPP is in the race to develop one. Mobile
and TV are the growth areas for ad-tech. Acxiom, Criteo, Rocket Fuel and WPP are our favourite long term plays.
Film, television and music
Internet TV is the game changer for this sector. Tech is fighting content owners. The tech giants are trying to acquire more content.
Content owners are trying to develop their own software platforms. But what happens to content prices if the tech sector wins? If a single
internet TV platform dominates, content prices will fall. If several competing TV platforms emerge, content prices will be bid up. Time
Warner and ITV should benefit. Inside, we also explain why the outlook for Netflix and Pandora media is negative.
Publishing
The publishing sector suffers from a total lack of leadership in response to the disruptive threats they are facing. Yet market sentiment
towards this sector appears to be looking more optimistic. Nonetheless, we do not see any reason to invest without a clear growth catalyst.
For now, there isn’t one.

E-commerce
Mobile
payments
Mobile payment apps own the customer
billing relationship, so they will become the
gateway to mobile commerce. There is no
clear winner yet.
Cloud-based solutions will probably
displace Near Field Communications
(NFC) as the global standard for
contactless payments.
Alibaba, Square,
Stripe, Monitise
Amazon, Apple,
Facebook, Google,
Groupon, eBay, Tencent,
VeriFone MasterCard,
Visa
OS wars Operating systems (and web browsers)
have control over customer profile data,
putting them in the driving seat for
demanding a bigger slice of digital
advertising revenues.
Expect several new OS launches,
especially from China. Some (e.g.
Amazon) will build on Android. Others
(e.g. Samsung’s Tizen) will build their own.
Apple, Google Alibaba, Amazon, Baidu,
Facebook, Jolla,
Microsoft, Mozilla, Qihoo,
Samsung, Twitter,
Tencent
Maps Knowing where someone is and where
they want to go is something many
businesses will pay for handsomely.
Google is the market leader in mapping
software. Expect Nokia’s Here and
TomTom to become bid targets.
Apple, Baidu, Google,
Nokia, TomTom
Alibaba, Amazon, eBay,
Facebook, Rakuten,
Tencent Samsung,
Yahoo
Internet of
Things
Clothes, fridges, watches, cars and many
other “things” will soon be connected to the
internet, enabling the automated economy.
Who will run the “control room” for the
automated home, the driverless car and
wearable technology? Apple and Google
lead so far.
Apple, Google Car manufacturers
Home appliance
manufacturers
Electronics makers
Net
neutrality
Under net neutrality rules, US internet
companies have underpaid the true cost of
internet bandwidth for the last 25 years.
The FCC is considering changing net
neutrality rules in Q3 2014.
If the FCC allows telcos to charge more for
“fast lane access”, heavy bandwidth users
may face much higher charges. European
and Asian regulators may copy, allowing
telcos to charge more.
AT&T, Comcast,
Verizon
(maybe Asian &
European telcos too)
Netflix, Google,
Facebook, Tencent
Tax
avoidance
Internet companies tend to pay less local
taxes than their peers in other industries.
The political will to address this anomaly is
strengthening.
The OECD is making good progress on
this. Effective tax rates for many internet
companies are likely to rise in 2014/15.
Alibaba, Amazon, Apple,
eBay, Google,
Facebook, Rakuten,
Tencent

