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It’s hard not to anticipate what technology companies are building, or supposedly building, in the burgeoning wearables space. Google (NASDAQ: GOOG ) already has Glass,Samsung (NASDAQOTH: SSNLF ) has its Galaxy Gear smart watch and is rumored to launch a Glass competitor, and Apple (NASDAQ: AAPL ) is (constantly) rumored to be releasing an iWatch.
With all the current wearables available from the top tech companies, and more on the way, can investors hope to make a pile of cash off these new devices this year?
Probably not. At least not this year anyway.
If you’re a tech investor, you’re likely looking at which companies are poised to benefit most from wearables, which is logical and likely a wise move. But even though we’re just at the beginning of 2014, there’s still a lot of ground that needs to be covered before investors see a payoff from wearable tech.
Overcoming the creepy factor
Let’s start with two high-profile wearable gadgets currently on the market: Google Glass and the Samsung Galaxy Gear. Google launched Glass last year and has released the device on a limited basis. Google recently opened up Glass to more users by allowing those with unlimited Google Play Music accounts to apply for the device. But, overall, testing of the glasses has been limited.
Google likely wants to keep a stronghold on supply in order to keep demand high, but also because the device is unlike anything the public has ever tested before. There’s a huge learning curve for Google, users, lawmakers, and the general public. For this reason, Google investors likely won’t stand to benefit from the revolutionary product just yet.
Even if Google launched a consumer version later this year that cost around $300 to $400, there’s still a lot of social etiquette that will have to be overcome before Glass becomes a prolific device. Which means it could take until next year before Google sees its bottom line grow because of device and app sales. Though 2014 may be the year Google Glass launches for the common man, I think the device is still too futuristic for Google’s bottom line to benefit this year. The future maybe now, but profits will come later.
Samsung’s smart watch fumble
While Samsung deserves credit for trying its hand at a smart watch before Apple, the Galaxy Gear has been, well, sort of a failure.
The Gear proves that the first one out of the gate isn’t always the winner. Samsung will need to build a much better product the second time around if they want to see real monetary gains from the device. Samsung says its shipped about 800,000 Galaxy Gears, but hasn’t disclosed actual sales numbers from those shipments.
For this reason, investors shouldn’t bank on Samsung winning the smart watch market or making big profits from the next iteration of the device, especially this year.
A promising option
If there’s a tech company that knows how not to rush to market and get user demand right, it’s Apple. At this point, it’s hard to believe Apple won’t release a smart watch for the masses. CEO Tim Cook has said, “I think the wrist is interesting. The wrist is natural.” Though that’s obviously not an admission Apple is manufacturing a smart watch, reports are increasing that an iWatch device is in the works.
Here’s why I don’t think investors will benefit this year from an iWatch, though: Apple sells devices for mass consumption, but smart watches are still a niche product. Macs, the iPod, iPad, and iPhone are all products for everyone. They may be priced at the high end, but they’re created for everyone to use. This is part of Apple’s product philosophy and it means that Apple won’t release such a device until it’s figured how to make the device appealing to the mass market.
I think there are two ways to do this: Make it so simple and inexpensive that it makes sense for the millions of iPhone users to pick one up or make it such an incredible stand-alone smart device that users see its usefulness right away.
Either way, I think Apple would release such a device toward the end of the year so it can benefit from holiday sales. If that’s true, then Apple investors wouldn’t start to see a real benefit form the device until early 2015. In addition to that, wearable smart watches are an unproven segment, so user adoption may be slow and could subsequently keep initial sales low.
Some may think I’m being a bit skeptical of the wearable trend, but it’s more that I’m just skeptical that it will skyrocket company revenue, and stock prices, this year. Wearables are definitely a big part of our technological future, but it’s going to take a while for the general public to adapt to these devices, which will keep sales relatively low compared other smart devices.
According to IHS, wearable tech shipments will hit 130 million by 2018. I hope investors see those estimates realized, but if you’re looking for explosive growth in the industry right now, you may want to wait until next year.
