In Search of the Perfect Investment

The Internet of Things: If I were still in the magazine and trade show business, I’d launch a new magazine and a new trade show called “The Internet of Things — how Things will change the world!“

For many years, I made a handsome living picking trends in technology and launching publications to serve the new market. This one is perfect — for publishers, not for investors.

Let me explain. Publishers (like me) like an exploding industry, with lots of froth and no clear leader, with everyone jockeying for market share. We write about how one product is better than another, how one standard will stick and which won’t.  The nice thing is the players have to advertise in our magazines and buy big booths at our trade shows — because it’s the magazines and the trade shows which define the frothing industry and lay out the choices to the buyers. Everyone loves a frothing new industry. Lots of super business and career opportunities.

When the industry finally shakes itself out, the fun (and all those delicious marketing dollars) are gone. But we have new leaders.

If you were lucky enough to invest in the right ones, you became rich. And if you were an intelligent publisher, you would have sold out.

To me, The Internet of Things is in flux, with no clear winners, yet. I have two reports for you. Morgan Stanley did the bigger one. Here are some excerpts:

Morgan Stanley defines The Internet of Things (IoT is the acronym) is an army of tens of billions of tiny robots making our lives easier.

The Internet of Things is the combination of sensors, actuators, distributed computing power, wireless communication on the hardware side and applications and big data/analytics on the software side. This is more of a functional definition, but it shows that there are many prerequisites for the Internet of Things to exist.

+ Key IoT-exposed companies we cover are Apple, ARM, Atmel, Crown Castle, CSR, Freescale, Google, Imagination Technologies Group, Intel, Linear Technology, Microchip Technology, NXP, Realtek, Richtek, Salesforce.com, SAP, Software AG, Spansion, Splunk, and STMicroelectronics.

+ The advance of the previous wave of computing (smartphone/mobile internet) has pushed the price of key communication, computing, and sensing components low enough to enable the beginning of a new wave of computing. These include Bluetooth chips below US$1, application processors at the US$2 level, gyroscopes and accelerometers at the US$1 mark. We believe that cost reduction will continue thanks to more standardization, further integration of functions into a single chip, and the continuation of Moore’s law. Blind man for my office.

+ Nonetheless, the tower companies (American Tower, Crown Castle, and SBA Communications) are perhaps the most obvious potential beneficiaries of the IoT, as new devices and applications should only accelerate the need for broader and deeper wireless coverage around the world.

+ We find that the key drivers for the Internet of Things are:

1)  Standardization and follow-on cost reductions-Increasing standardization of software and hardware, in combination with the progress of Moore’s Law (printing smaller transistors) and further integration (more chips combined into one), can drive device prices down and penetration up.

2)  The exploitation of Big Data-The increasingly pervasive penetration of sensors throughout the industrial economy will generate lots of data, which will have to be digested and analyzed in order to become useful for non-technology companies. Eventually, mathematics and algorithms should identify trends which create value, in terms of cost savings / efficiencies and increased revenues to the real economy.

Major business opportunities are summed up in this chart:

After surveying all sectors covered by Morgan Stanley globally, we found that the Internet of Things potentially disrupts the following industries:

1)  Factory Automation could drive enhanced efficiency with process monitoring and supervision, remote management and optimization, optimal energy management. Assuming the global cost base of manufacturing is $25trn today, 2-4% cost savings from IoT as a result of 50% penetration of IoT, we could see $500bn in cost savings.  Mining, for instance, is an early adopter of the Internet of Things, with Rio Tinto currently generating over $300m in cost savings from the “autonomous mining” concept.

2)  Precision Agriculture-Real-time analysis of weather data could provide $20bn of increased revenues for companies such as Agrium, DuPont, and Monsanto. We also expect farmers to increase productivity and revenues by an even larger amount.

3)  Utilities-`Smart water’ could generate ?18bn in revenues in 2020 in Europe by potentially reducing leakage (which is at 20% today). The `smart grid’ could drive material changes to the electric power business model through the development of distributed power, requirements for more energy storage, and changes in consumer behavior.

4)  Healthcare-Real-time monitoring reduces the need for specialized human capital and could result in 1-2% cost savings, which would represent $800-1,600m of EBITDA savings for the four for-profit US hospital companies covered by Morgan Stanley Research (LPNT, HTC, HCA, and CYH).

5)  Retail-The use of radio-frequency identification (RFID) chips and precision analytics that improve inventory management could lower the cost of goods sold by 2%.  For non-food retail in the UK, that would represent potential savings of £3bn/US$5bn.

6)  Insurance-The Internet of Things could drive major changes in business models and profit pools as a result of the growing adoption of telematics in automotive insurance. On the life insurance side, biometrics could become intrinsic to risk- assessment by insurers.

Morgan Stanley has this nice chart of exploding growth:

You can read the Morgan Stanley report here. Click internet of Things — 2. You can read the other report, which figures this impressive growth:

Click Internet of Things-Infographic.

It’s clearly a good time to start an Internet of Things company. With all this favorable press, you’ll be able to raise oodles of money and get off to a fine start. Make sure you go in the right direction. Heh, Google just bought Nest for $3.2 billion. Nest is the classic Internet of Things company.

You can do it. Form your own Internet of Things company. Let me buy a small piece, please. Pretty please.

 Apple’s press conference/new product launch starts at 10:00 AM PDT. You can apparently watch a live stream of it by clicking here. You may need to watch it with Safari and other Apple stuff.

The magazine contrarian theory. Friends tell me I should never believe magazine covers and always do the opposite. My favorite magazine carried this cover for its October 15-21, 2011 issue.

Since then,  the S&P did this:

Microsoft’s Hotmail is busted. I don’t know what’s wrong. I’m getting “undeliverable” on all my Hotmail subscribers. Microsoft which ran Hotmail.com, changed it to Outlook.com for reasons I never figured. Suffice, it’s a mess. If you’re not getting your regular daily emails from me, I apologize. But I don’t know what to do. Except recommend you get a Google Gmail.com account.

Favorite spam mail. I actually received this. I’ve been married for 38 years.

Favorite country store notice: I found it yesterday when I went to buy a cup of coffee and a croissant.

The dumbest punchline ever
A man is dining in a fancy restaurant and there is a gorgeous redhead sitting at the next table. He has been checking her out since he sat down, but lacks the nerve to talk with her.

Suddenly she sneezes, and her glass eye comes flying out of its socket toward the man.

He reflexively reaches out, grabs it out of the air, and hands it back.

“Oh my, I am so sorry,” the woman says as she pops her eye back in place.

“I’m sure that must have embarrassed you so let me pay for your dinner to make it up to you,” she says.

They enjoy a wonderful dinner together, and afterwards, they go to the theater followed by drinks. They talk, they laugh, she shares her deepest dreams and he listens, he shares his and she listens.

After paying for everything, she asks him if he would like to come to her place for a nightcap and stay for breakfast.

They have a wonderful, wonderful time.

The next morning, she cooks a gourmet breakfast with all the trimmings. The guy is amazed and totally impressed. Everything had been SO incredible!

“You know,” he said, “you are the perfect woman. Are you this nice to every guy you meet?”

“No,” she replies. . ….. . . “You just happened to catch my eye.”

Harry Newton whose daughter and granddaughter arrive tomorrow. Meantime, we do cleaning, shopping, getting all our TDAP shots, stocking up hand sanitizers, face masks and aspecial detergent called Dreft — #1 choice of pediatricians. Tide will no longer do. They got outbid by the child doctors?