Social Media
Messaging Messaging has long been the growth
driver for social media businesses. But
Facebook’s $19bn acquisition of
WhatsApp highlighted the investor’s
dilemma: WhatsApp’s success was due to
its “No ads, no games, no gimmicks”
motto. Translated: “no revenue potential”.
Yet Facebook requires profits.
If success is measured by size of user
base, Tencent’s WeChat and Facebook’s
WhatsApp are leaders. But if profitability is
the measure, Naver’s Line and Daum
Kakao win. Line’s profits come from
games and sponsored “stickers”. The big
question is whether the Asian messaging
model will work elsewhere.
Naver’s Line, Daum
Kakao,
Blackberry BBM,
Google+, Apple’s
Facetime, Rakuten’s
Viber, Microsoft Skype,
Alibaba Tango, Weibo,
Snapchat, Facebook
WhatsApp Tencent
WeChat, Twitter
Sharing
economy
People share underused assets like
bedrooms and cars by renting them out on
the internet. In this model, everyone wins: I
help you; you help me; we help others; and
the sharing app makes a profit.
The most valuable “sharing apps” are
Airbnb (for rented accommodation) and
Lyft or Uber (for car sharing). The big
losers in this case are hotel chains and
taxi companies.
Airbnb, Uber, Lyft
Tencent (Didi Dache)
Alibaba (Kuaidi
Dache)
Amazon, Baidu, Apple,
Google, Facebook,
Twitter
Crowd-
funding
Crowd-funding and peer-to-peer loans
offer traditionally uncreditworthy
businesses alternative sources of finance.
Growth potential for this market is almost
limitless as it expands into corporate
loans, mortgages and credit cards.
Crowdcube,
Indiegogo, Lending
Club, Seedrs, Wonga
Banks, credit card and
insurance companies
Crypto-
currencies
Despite legality issues, crypto-currencies
look set to become a serious investment
theme. More institutions are starting to
accept Bitcoin as a method of payment.
Social networks are developing their own
virtual currencies as well as investing in
mobile payments technology. But crypto-
currencies present a threat.
Bitcoin, Litecoin,
Namecoin, Peercoin,
Ripple, WorldCoin,
Anoncoin
MasterCard, Visa, Apple,
Alibaba, Amazon, eBay,
Facebook, Google,
Monitise, Tencent
Data
privacy
Ever since Snapchat’s erasable messages
were invented, social networks have
differentiated themselves by offering better
privacy-protection features. Facebook’s
“anonymous login” button is an example.
But, in May 2014, data privacy became a
serious legal issue when the EU courts
sanctioned the “right to be forgotten”. As a
result, social networks may see costs rise
as they struggle to comply with EU laws.
Snapchat Apple, Google,
Facebook, Twitter,
Microsoft, LinkedIn
Big Data The focus of user profiles is shifting from
content (i.e. our messages and photos) to
metadata (i.e. data about the content).
Algorithms can analyse this metadata to
reveal patterns and correlations, making it
more valuable than content itself.
This metadata is held by two types of
companies: the industry specific data
collectors (e.g. Experian for credit profiles)
and the internet ecosystems (e.g. Amazon
or Google) that monitor and analyse in
real-time what we do, say and feel online.
Alibaba, Apple,
Facebook, Google,
Tencent, Twitter
Baidu, Microsoft, Sina,
Weibo, Yahoo

Advertising
Cross-
media ad-
tech
Until recently, marketers had to go to
different ad exchanges to buy ads on
different media – TV, web, social media
and mobile. They would use one system to
buy online display ads, another for digital
video ads and a third for TV, etc.
A new wave of ad-tech companies will soon
give marketers a “one-stop shop” for buying
ads across television, the web, mobile and
social media. AOL aims to be the first of this
new breed of cross-media ad exchanges.
AOL, Acxiom, The
Rubicon Project
Apple, Facebook,
Google, Microsoft,
Twitter
Cross-
platform
ad-tech
Digital ad exchanges like Google’s
DoubleClick, Facebook, Twitter and Yahoo
use real-time algorithms to sell digital ad
space at the highest price, with customers
bidding for eyeballs on new sites. But their
objective is to maximize profits on their
own platform.
By contrast, a cross-platform ad-tech firm,
like Criteo or Rocket Fuel, does the same
thing; only its objective is to maximize value
for the customer. Their bidding technology
is based on artificial intelligence techniques
that produce a result within 200
milliseconds.
Criteo, Rocket Fuel,
The Rubicon
Project, WPP
Omnicom, Havas,
Interpublic, JC Decaux,
Publicis, Telefonica
Axonix
Mobile
ad-tech
A few years ago Apple, Google, Facebook
had little idea how to sell ads on mobile.
The future of mobile ad-tech firms like
Millennial Media looked bright. But that’s all
changed.
In 2013, Google and Facebook accounted
for two thirds of the $18bn global mobile ad
market, according to eMarketer. Niche
mobile ad tech firms will find life tough in
2014.
Google (AdMob),
Apple (iAd), Twitter
(MoPub), Facebook
(Audience Network)
InMobi, Rubicon Project,
Millennial Media, Yelp
Internet TV TV advertising still accounts for over 33%
of the $550bn global advertising market. It
remains the last traditional medium able to
stand up to the digital ad titans.
Every tech giant has its eyes on the digital
TV market. If Apple or Google release an
internet TV product that catches on fast, the
biggest losers will be the traditional
advertising giants.
Alibaba, Apple,
Facebook, Google,
Microsoft, Roku,
Sony
Dentsu, Havas,
Interpublic, Omnicom,
Publicis, WPP, Blinkx,
Tremor Video
Ambient
commerce
The Internet of Things is creating a world
full of sensors, data and algorithms that
can anticipate consumer needs. For
example, when a customer enters a shop,
she can be offered a range of products
based on her past spending patterns and
profile.
Clearly consumers have to trust the brand
providing the ambient commerce service.
But once a consumer agrees to set up a
profile, the process can be automated. The
gateway into ambient commerce is likely to
be the mobile operating system on
smartphones.
Apple, Google Amazon, Alibaba,
Microsoft, Tencent