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When Lee Kun Hee Chairman Of Samsung ( KRX:005930 ) made that statement, he was not trying frighten or create panic among his shareholders or workers. He was speaking the truth. A couple of years back HTC was the number one Smartphone company for North America, with its devices selling like hot-breads, but today the company is no where to be found even among the top 10 Smartphone makers. Lee has read the market and market history correctly. Riding the bandwagon of Android based OS, Samsung rose to become the 2nd largest Smartphone maker after Apple. Samsung Galaxy S4 and Galaxy Note 3 phablets drove the sales and revenue figures this year. But as Lee pointed out, the picture could change any minute.
The reason for this worry is that most of Samsung’s revenue margin comes from its Smartphones. If it were not for the Smartphones Samsung could have posted bad results.
Below is a graph from Asymco’s Horace Dediu showing the increasing percentage of Telecom divisions in its profit margins.
Its Galaxy S and Galaxy Note series have made Samsung the leading player in the global Smartphone market and is able to challenge bigwigs like Apple. But if profits start declining one fine day, Samsung will turn back into a component supplier.
Samsung wants to avoid such a scenario and this the reason why it is trying to find out the next big thing, so that it can keep its dominant position in the market intact. One area in which Samsung sees high possibility of growth before it becomes crowded is that of Wearable technology. That is the reason why it is trying to enter the market of Wearable technology in a big way and Samsung Galaxy Gear Smartwatch is only the start of things to come.
Starting with Samsung Galaxy Gear smartwatch, Samsung is trying to evolve itself into more of a lifestyle brand from just being an Electronics brand. In the words of Dennis Miloseski, head of studio for Samsung Design America, Samsung is trying to make products which would become part of people, their style statements.
“You have to look at the tastes that individuals have. It is something that is visible on your body and it is a part of you.”
– Dennis Miloseski, head of studio for Samsung Design America
Wearable technology is still in its infancy and it may still take time for the market to boom and start driving revenue in the balance sheets for the companies. Meanwhile, Samsung is trying to place bets on the growing phablet market. Company is planning to launch more tablets with bigger displays and also launch more phablets. Galaxy NotePro 12.2 and Galaxy TabPro 12.2 showcased at CES 2014, were glimpses of things to come.
It appears that Samsung is trying to achieve the same thing in the phablet/tablet market as it has achieved in the Smartphone market. Samsung is planning to bring out more phablets with 5-6 inch screen sizes as part of this strategy. It is planning to dump multiple devices fitting different requirement and budgets. This means that whatever requirement a user has, there is always a Samsung device to choose from.
Samsung as of now is comfortably placed in the Smartphone market, but having seen the decline of some of the big names in the recent past, it is getting nervous. But this nervousness is good for the company and may one day be the reason for its success.
Since it’s still January, I’ve decided to revise my New Year’s resolution list to include one thing I will not ever do, no matter what. I am never going to wear any kind of fashionable technology.
I don’t want a “smart watch” that doubles as a phone. I don’t want one of those fitness-tracker bracelets that everyone at work is wearing, the ones that report how many miles per day you walk. I don’t want a “smart tattoo” that changes colors when my blood sugar is low.
This is it. On behalf of the last generation that’s not considered “digital natives”, I am drawing my line in the sand. Bad enough I’m a slave to the iPhone. I have no intention of inviting technology onto (or into) my body.
I’ve seen enough fools with those Bluetooth earpieces to know I don’t want that to be me.
I got to thinking about this after reading the cover article “Why Wearable Tech Will Be as Big as the Smartphone” in the January edition of Wired Magazine. The article claims that “Google Glass was just the beginning and that the new generation of wearable tech…will transform the way you experience the world.”
For those of you not familiar with Google Glass, the concept is simple. You put them on and a small visual overlay pops up as you go about your day. One of their ads features a guy chopping vegetables while reading a recipe, which doesn’t seem like a very good idea to me. Distracted driving is one thing. Distracted knife chopping is just plain stupid.
