It’s time to take a look back at 2007 and see how our predictions fared. (See “Nyquist Predictions for 2007“)
- Web 2.0 as an investment theme peaks. We were right on Akamai but wrong on Google. Cisco jumped on the Web 2.0 bandwagon in 2007, with John Chambers freely using the phrase. We feel this is a contrarian indicator. As 2008 unfolds we’ll see if 2007 was the peak.
- Google makes a really big move into hardware. Android, Google’s effort to develop a mobile OS, is this effort. Google chose to partner with many hardware folks – HTC being a notable one we should have seen.
- Sales of gaming platforms explode. The Wii was a hit and the PS3 started selling with the proper price cuts. While explode wasn’t the right word there is plenty of momentum to complete the trend in 2008 of the gaming machine emerging as one variation of the Third PC.
- AMD successfully integrates ATI. Whoops. AMD has done nothing to capitalize on this horizontal integration. ATI has been decimated in it’s technical competition with NVidia.
- High Def explodes. It is hard to find a non-HDTV in stores anymore. Comcast, Verizon and the satellite providers are all trying to one-up each other with more HD content. The high-def DVD wars wage on though the cost of players dropped more than 50% in 2007, and for $200 each consumers are starting to take sides.
- Muni-Fi loses it’s luster. Nailed this one. Earthlink, poster child of Muni-FI, exited the business. Favorite quote from Anthony Townsend: “Muni-Fi is the Monorail for the decade“.
- Cisco attracts negative publicity. Not there yet, though one has to wonder with all of the sound and light emerging from the Cisco
Marketing Investor Relations machine why the stock ended the year flat.
- The luster comes off US Cable and Telecom stocks. Home run here on the Cable sector- they entered 2007 as the favorite sons and exited at 5-year lows. The only exceptions were AT&T and Verizon, which found strength from the only consumer Telco business that matters anymore – Wireless. Embarq and Qwest both suffered.
- Net Neutrality debates move to the wireless domain. Didn’t really happen, may not happen now that carriers see the additional revenue from data growth. The iPhone is having a profound impact on consumer perceptions of unlocked phones.
- Tivo becomes increasingly irrelevant. Easy one, but still right.
- China becomes the next investment meme. Jackpot. If the wheels come off, it won’t be ’till after the Olympics.
- Medical Tech and Silicon Valley increasingly team up. This is happening with medical startups proliferating in the Valley, particularly around Genomes. Check out 23andMe. This trend builds in 2008.
- Lots of M&A in the Networking Component and Equipment business. Hard to measure ‘Lots’ but it didn’t feel like there was ‘Lots’ – particularly after the big events of 2006; Alcatel/Lucent, Nokia/Siemens, Ericsson/Redback/Marconi. Meaningful M&A in the Component sector was absent. This prediction appears again for 2008, albeit revised.
It was terrible year for the small/mid-cap Networking sector, one in which the best decisions we made were the disasters averted for clients – MRV, Opnext, Level3, Mindspeed, Conexant – the list goes on.
Short positions in the Cable group worked and a massive short position in Nu Horizons worked. Our long position in Abovenet worked well in a market where it’s peers (LVLT, XOHO) were decimated. We successfully traded and timed Vitesse Semiconductor.
Outside of this, positions in just about any company in the sector were decimated. Close to home were Finisar (down 55%) and Adtran (even for year, but down 30% from 2007 peak) and Adva (down 60%).
One market prediction we got right was more volatility. It should be noted that as rough as the year seemed, volatility was in line with historical averages. (see here).
More on what is coming in 2008 over the next few days.