Typically the Mobile World Congress exposition focuses on the smartphone and handset part of the industry, and at this years recently completed show in Barcelona that was once again the case. While there were not a tremendous number of new device launches, new smartphones from LG, HTC and Sony Corp. (NYSE: SNE) made a splash. But in a note today from FBR & Co. (NASDAQ: FBRC), it was less about handsets, and more about infrastructure.
The research team at FBR Capital Markets notes that, surprisingly, the most meaningful announcements at Mobile World Congress 2013 were not handset-driven but rather emphasized the changes in data centers, delivery and infrastructure needed to enable next-generation handset service. The most significant takeaways from the meeting reinforce the idea that they are on the brink of a large-scale shift in data center architecture, and while not yet fully defined, this holds significant implications for chip companies.
The mobile ecosystem is expanding at lightning speed, with endless innovation and new applications of mobile technology. From contactless payments and augmented reality to embedded devices and connected cities, mobile technology is changing the landscape. The impact mobile will have on the world is limitless. The explosive growth of at-your-fingertips data has driven the need for data centers to change some of their basic infrastructure. According to the FBR team, this can have big implications for semiconductor companies.
Their report lists four semiconductor companies that may benefit from the change in data center architecture as companies strive to have the processing power to accommodate huge advances in technology.
Intel Corp. (NASDAQ: INTC), the leader in personal computing and laptop processors, is working to add new products that target the smartphone and tablet industry. The Thomson/First Call consensus price target for Intel is $23.
Troubled industry laggard Advanced Micro Devices Inc. (NYSE: AMD) has promising new low-power, low-cost semiconductors that may prove competitive. The stock has taken a beating over the years and trades at just $2.41 today. The Wall St. consensus estimate is $3.
Broadcom Corp. (NASDAQ: BRCM), which specializes in semiconductor solutions for wired and wireless communications, may have the most potential upside. The company operates in three segments: Broadband Communications, Mobile and Wireless, and Infrastructure and Networking. Its ability to offer solution for multiple segments of the industry may help sustain its heady growth prospects. The consensus price target is $40.
Marvell Technology Group Ltd. (NASDAQ: MRVL) is a big favorite of hedge fund manager David Einhorn, who has almost 6% of his total portfolio in the name. The company also may benefit from data center growth. The consensus price target is $15, which would represent almost a 50% move from today’s price of $10.12.
The inevitable growth of the wireless industry means that semiconductor companies will have to keep up their research and development expenditures to compete in a challenging and changing environment. The companies with the deepest pockets for R&D may prove to be the biggest winners.