What’s most interesting to me is that the Wired article called Google Glass “just the beginning” (when you can’t even get them yet, I might add.) What’s next? Eyeball implants powered by Apple? Tiny Bose speakers sewn into our eardrums? Where is this going to end?
Between my cell phone and Internet viewing habits, Google (and apparently, the NSA) already know enough about me as it is. They know what I look at on the Internet. They know who I email and who my friends are. They know what products I purchase and what books I read. But these are conscious decisions on my part. I choose to share this information (more or less).
But once we start wearing technology, familiarizing it to our bodies so to speak, we lose this choice. I don’t need Google Glass tracking where my gaze falls so they can throw another pop-up ad in my face. And I’m not interested in “transforming” how I experience the world. At least not in the manner being marketed to me at the moment.
Just in case I was being too much of a fuddy-duddy, I decided to do one last Internet search on “technology wearables” before committing myself to this new resolution of mine. I mean, I do like to keep an open mind with these kinds of things. I was immediately brought to an article on the new Twitter Dress, a rechargeable floor-length dress that displays tweets from your friends in real time.
I think this is one resolution I might just actually be able to keep.
The International CES is the world’s largest consumer electronics show, and a showcase each year for the biggest new things in consumer tech. This year, The Motley Fool’s Rex Moore caught up with one of the world’s leading tech columnists at the show, David Pogue of Yahoo Tech, to get a breakdown of the hottest new trends in electronics that could soon be hitting the market.
This year, wearable technology was one of the biggest themes at the show, and fitness trackers dominate this space. FitBit, Nike‘s (NYSE: NKE ) FuelBand, Jawbone, Withings Pulse, and Garmin‘s (NASDAQ: GRMN ) new Vivofit are all among the hottest of the wearables right now. Pogue discusses why these are such a hit with consumers, and which one is his favorite of the group.
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With a recent study hinting at the fact that Indians are among the fastest in the world among people who adapt to wearable tech, we take a look at what forms of tech are people adapting to…
Wearable tech decoded: When accessories or clothing incorporate technology with the purely practical aim of aiding actual day-to-day tasks, they can be said to a part of wearable technology or tech togs. Although there are some rather inane and pure aesthetic uses of wearable tech, like the bluetooth dress that lights up when there is a call. Or even the tee shirt that shows a blinking equaliser, there are a number of gadgets which have helped people immensely. Fitness monitors and testing kits that help keep diabetes in check have helped patients keep their illness in check.
Usefulness: From monitoring vital statistics for people with various ailments, to choosing the music that matches your mood to even just looking up restaurants, wearable tech is fast becoming as a useful, dependable tool. Products that saw such a response earlier were cellphones. And if researchers and market analysts are to be believed, people will adapt to wearable tech faster than they did with cell phones!
Preferred gizmos: Fitness aids are a rage and have registered a sharp increase in sales recently. Gadgets incorporated into accessories and even footwear are being used to keep a check on calories burned, the effectiveness of the workout and even to count the number of steps taken, so as to know make workouts effective. However, now, people are looking at watches to support these features. A recent survey found that 80 percent of Gizmo buyers were interested in fitness monitors, 76 percent were interested in smart watches and 74 percent in internet enabled glasses.
At this point, I’m not even sure what came first: The pocket watch or the wristwatch? I do know we’ve reached a point in technology innovation where we must decide what is appropriate wearable technology. Over the past year, we’ve seen products like the Pebble and Samsung Galaxy Gear surface, and our own Marco Hanna is even in the process of conducting a 30 Day Challenge with Google Glass. I want to know what you think about the introduction of modern wearable tech. Have you already taken the leap and purchased a new wearable like the Galaxy Gear or Pebble? Or are you waiting for further innovations before picking up one of these new devices? Take our poll and let us know if you’re ready for wearable tech!