Music, film & television
Internet TV
software
The great and the good of tech have not
managed to disrupt the TV industry yet.
The tech giants have too little by way of
content rights. The content owners are
unable to develop their own software
platforms. Tech will likely win. The
outcome for content owners will depend
on the extent of competition in the market
for internet TV software.
If a single TV operating system (say, Apple)
dominates internet TV (in the way that
iTunes has dominated digital music
downloads since 2001), content prices may
fall. If, however, the emerging market for
internet TV software is highly competitive,
the price of content is likely to be bid up, at
least for the first few years. The latter is
more likely.
If content prices bid
up, winners will be:
BSkyB, CBS,
Comcast, Disney,
Discovery, Lions
Gate, 21st
Century
Fox, Time Warner,
Viacom, Zee
Streaming
services
For music and video, the download
model is being replaced by streaming
services. Apple pioneered the former, but
Netflix pioneered the latter. Tech
companies have been buying up
streaming services.
For content owners, streaming services
tend to be less prone to piracy than
downloads. For streaming services, content
rights tend to be their largest cost. But
streaming services are also bandwidth
hungry. With the FCC reviewing net
neutrality rules, they may also see
bandwidth costs rise substantially, making
many streaming services unviable.
Google, Hulu,
Netflix, Spotify,
Pandora Media,
Vevo, Vimeo
Second
screens
New wireless technologies – like
Google’s Chromecast or Apple’s iBeacon
– are turning smartphones and tablets
into remote control devices for the TV.
These technologies may later be used to
convert the TV into a control hub for the
automated home.
By replacing the TV remote control device
with a second screen (on a smartphone or
tablet), competitive power is shifting from
broadcasters to the owners of that second
screen and the operating system that runs
it. Apple and Google are the frontrunners.
Apple, Google,
Roku, BSkyB,
Comcast
Alibaba, Amazon, Baidu,
Cisco, Ericsson, Intel,
Microsoft, LG
Electronics, Netflix,
Pace, Samsung, Sony,
TiVo, Tencent
In-house
programming
Content owners are refusing to license
their best content – live sports or hit TV
series – to the likes of Apple or Netflix for
fear of losing control. So the tech giants
are commissioning their own in-house
programming.
Netflix’s $100m investment in House of
Cards was the first. Many tech giants are
following its lead. Film studios will benefit
from the renewed demand for high quality
content. China’s Alibaba and Tencent are
also in the midst of a content-buying spree.
Netflix, CBS,
Comcast, Disney,
Discovery, Lions
Gate, 21st
Century
Fox, Sony, Time
Warner, Viacom
Alibaba, Amazon,
AOL, Apple,
Baidu, Microsoft,
Samsung, Tencent,
Yahoo

