Last year in response to many requests I started a Top 10 investments list in which I outlined some of the best investments for 2005. Here is an update on last years list as well as some new additions. As a bonus I have added some top trends.
Peer to Peer
I led with P2P last year and lo and behold, two out of the three companies mentioned, Nimcat Networks and Skype were purchased for CA$46 million and over $2 billion respectively. P2P is still a super-hot market. Expect much more activity in this segment in the next 12 months.
There are rumors that some of the interconnection facilities may be acquired soon. These are the buildings that actually allow the physical peering to take place. Telx is a leading voice peering facility. The Voice Peering Fabric (VPF) is a Layer 2 Ethernet exchange allowing VoIP peering to take place as well as the resale of ASP services. The VPF is owned and run by Stealth Communications. As VoIP peering is generally a small part of what Telx does, the more pure play companies in VoIP peering are session border control companies as well as those that do transcoding such as Ditech Communications whose stock has appreciated 50 percent in the last quarter.
Open Source Telephony
This continues to be a rapidly growing space but it is unclear where the investment opportunities are. Companies like Digium or Pingtel are obvious plays but Sangoma, a company making high-end open source compatible hardware, is less obvious. Still, all of these companies are private at the moment which presents a problem for the casual investor.
This is still a hot area and the government will likely be one of the largest purchasers of VoIP equipment in the world. There are a few companies here worth watching such as NET.com and TeleCommunications Systems. The former used to also sell products to service providers but recently changed focus to selling enterprise VoIP solutions. In addition they have had a recent management overhaul. As a result the stock is battered and at a three-year low.
This is still a very hot space and like last year it is the holy grail of service providers. Sales in this space are still brisk and will only get hotter. Cisco recently acquired set-top box maker Scientific Atlanta to further entrench themselves in video and paid just under $7 billion to do so. The IPTV market is also seeing massive growth. I dont expect either of these spaces to slow for the foreseeable future.
As VoIP gets more entrenched in our everyday lives the consumer electronics market will have more and more VoIP embedded in every day products. I am still waiting for the Apple VoIPod.
The companies that may benefit here are service providers such as Vonage or Skype that can get great licensing deals in place with these companies.
VoIP Chips and HMP
These technologies are actually at odds with one another but there are certain devices where HMP makes no sense and in these areas highly specialized VoIP processors are way to go and represent a great opportunity.
In larger VoIP systems, look to Intel and Aculab as some of the major players in the HMP market. No, unfortunately Aculab is not public.
SIP is hotter today than it was a year ago and TMC is launching SIP Magazine (sipmag.com) in print this month in order to help educate the market on the tremendous opportunities available in the space. Anything relating to SIP has legs at the moment and service providers and enterprise customers want more SIP products now.
As more SIP products are released, the desire for products and services based on this standard will only grow. Expect companies to make a nice living this year providing SIP trunks for IP PBXs.
That wraps it up for last years list. Here are some new thoughts:
VoIP Service Providers
In the past few weeks 8x8/Packet8 worked out a deal to provide VoIP service to BellSouth and their stock price doubled overnight. Then Vonage announced it received $250 million in convertible debt! Whether this makes Vonage a good investment or not is unclear but obviously there are many people who want to back this company at all costs.
I would have to say that the position that Packet8 is in is highly enviable as they are wholesaling their service quite effectively overseas and domestically. In the past six months they have turned me into a believer in their strategy. Prior to this point they were a niche player Now they are in an amazing position. Yes Vonage is gaining tremendous mindshare and their brand is synonymous with VoIP. Packet8 on the other hand has a low-risk, high-reward strategy of growing their wholesale business and reaping the future rewards of someone elses marketing.
IMS is one of the most exciting technologies I have ever been involved with and it promises to help service providers roll out new services faster than ever before and furthermore allows these providers to make more money from the networks they own. Finally it allows wired and wireless networks to work seamlessly together. At the moment anything having to do with IMS is in high demand making this another investment opportunity for the foreseeable future. TMC will be launching IMS Magazine (ims-mag.com) in print next month.
WiFi Telephony, Dual Mode
These markets will be huge. There is no doubt in my mind. Companies making money here will be those selling equipment as well as service. Even Skype will make a killing as they continue to license their protocol for WiFi telephony phones.
