Stuck In Traffic? How To Profit...
The Dynamic Wealth Report
November 5, 2009
by Robert Morris, Editor
Yesterday morning I called my mom on my new mobile phone from Verizon. My parents are visiting Scottsdale in February, and we needed to discuss
travel plans.
Of course, mid-conversation the line goes dead. I’m sure you’ve had this
problem too!
I look at my phone and see there aren’t any bars. So, I do the
humiliating wireless walk around the office courtyard to find a signal. I’m holding the phone up over my head. I walk a few steps this way. No
signal. I walk a few steps that way. No signal.
Finally, after walking around in circles like a chicken with my head cut
off, I got a signal.
This isn’t the first time I’ve had a call dropped since I joined
Verizon. The biggest irony is I just transferred my wireless service to
Verizon because they’re supposed to have the best network.
Of course, Verizon’s not the only network having dropped call issues. In
fact, the network having the biggest problems with dropped calls right
now is AT&T.
AT&T’s iPhone customers are complaining about dropped calls and slow
data connections. A recent survey showed that up to 30% of iPhone calls
in New York City are dropped.
Talk about a problem!
Today’s networks just aren’t ready to handle the huge increase in mobile
data traffic.
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The proliferation of smartphones, messaging devices, streaming audio and
video, netbooks, and laptops is causing an explosion in mobile data
usage. Carriers are scrambling to upgrade their networks to 3G and 4G. But, the additional capacity alone won’t deliver fast enough data rates
to ensure quality service for customers.
One smartphone generates as much data traffic as 30 regular phones. And,
one laptop with a data card generates 15 times more traffic than one smartphone. That’s the equivalent of 450 regular phones.
Cisco Systems (CSCO) predicts mobile data traffic will grow fivefold
from 2008 through 2013. By that time, it will have reached 2 exabytes (2
billion gigabytes) per month.
If network operators don’t start working on this problem now, we’re
going to see massive overload. This would negatively impact everyone
with a cell phone.
One solution to the problem is Deep Packet Inspection (DPI) technology.
DPI enables network operators to more efficiently manage traffic on
their network. By using DPI, they can move certain traffic into the fast
lane and other traffic into the slow lane. And, they can block harmful
messages entirely.
Here’s how it works.
When data (email, webpage, music, video, etc.) is sent through the
internet, it is broken down into small pieces called “packets”. Each
packet contains a header and a data field.
The header shows the source and destination of the data. The data field
shows the identity of the source application as well as the content of
the message. (I know it’s technical, just bear with me for a moment.)
In the early days of the internet, DPI was used only to filter out spam,
viruses, spyware, and other dangerous messages. Now, network operators
want to use it to ensure a high quality experience for their customers.
Of course, this raises privacy and net neutrality concerns. Many are
opposed to giving network operators access to the private information
contained in the data field.
But, the surge in mobile data usage is exposing the pressing need for
DPI.
A number of networks are already using DPI. Many more are implementing
it every day. And not too long from now, we should see an explosion in
DPI.
How can we profit from this trend?
Several companies provide DPI solutions. Most of the pure plays in the
space are very small companies. However, one technology giant offers
exposure to the coming boom in DPI.
Cisco Systems (CSCO) offers several products with its version of DPI
called Cisco Service Control technology. With a market cap of $138
billion, CSCO is the 800 pound gorilla in the networking industry.
The company reported quarterly earnings yesterday after the market
closed. Revenue and earnings declined, but they came in much better than
analysts were expecting.
More importantly, CSCO’s CEO said business is recovering and customers
are buying more network equipment.
Here’s what he said, “There will be a good chance we will look back to
see Q3 was in fact the bottom, that Q4 was the tipping point, and the
recovery started in Q1 of fiscal 2010.”
CSCO is now forecasting revenue will grow 1% to 4% in the next quarter. That would be the company’s first quarterly increase in revenue in over
a year.
The company also offered three other signs of growing optimism. They’re
going to start hiring workers again. They’re stepping up the pace of
acquisitions. And, they’re going to buy up to $10 billion of company
stock.
Analysts are scurrying to raise earnings estimates. Rising estimates are
usually a strong catalyst for a stock. Take a closer look at CSCO. It’s
one way to profit from DPI technology.
Editor’s Note: Robert’s found a terrific microcap pure play on the fast
growing DPI market. He’s going to be recommending this company’s stock
in his Penny Speculator advisory service tomorrow morning. You don’t
want to miss this opportunity.
Click here to learn more about
The Penny
Speculator.
A brighter outlook for the semiconductor industry has chip stocks moving
higher. The Semiconductor Industry Association expects global chip sales
to rise 10.2% to $242 billion in 2010 and 8.4% to $262 billion in 2011. The
ProShares Ultra Semiconductors (USD) ETF is jumping on the news. The
double leveraged ETF is up 5.7% as I write.
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