Publishing
Native ads When newspapers were profitable, they
could afford to keep news separate from
ads. Readers always knew the difference.
But as advertising and circulation revenues
fall, the line between editorial and
advertising has become blurred.
Newspapers – even prestigious brands
such as the Wall Street Journal – are
selling native ads online. These refer to
articles (and videos) that appear to be
created by independent journalists, but are
instead simply adverts.
The trend towards native ads originally took
off because marketers found that
consumers were ignoring standard digital
banner ads, especially on mobile. The big
beneficiaries will be the technology
companies that create such content, (e.g.
Demand Media) and the social media sites
that display it, (e.g. Facebook). Newspapers
who lend their credibility to such native ads
may find this strategy backfires on them as
customers get confused and angry over
what is real news and what is advertising.
Demand Media,
Facebook
DMGT, Gannett,
News Corp, New York
Times, Pearson, Reed
Elsevier, SCMP, Trinity
Mirror, Wolters Kluwer
The
Andreesson
Horowitz
theory
In a seminal article entitled “The future of
the news business”, Marc Andreesson
argues that over the next 20 years, the
news industry will grow 10x to 100x from
where it is today. He argues that whilst
business models and leadership will play a
part, the real growth driver is exponentially
higher digital readership figures.
Whilst the news industry will inevitably grow,
not all traditional publishers will ride that
wave. Two beneficiaries will emerge: First,
the newspapers that with innovative online
strategies, like DMGT. Second, the
information businesses like S&P who corner
the data for a certain market and charge
high subscriptions for access.
DMGT, McGraw-Hill,
Pearson
Gannett, News Corp,
New York Times, Reed
Elsevier, SCMP, Trinity
Mirror, Wolters Kluwer
Books Book publishers have lost several battles
against the tech sector. First, they were
found guilty of colluding with Apple to raise
the book prices. Second, they were forced
by Amazon to lower book prices and
punished for non-compliance. Third,
Google’s digital books library project
seems to be blatantly infringing copyright.
Like lambs to the slaughter, book publishers
appear powerless in the face of a relentless
assault on their profitability by the tech
sector. No book publisher has a viable
strategy to combat the threats they face.
Barring any regulatory changes in their
favor, the future for book publishers remains
bleak for now.
Amazon, Google Hachette (Lagardere),
HarperCollins (News
Corp),
Macmillan (Holtzbrinck),
Simon & Schuster
(CBS),
Penguin (Pearson)
Massive
open online
courses
MOOCs offers students free college-level
classes on the internet.
Universities and educational book
publishers will need to devise online sales
models.
Coursera, edX,
Open2Study,
SoundviewPro
Pearson

Telecoms

TELECOMS Trend Summary
Here is a summary of our dominant themes for the Telecom Services sector over the next 12 months:
Telecom operators
About $386bn will be wiped off mobile operator revenues globally by 2018 as more customers use voice calls and messaging services
provided for free over data networks, according to Ovum. To stay relevant, telecom operators need to invest in emerging technology cycles
such as Software Defined Networks, Big Data and the Internet of Things. To do that, they need to transform themselves into software
companies. So far, the only big step they have taken is to open data centres. Their future is tied to over-the-top services such as internet
TV, mobile payments, Big Data and cloud services. But, as with many technology cycles before them, they are likely to mess up.
The one bright spot for telecom operators is the regulatory U-turn performed by America’s FCC on net neutrality. If US broadband service
providers are allowed to sell “fast lane internet access” to internet companies like Netflix, telecom operators like Comcast, AT&T and
Verizon could get a significant earnings boost (in September) that could ripple around the world.
Elsewhere, our favourite plays are northern Europe and India. Deutsche Telekom, Orange and Telefonica should benefit from a Juncker-
led European Commission which is more likely to be protectionist against US internet companies. Also, Bharti Airtel, Idea Cellular and Tata
Comms should benefit from a more business-friendly political leader in India who is likely to see votes in a booming telecom sector.
Cable & satellite operators
Both cable and satellite operators face disruptive threats: cable from internet TV and satellite from smaller nimbler satellite operators like
Google’s Skybox.
Within the next year, Apple, Google and others are likely to launch a credible internet TV platform that finally shifts pay TV customers en
masse from broadcast viewing to narrowcasting. In order to combat this threat, the pay TV operators are consolidating. What they should
be doing is developing their own in-house internet TV software platforms to compete with Apple, and Google. The only winners (in the
medium term) will be content owners.
A new wave of efficient satellite technology is likely to disrupt the commercial satellite imaging sector, where the market leaders –
DigitalGlobe and Airbus – may lose market share from 2016. A few years later it could be the communications and broadcasting satellite
operators – like Eutelsat, Inmarsat and SES – whose models start to look obsolete. They can avoid too much carnage later on by
embracing the “Skybox” business model now. But that will involve a root and branch restructuring of their supply chain.

