RFID Stocks

RFID (radio frequency identification) technology should exhibit growth in 2004. According to economists, RFID Stocks being adopted more rapidly in 2005, and it is closely linked to fundamental improvements in the warehousing, logistics, transportation, retail, and some other sectors.

VOIP, Wi-Max, and other related communications technologies. They think VoIP can really take off in 2004, and there will be some good opportunities to play this trend via stocks such as EGHT, IBAS, VOCL, DDDC, ALVR, ISEC, AUDC, NRRD, and INAP. Their favorites in this group are EGHT and ALVR.

They think Linux begins to look more attractive, via stocks like RHAT, in 2004. So long as consumer resistance continues to build against Microsoft's relatively weaker products, then Red Hat should continue to grow.

TCP/IP-6: The Internet currently operates with TCP/IPv4. Moving to IPv6 will enable and stimulate the development of new applications. Ipv6 should also lead to IP telephony on quite a large scale.

High Definition or Digital TV should experience more growth in 2004 and into 2005. One name They like in this space is Spatialite (HDTV:Nasdaq).

Modest technology drivers for certain technology stocks would likely include increased consumer adoption rates, increased levels of broadband access, higher adoption rates for wireless technologies, and a continuing trend toward embedded intelligence (chips; storage, etc)

Huge up move in the tech sector, largely because significant and sustainable growth (particularly of the large cap technology RFID Stocks) is difficult. First, in 2003 we came off our trough lows so the growth in 2003 was off an unsustainably low base. Second, the technology industry evolved from having been more vertically integrated to being composed of more technology-specific industries. Two or three firms are now established as leaders of a sector with scale and low-cost advantages (think Microsoft, Dell, Intel, Applied Materials, etc.). Consequently, opportunities for market share shifts between companies in these more mature sectors are smaller.

Third, the five main technology drivers that propelled growth during the last 5 years are now mature. These trends are TCP/IP, GUI Interfaces, microprocessors, relational Databases, and the Internet (www). However, emerging growth in technologies such as VOIP and Linux should provide growth in the smaller cap tech sector. Other growth themes include companies with a dominant leadership position, which can leverage that position with continued market share gains. Examples include Dell and Qualcomm. Companies that can leverage the Internet in delivering new services to customers should do well; in particular, companies that facilitate bill remittance and payment via the web. (Although not close to this particular name, Checkfree comes to mind as an example.) Lastly, IT services companies should begin to see budgets loosen up allowing for new contract expenditures. This should benefit RFID deployments, likely to occur in the back half of 2004, and benefit the RFID Stocks of Symbol Technologies (whose “monololy-like” domination of the AutoID Bar Coding segment will be extended with growth in its RFID business).

There has been a solid improvement in RFID Stocks fundamentals during 2003 expect deterioration in tech fundamentals in 2004, but neither, surge in fundamental strength across the board, either. RFID Stocks can move on economic benefits at companies or new technology drivers, or a combination of the two. For 2004, in general they would expect RFID Stocks to move more on company economics than new technologies.

Fundamentally, they could see growth in corporate operating cash flows. They would also expect to see a cyclical investment cycle, such as ongoing rotations out of semiconductor stocks and into software. As companies continue to tighten their belts, they would also foresee continued declines in operating costs and accompanying improvements in operating leverage. Growth cyclical propelled out-performance in 2003 as technology stocks began to discount the increased operating leverage in their business models.