The Android ecosystem and wearable technology will probably get a boost from the patent deal Google and Samsung have struck, but the agreement is unlikely to have an influence on Samsung’s intellectual property disputes with Apple, analysts said Monday.
Google and Samsung announced Sunday that they had reached a global cross-license deal for existing and future patents for the next 10 years. The companies said they want to reduce the potential for litigation and instead focus on innovation. The deal also paves the way for a deeper collaboration on research and development of current and future technologies, they said.
The deal makes a lot of sense for both Google and Samsung, agreed several analysts on Monday.
First of all, it is going to boost development of the Android ecosystem.
“It does make a lot of sense for Samsung and Google to work together more closely. Samsung is really the engine that drives Android, Google’s operating system,” said Tim Coulling, senior analyst at Canalys. Samsung is a big company with huge financial resources and if those are used to invest with Google in R&D for the future of Android that can only be a positive thing, he added.
Samsung had 34 percent of the smartphone market in the third quarter of 2013 and shipped 85.5 million units globally, according to Canalys figures. Samsung also shipped 42.4 percent of the world’s Android handsets, and 99.9 percent of all Samsung’s handsets are Android-based. “So you can see why forming an alliance with Google that is going to last 10 years is a very good move for them,” Coulling said.
Mark Newman, chief research officer at Informa Telecoms & Media, agreed that the deal could benefit Android. “The combined R&D muscle of Google and Samsung, and their ability to innovate, is unparalleled,” he said in an email, adding that the deal “is going to send shivers down the spines” of manufacturers that are not part of a major ecosystem, which would include Sony, HTC, Huawei and ZTE.
In addition to giving a boost to Android, there are other benefits from such a deal because it also covers patents for other, future technology, analysts said.
Google is currently investing in wearable technology, most notably in Google Glass, and Samsung could benefit from Google’s innovations in that market, noted Ben Wood, chief of research at CCS Insight. It will be good for Samsung to have access to that intellectual property, he said.
Having a good cross-licensing agreement early on could limit future litigation in the wearables market, he added.
Malik Saadi, practice director at ABI research, saw similar benefits. “The mobile market right now is growing way beyond smartphones and tablets,” he said.
Because those new areas will probably spur plenty of new innovations, any company that tries to enter those markets could very easily be in trouble without cross-licensing agreements, he said.
Samsung also entered into a cross-licensing agreement with Ericsson, the companies announced Monday. The deal covers patents relating to GSM, UMTS and LTE standards for both networks and handsets, ending all ongoing patent-related legal disputes between the companies.
Both the Google and the Ericsson deals can be seen as a peaceful way for Samsung to prepare to enter new markets, Saadi said. Eventually these kinds of deals are also going to benefit consumers, because companies are going to invest more in innovation instead of busying themselves with litigation, he added.
However, the analysts were not convinced the cross-licensing deals with Google and Ericsson were a sign that Samsung is on the verge of settling its patent disputes with Apple. Samsung has been locked in numerous lawsuits over mobile patents with Apple for years and in one of the U.S. lawsuits it was ordered to pay about US$930 million in damages to Apple.
Apple shipped 33.8 million smartphones in the third quarter of 2013 and had a 13.5 percent market share, according to Canalys figures.
Apple has been trying to defend its intellectual property as much as possible, and is likely to keep doing that instead of striking a license deal, said Coulling. “I don’t think Apple will stand down overnight, because it feels it has been unfairly treated by Samsung,” he said.
Apple is also looking to protect innovations to be able to keep charging a premium for its products, he said. “And for Apple to protect their margins they need to ensure that their intellectual property stays within their company,” he added.
However, the deals Samsung struck show that it is a company that can come to a reasonable settlement, Wood said. It might be totally coincidental though that the announcements of the Google and Ericsson deals followed each other closely, but it is not going to hurt Samsung to show that it has intellectual property that is worth cross-licensing and that it is prepared to sit around the table to hash out a deal, he said.