Opportunities in the TMT sector
Technology is a constantly developing industry that covers a broad range of areas. Over our lifetimes we have seen the emergence of new technologies in the home entertainment sector, with it currently venturing into the realms of 3D. We have witnessed great advancements in the mobile communications industry also, with super smart phones soon to be released, and of course arguably the most important invention of them all, the Internet. There is always great potential for further development and it seems the next stage involves the convergence of different technologies such as the telecom, media and entertainment sectors through the capability of the Internet.
Improvements in the IT sector have enabled companies in all technological areas to further develop systems that benefit their industry. After the hangover of the dotcom boom, spending in the IT area was constrained, however in 06-07 spending increased. This saw a broad range of industries developing their technology such as manufacturing companies, healthcare companies, media companies and pharmaceutical companies. A lot of this is being made available through advancements such as cloud computing (allows companies to access databases or software hosted by a third party over the Internet). Thus, allowing more sales, development of new products and services and improving the overall efficiency of an organization. So when companies add to their IT spend, it benefits the growth of technology. Further prospects and developments in wireless networking, storage and tablet computing should bring additional benefits to the technology sector and companies who make the most of this technology.
The increase in demand for mobility is also a key indicator as to why the technology sector is good to invest in. The advanced technologies in smart phones and tablets have led to consumers questioning whether they should buy traditional PC’s or notebooks. Even though the PC and notebook sector will still be around for many years to come, the current boom in touch screen innovation particularly expressed through Apple, the leader in the market will and has put a dent in the sales of PC’s and notebooks. Consumer demand is extremely high with massive numbers of Apple iPhones and tablets expected to be sold in 2011 combined with the launch of the iPad 2 and further models of the iPhone soon to be released. Other competitors are also releasing their own versions of these products. All this has a major impact on social networking, e-commerce, mobile payments and media consumption. So investors would do well to keep an eye on new technologies in these sectors, with such a fast paced market the next big thing is surely already on its way.
The overall general improvement in the global economy also indicates it’s the right time to be investing in technology. Government policies here in the UK and abroad have led to tax cuts and reliefs for new businesses, all in a bid to help the economy. In the UK the Technology Strategy Board has been set up to specifically aid with the development of new technology businesses. Already established companies are diversifying such as Intel who had no processors for the new tablet market but have now invested in new plants to produce faster and more efficient chips for this market. Other conductor companies are doing the same so there is a healthy sign of competition among the big players, so this is an industry to watch out for. The telecoms sector is also producing new technology, and competing for coverage, speed and quality.
With high speed internet becoming increasingly accessible technologies such as VoIP become more popular. Voice over Internet Protocol (VoIP) is increasingly being used by companies to bring such benefits as cutting costs and improving productivity. VoIP allows the integration of data, voice and video into one communication channel. Some of its applications include distance learning, video conferencing, video streaming, security surveillance and many others. One of the most well known companies utilizing VoIP technology at the moment is Skype. There are many other competitors in this market with Google being a strong candidate and with Skype launching an eagerly anticipated IPO in 2011, there is a massive amount of interest from all types of investors. This sector is expected to grow with the mobile phone industry making the most of its applications.
With poor valuations and a lack of IPO opportunities available the leading investor firms of Silicon Valley are hoping Skype’s IPO will encourage further companies to launch their own IPO’s. Silicon Valley is the home to many of the world’s largest technology corporations. It accounts for one third of all the venture capital investment in the USA. The micro-processor, micro computer, among other key technologies were developed here and it has been the centre of electronic innovation in the US for over four decades. It is an area known for its network of venture capital firms and recently has been famous for backing companies in the software and internet services sectors.
Technology investment also forms new alliances across the globe as demonstrated by the recent openness from Taiwanese technology companies to Chinese investors. With Taiwan excelling in many technological industries such as notebook and flat panel making, these new strategic alliances will further expand the Taiwanese technology sector.
New technology for the business sectors usually focus around time and cost saving techniques. Smart phones have benefited businesses a great deal and are set to do so further with new and improving apps. Work related tasks can be carried out anywhere anytime with easy secure access to the Intranet, incorporating cloud computing. There is also an increase in the speed of access to information and the general use of systems. More tasks can be automated saving costs as the technology can carry out tasks rather than employees.
Many of the market leaders for the technology sector stemmed from the small to medium enterprise sector. Fast growing technology companies propping up supported by consumer demand in smart phone technology. It is expected the growth rate will continue especially in sectors such as mobile payments, apps and VoIP technology to name a few. Other popular start ups have been in the finance, payments and ecommerce and enterprise sector, security, storage, collaboration and databases categories.
Companies in the technology sector have the potential to grow at rapid rates, for example if $10,000 was invested in Cisco a decade ago it would give returns of $1 million today. So with technology becoming essential in modern day life, new developments are always being made keeping investors on their toes.
The costs of starting a technology business are lower than ever before and never before in history have such diverse numbers of people had access to new start ups through the power of the Internet. Companies are also able to make the most of new areas such as social media and mobile apps. Areas such as online advertising and financial technology are also showing promise for investors. Investors will look for new exciting ideas which are not just cool to use but also show practical implication. Computers are becoming mobile devices, with many new apps and innovations being created. Storage is also an area that is constantly improving alongside the computer and video revolution. Technology has become an essential part of life and investment in this sector is always going to lead to success so long as the right types of investment deals are done, there are many start ups imitating each other but it is the new ideas that attract investor interest.