There is additional opportunity in connecting WiFi telephony devices to corporate PBXs. SpectraLink and Symbol Technologies are some of the players in this market.
This market will grow more slowly than expected due to tremendous competition. Corporate America is not as eager to go the hosted route as the hosted community hopes. This means the IP PBX vendors will still do well for a while longer. Tremendous education still needs so take place to get more corporations comfortable with hosting.
The overall picture for VoIP is very bright. There are few segments of the market that arent growing rapidly. If you are interested in hearing more about the financial angle regarding VoIP, dont miss the opportunity to hear investment guru and CNBC anchor Ron Insana as he keynotes our upcoming Internet Telephony Conference & EXPO this January 2427. We are truly honored to have Mr. Insana as part of the event and I for one am very much looking forward to his illuminating comments.
Enough with the investment thoughts; Here are a few predictions that Ive been mulling over:
The FCC will continue to make life difficult for VoIP providers. In addition they will side with the LECs on a two-tiered Internet system meaning LECs will be able to block competitive content. For this, the Federal government will come down hard on Kevin Martin and in so doing reduce his ability to get anything accomplished in the FCC.
Cable companies and LECs will have brutal wars with one another about what rules the ILECs must follow to provide TV in areas where cable companies are dominant. Bribes and government wooing will take place on both sides of this conflict and 90 percent of the effort will be on killing off each other and 10 percent will be on providing services consumers actually want.
In the meantime Yahoo!, Apple, and others will become TV stations providing broadband television to consumers at such a rapid clip that everyone will be forced to rethink their Internet TV strategy.
Finally a VoIP Phone Our Kids WANT To Use
I have been asking the VoIP community to come up with the iPod of VoIP phones for some time now. No one has listened. I asked for SMS and other next-gen features to be built in. No one listened. Now Hasbro (yes the people that make the Nerf football) has a device that is part walkie-talkie and part IM device. The toy is aptly named ChatNow and is selling in record numbers. On eBay it is currently selling at more than twice the list price of $80. I now predict someone will listen and develop a VoIP phone with SMS/IM built-in. Hopefully it will look good too.
Designer Phones Will Take Over
In true all or nothing fashion we will not only get really cool wireless VoIP phones but we will see more designer phones from the likes of companies like Bang & Olufsen and others. The telephone will go the way of the iPod and have to look stylish to be considered by ever-snobbier (more demanding) consumers.
More FCC Mess
The FCC will force all phone providers to pay into the Universal Service Fund and as a result Skype, Google, and others will see a massive upswing in their subscriptions as people sprint as fast as possible away from telephone numbers.
Starting in Q1 expect enforcement of 911 rules. The FCC will get very tough with service providers that arent providing adequate 911 service. For the record, I am 100 percent behind them on this.
Blackberry Loses Large Amounts Of Device Share
A slew of new devices from companies like Motorola will eat into Blackberry share of market and devastate the company. These devices will be VoIP and presence enabled, will allow seamless browsing, and look sleek and new-age.
More importantly, the mobile device market will really take off as processors get faster, wireless networks speed up and applications take advantage of small screen size. It will finally be almost redundant to have a laptop unless you need access to large graphics.
Web 2.0 and VoIP 2.0 Finally Merge
The opening up of the GoogleTalk API creates a slew of new products and services leveraging Googles open API to allow developers to voice enable everything on the Internet. Every Web site now can easily take advantage of the amazing potential of adding voice.
Google Launches GoogleTalk Out
On the heels of the GoogleTalk Out announcement, eBay/Skype will sue Google to get them to change the name to something else. Google changes the name but gets so annoyed they vow internally to take eBay out. Google subsequently begins to integrate tighter with Amazon and eBay makes nice with Yahoo!
Regardless of what the name becomes, GoogleTalk Out allows any Web application to be connected with any and every phone. Overnight, new business models appear on specialized Web sites allowing these sites to send phone calls to retail establishments on a paid per call basis.
Google will get involved in this market allowing the pay per call ads to be placed on a variety of Web sites like Google ads are distributed today. Google will get a cut of every call as will the owner of all the specialty sites.
VoIP Continues Growth
Lastly, I predict that VoIP, IMS, and SIP will continue to grow rapidly and will blaze past many of the most optimistic market forecasts. IT