Telecom operators
Net
neutrality
Under net neutrality rules, US internet
internet bandwidth for the last 25 years. The
FCC is considering changing net neutrality
rules in Q3 2014.
If the FCC allows telcos to charge more for
“fast lane access”, heavy bandwidth users may
face much higher charges. European and
Asian regulators may copy, allowing telcos to
charge more.
AT&T, Comcast,
Verizon
(later this may
spread to Asian &
European telcos too)
Netflix, Google,
Facebook, Tencent
Software
defined
networks
(SDNs)
SDN is a new architecture for data networks
in which the emphasis shifts from hardware
to software. It will be hugely disruptive
because it fundamentally changes who
controls the telecom network. Today SDN
accounts for less than 1% of the $68bn
global network equipment market.
Telcos are evaluating SDN technology
carefully: it could enhance network services
whilst simultaneously lowering costs. But who
benefits largely depends on whether or not
regulators will force telcos to open up their
SDNs to third parties like Netflix or Google who
can then progamme them directly.
Too early to say
Internet of
Things
(IOT)
The automated home, connected cars and
wearable tech: all are examples of how
“things” will be connected to the internet in
order to make our lives easier.
Operators have an opportunity not just to make
money from carrying machine-to-machine
(M2M) traffic but by creating a set of cloud-
based enterprise software services and data
centers built around the IOT.
AT&T, NTT, KT,
CenturyLink, China
Mobile, KPN, SK
Telecom, Telefonica,
Verizon, Vodafone
Big Data The two bottlenecks in the Big Data value
chain are within “analytics” and “security”.
If telcos are to avoid turning into dumb pipes,
they need to invest heavily into analytics
software. So far that’s not happening.
Splunk, Google,
Apple, IBM
Telecom operators
Mobile
payments
Operators failed to profit from the first round
of the mobile internet. Many see mobile
payments as their second chance to ride the
mobile commerce wave.
Operators are grouping together regionally
(e.g. ISIS in the US and Weve in the UK). But
they are competing with more nimble
technology companies and are losing.
Apple, Alibaba,
eBay, Google,
Square, Tencent
Most telecom
operators
Data
centers
Telecom operators are investing heavily into
the data center market, providing enterprise
cloud services that compete with market
leaders Rackspace and Telecity.
Google and Amazon have already started a
price war in the cloud infrastructure market.
Margins are likely to be squeezed. Some
telcos may be forced to exit.
Amazon, Equinix,
Microsoft, Google,
IBM, Rackspace,
Telecity
BT, CenturyLink,
China Telecom,
Deutsche Telekom,
Orange, Telefonica,
Verizon

Cable & satellite operators
Internet TV A successful internet TV platform requires
software, content and distribution. The
missing bit within most cable ecosystems is
software. The missing bit for most tech
companies is content.
Content rights can be acquired. But without an
in-house software platform, the game is over
for the pay TV companies. Over the next year
we expect Apple or Google to launch another
wave of internet TV products. Pay TV
investors beware.
Alibaba, Amazon,
Apple, Google,
Roku
BSkyB, Comcast,
Cablevision,
DirecTV, Time
Warner Cable
Second
screens
New wireless technologies – like Google’s
Chromecast or Apple’s iBeacon – are
turning smartphones and tablets into
remote control devices for the TV. These
technologies may later be used to convert
the TV into a control hub for the automated
home.
By replacing the TV remote control device with
a second screen (on a smartphone or tablet),
competitive power is shifting from
broadcasters to the owners of that second
screen and the operating system that runs it.
Apple and Google are the frontrunners.
Apple, Google,
Roku
BSkyB, Comcast,
Cablevision,
DirecTV, Time
Warner Cable
Satellite
technology
A new generation of satellite operators –
like Google’s Skybox – is completely
changing the economics of space imagery.
The Skybox satellite design is much
smaller, nimbler and cheaper than current
designs.
The immediate threat from this new compact
satellite technology is to commercial imaging
businesses like Airbus’s space division and
DigitalGlobe. But soon even the big
communications satellite companies will be
forced to rethink their pricing and supply chain
in order to stay relevant.
Google Airbus, DigitalGlobe,
Eutelsat, Inmarsat,
SES
Net neutrality Under net neutrality rules, US internet
internet bandwidth for the last 25 years.
The FCC is considering changing net
neutrality rules in Q3 2014.
If the FCC allows ISPs to charge more for “fast
lane access”, heavy bandwidth users may
face much higher charges. Cable operators
will be able to generate a new revenue
stream.
BSkyB, Comcast,
Time Warner Cable,
Cablevision
Netflix, Google,
Facebook, Tencent
In-house
programming
TV networks are refusing to license their
best content – live sports or hit TV series –
to the likes of Apple or Netflix for fear of
losing control of the customer. So the tech
giants are commissioning their own in-
house programming.
Netflix’s $100m investment in House of Cards
was the first. Many tech giants are following its
lead. Film studios should benefit from the
renewed demand for high quality content.
China’s Alibaba and Tencent are also in the
midst of a content-buying spree.
BSkyB, CBS,
Comcast, Disney,
21st
Century Fox,
Viacom, Zee
Alibaba, Amazon,
AOL, Apple,
Baidu, Microsoft,
Samsung, Tencent,
Yahoo

