Worldwide Wireless E-Commerce Explosion

Two weeks ago, the newsletter covered the topic of investing in major market moves. One of the biggest is the Worldwide Wireless E-Commerce Explosion, WWEE. Because of this I have been buying stock in CommScope, CTV. So what is this major market move and why am I talking about CTV?

Governments and companies around the world have stated they are investing in Wireless infrastructure on the magnitude of about $100 billion with a time horizon of 5-10 years. For example, China has announced a $40 billion Wireless investment while India has announced a $30 billion Wireless investment. Most if not all of the emerging and developing countries in the world are actively pursuing Wireless infrastructure. Why now, why Wireless and why CTV?

Why now is easy because of the access to the internet by virtually every mobile device like a laptop computer, cell phone, Blackberry and because lots of business is done on the internet. E-Commerce is huge and growing fast. My wife will tell you that at one point I was addicted to internet access on my cell phone, a point that I still deny. On the internet anyone can do countless things from voice, video, texting, pay bills, banking, you get the picture. Because of evolution of these devices you can do it now and it will only get easier in the future.

A developing country can grow economically by giving more citizens, aka customers, access. It is believed that in 5 years developing countries that have about 1 phone for every 10 people will move to 1 phone for every 2 people. That is a lot of phones and a lot of E-Commerce.

Moore's law of semiconductors states that a computer chip will be half the size, have twice the capabilility, and be half the cost about every 2 years. What this means is that in the future, a Blackberry will have the same capability as your current laptop.

Why Wireless is easy because in a developing country, that does not have infrastructure, Wireless is the most cost effective communication method instead of burying cable everywhere. Wireless speeds have been increasing and this trend will continue. Wireless entails lots of fiber and coaxial cable backhaul systems.

Why CTV is a little more difficult to explain. I am very picky and will not directly invest in a company without US roots which limits my choices, I want to invest in company that has few competitors, and the company must have good financial ratios. Let's look at the components of a Wireless E-Commerce system in China. The largest network equipment provider is Huawei, a Chinese company that ate the lunch of competitors like Alcatel, Lucent, Nortel, and Ericcson, so I am not interested. The largest internet provider in China is Baidu and it is ahead of Google which means that I am not interested. Their is lots of competition for hand held devices and lots of makers of laptop computers which leaves me out. The Wireless antenna, cable, tower, and system makers are the last piece of the puzzle and this area meets my criteria.

The Andrew Corpration was the leader and largest Wireless equipment maker in the world until early 2008 when they were acquired by CommScope. So now CommScope is the leader and largest Wireless equipment maker in the world and is growing and hiring in this area. The reason Andrew was acquired was because they had great growth and great products with a very poor management team which meant they had little profit and a relatively low stock price. CommScope has an excellent management team and knows how to make money. If you look at the 2nd Quarter financial statement for CommScope you will notice the Andrew division now has profitability in line with the rest of the other divisions and the financial ratios are very good. Also the acquisition was done with a relatively few additional shares issued which will give accelerated future earnings growth.

The bottom line is WWEE is here and investing in it is a good idea. I selected CTV as my investment choice. This also means that the economies of developing and emerging countries will grow faster than more established countries like the US and Europe.