Condor Capital's Ken Schapiro: Smartphone Growth Fast-Tracking Telecommunications Trend Toward Greater Profitability in Data Services

MARTINSVILLE, N.J., April 28 /PRNewswire/ -- Condor Capital President and Founder Ken Schapiro reports that the U.S. smartphone market has grown exponentially with close to 20 percent of adult Americans now using smartphones – more than double the number from 2007. In the following interview, Schapiro notes that significant investment opportunities have been created by the surge in data production, transmission and storage, and the telecommunications trend toward greater profitability through data services as compared to voice.

What data supports the notion that smartphone data is where the future lies?

In addition to a larger number of people using the Internet, peer-to-peer communication has evolved from voice and text to pictures and videos. In fact, according to a recent study conducted by Cisco Systems, mobile data is expected to grow by more than 100 percent per year from 2009 to 2014.  Furthermore, the company said that video is expected to "represent 66 percent of all mobile data traffic by 2014, increasing 66-fold from 2009 to 2014."

How will the surge in data impact telecommunications revenue?

Data is on its way to replacing voice as the most profitable segment of the cell phone market. If we examine average revenue per unit (ARPU) for both voice and data since 2004, voice ARPU has been on a steady decline while data revenue per unit has been trending up.

In addition to revenue, several studies support the data trend. Ericsson recently reported that global data traffic exceeded voice traffic for the first time in the fourth quarter of 2009 and is expected to continue to do so as users with smartphones begin to utilize more email in lieu of, or in addition to, text messages.

CTIA-The Wireless Industry Association reported that text messaging doubled from June 2008 to June 2009, as Americans sent 135.2 billion texts. CTIA also reports that the number of U.S. cell phone subscribers grew 5.3 percent during that same period, but total talk time grew only 3.1 percent, a small per-subscriber decline supporting the down trend in voice. CTIA also reports that the average length of a voice call fell from 3.13 minutes in June 2007, to 2.43 minutes in June 2008, and 2.03 minutes in June 2009. Realizing that data is the future and voice is declining, both AT&T and Verizon are cutting the prices of their wireless voice plans.

What investment opportunities are presented by the trend toward data?

There are many ways to play the ongoing surge in mobile data traffic, especially since many analysts are predicting that smartphone sales will outpace laptop and desktop sales over the next two to three years. The strongest opportunities exist at Apple (AAPL), American Tower (AMT), Cisco Systems (CSCO), EMC Corporation (EMC) and the iShares S&P North American Technology-Multimedia Networking Index ETF (IGN).

Apple is an easy choice because they just have the Midas touch and the recent launch of the iPad and rumors about a new version of the iPhone, only make them stronger. Apple sold a record 8.7 million iPhones in the first quarter of the year, up 18 percent from the previous quarter and they have plenty of room to grow with Piper Jaffray forecasting that Apple could sell 36 million iPhones in 2010 as well as great opportunities for distribution partners, including Verizon.

American Tower is the country's largest tower operator, collecting "rent" from carriers seeking to upgrade their networks. AMT has more towers, a solid international footprint, and lower debt, than its competitors. The company has significant market advantages in terms of its portfolio, land ownership and international business. Morningstar projects revenues to grow 8.2 percent annually through 2013.

Cisco Systems is the global leader in data networking software and equipment, specifically routers that steer information across networks. With control of about 50 percent of the routing market, the company is strong in virtually all business areas and posts solid earnings, sales and revenues. Cisco is benefitting from the corporate IT spending rebound as well as its March launch of new generation routing equipment.

EMC Corporation has led the overall data storage market for eight consecutive years with a 22.7 percent market share in 2009. Data needs to be managed, stored, protected and archived on the back end and EMC stands to benefit significantly from current trends and bandwidth demands from media providers. The company is streamlining operations and pursuing joint ventures with industry leaders, including Cisco, Microsoft and Intel.

IGN seeks returns that mirror the S&P North American Technology-Multimedia Networking Index and is comprised mostly of domestic companies that make telecommunications and data networking equipment. IGN offers exposure to many smaller, lesser known companies, providing investors an opportunity to diversify while capitalizing on the data growth trend.  

Condor Capital

Founded in 1988, Condor Capital is an SEC-registered investment advisor based in Martinsville, N.J. employing 15 professional and support staff. Since Condor is a fee-only, investment management firm, its fees are based on portfolio size, not sales commissions or number of trades. For more information on Condor Capital, please visit www.condorcapital.com or call 732-356-7323.

SOURCE Condor Capital