About us
Our research service
CM Research provides a subscription research service covering the global technology, media and telecom (TMT) industries. We identify
the big technology trends and then delve deep into them. Our focus is on disruptive technologies. How will they unfold? Which industries
will be impacted? And who will be the ultimate winners and losers?
Our technology research is:
 Independent
 Thematic
 Global
Our clients
We help our clients to see the big picture trends and highlight companies that might be impacted by them across the world.
Investor clients
For our investor clients, we convert big picture trends into global investment themes, highlighting local stocks that might be impacted.
We help CIOs formulate a TMT investment strategy that is global, thematic, timely and coherent.
We help TMT specialists spot emerging technology trends and disruptive threats early.
Corporate clients
For our corporate clients, we provide industry analysis and market intelligence, predicting how technology markets will evolve and which
business models will win. Our aim is to help CEOs and Strategy Directors stay one step ahead of the technology trends that are shaping
their industry.
“We help Chief Investment Officers and Chief Executive Officers predict the future.”

Our 2015 themes
These are the main technology investment themes we will be researching over the next 12 months.
Social
- Crowd funding
- Virtual currencies
- Sharing economy
- Music, video, games
Cloud
- Enterprise software
- Internet of things
- Automated home
- Cyber security
Mobile
- operating systems
- maps
- mobile payments
- messaging
Big Data
- Artificial intelligence
- Ad-tech
- Software analytics
- Wearable tech
Ecosystems
- Ecommerce
- Enterprise software
- Automated home
- Mobile internet
Internet of Things
- Automated home
- Ambient commerce
- Cyber security
Adv. Manufacturing
- 3D printing
- Robotics
- Driverless cars
Software Defined
Networks
- Internet of things
- M2M
- Cost reduction
Wearable Tech
- Google Glass
- Smart watches
- Med-tech
- Internet of Things
Internet TV
- Video streaming platform
- Second/third screens
- 16k / flexible screens
- Ad-tech
China
- Alibaba IPO
- Telecom equip trade wars
- Variable Interest Entities
- Accounting risk
Regulation
- Net neutrality
- Data privacy
- Patent litigation
- Anti-competition law

About CM Research
CM Research is an independent research provider with a blue chip list of institutional clients. We analyse emerging trends in the technology, media and telecom
sectors and develop them into global investment themes, highlighting the winners and losers. At a time when many of our competitors have had their reputations mired
by conflicts of interest, we fiercely guard our independence. Our business model is based on independence, exclusivity and experience. CM Research is a member of
the European Association of Independent Research Providers (EuroIRP). CM Research is authorised and regulated by the Financial Conduct Authority (FRN: 579360).
Contact CM Research
Research
Cyrus Mewawalla
cyrus@researchcm.com
+44 20 3393 3866
Sales
Elgen Strait
elgen@researchcm.com
+44 20 3744 0105
56 Broadwick Street | London W1F 7AJ | United Kingdom
www.researchcm.com
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Analysts’ Certification
The analysts involved in the production of this document hereby certify that the views expressed in this document accurately reflect their personal views about the securities mentioned herein. The analysts point out that they may buy, sell or already have taken positions in the
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