Morningstar's Take on The Consumer Electronics Show

Equity analyst Brian Colello describes his outlook for global technology companies after attending the much-hyped Consumer Electronics Show in Las Vegas

Brian Colello, CPA 14 January, 2013 | 10:48AM

This week we attended the Consumer Electronics Show (CES) in Las Vegas and viewed a wide range of electronic devices. We didn't see any products or announcements that were game-changers and we don't expect to immediately change our long-term theses for any firms in our coverage, based on CES. Rather, we view much of the news from CES as evolutionary, whether it be faster, more integrated chipsets, higher-quality HD TVs, or differentiated computing form factors, such as the phablet (phone/tablet) or the large tablet/Table Top PC.

Below are our initial key takeaways from the army of product announcements at the event:

Key Takeaways

A host of mobile processor-makers, such as Qualcomm (QCOM), Samsung, Nvidia (NVDA) and Intel (INTC), upped the ante in the smartphone space, announcing increasingly faster processors with impressive specs.

• We view Qualcomm as a potential winner, especially as its Snapdragon 800 series integrates 802.11ac Wi-Fi and poses a threat to Broadcom's (BRCM) connectivity chip business. We view this product line as an extension of Qualcomm's lead in the mobile processor industry.

• Samsung's Octa-core processors also appear impressive and could be the processor of choice in the firm's Galaxy S4 smartphone next year, thus maintaining a sizable portion of the processor market. In turn, outside suppliers may be unable to break into Samsung's flagship products next year, other than perhaps Qualcomm's supply of processors into the CDMA versions of these devices.

• Processor enhancements continue to be an incremental positive for ARM Holdings (ARM), but such news is more than baked into the stock price, in our view. On the other hand, these chipsets pose further risks to Imagination Technologies Group (IMG) as Qualcomm, Nvidia, and Samsung do not rely on Imagination's graphics IP.

• Based on these announcements, we recognise that Apple (AAPLwill need to push the envelope in its processor development for its future iPhone and iPad launches in the coming year, and we anticipate another round of new processors with any potential iPhone 5S launch in 2013.

We saw few notable smartphone and tablet launches at CES, perhaps in part because of the high number of new devices released before the holiday season. However, Huawei and ZTE's phablets (phone/tablets) and smartphones appeared interesting, especially if they are sold into the Chinese market at significant discounts to other Tier-1 Android-based devices.

We spent some time with a variety of Google (GOOG) TV products (both Smart TVs and over-the-top boxes) and came away impressed with the user interface. We still see some holes in the overall experience, but CES highlighted that the eventual merger of live and streaming video content is on the way. Based on the inroads made by Google, Samsung, and others in this area, Apple may need to crack the code on TVs sooner rather than later.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Apple Inc188.84 USD-1.03
ARM Holdings PLC  -
Broadcom Corporation  -
Google, Inc. A1,159.27 USD-0.07
Imagination Technologies Group PLC  -
Intel Corp55.11 USD-0.77
NVIDIA Corporation265.38 USD-0.57
Qualcomm, Inc.59.86 USD0.67
About Author

Brian Colello, CPA  is a senior stock analyst with Morningstar.