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The 'Internet of Things' Is Now a Thing

28 February 2014 in Trading Ideas

It hasn’t been the most lucrative times for those investing in networking equipment maker Cisco Systems.

While a steadily increasing dividend payment has been a staple of the past three years, the company’s stock – once a high-flyer of the late ’90s tech boom – is trading exactly where it was in August 2009, and it spent 2011 and 2012 trading below that level.

Recent times haven’t been much kinder, as the stock has slumped about 3.4% since disappointing Wall Street with its most recent earnings report, which showed the impact of falling demand from emerging markets and uncertainty about Cisco’s product transition.1

However, for Cisco bulls (and some do remain), the company’s future promise centers around one key notion: the company’s CEO, John Chambers, remains one of the tech industry’s biggest cheerleaders for what many consider the next big unifying direction – the Internet of Things.2

Many of you may have begun to see the phrase in your investment reading, while others may have noticed the sprouting of new community motifs that relate to the Internet of Things or IoT — to the point of wondering, “Sounds interesting, but what is it?”

If you caught our recent story on the investing concept of “wearable tech,” you probably understand the Internet of Things already. In effect, wearable tech is a subset of The Internet of Things – a global ecosystem of connected physical objects that can sense, process and communicate with each other, without the necessarily inclusion of the human touch.

As a recent white paper by Fidelity Worldwide Investment explained, perhaps the most important driver of the Internet of Things meme has been the rapid proliferation of the smartphone, which has raised our consciousness to the idea of “always-on” connectivity. If you think about it, the phones in most people’s pockets today are really just Internet-enabled mini-computers that just happen to be more powerful than the average PC just 10 years ago.3

And now, the reams of data created by – and exchanged with – mobile devices have a destination: the cloud, which can store infinitely more information remotely. With all that data just a button away, the process of Internet-enabling and connecting a wide variety of objects could be the next logical step.

Of course, investors have already caught glimpses of this new direction: the continually rumored Apple TV, Nike FitBands, and Google’s $3.2 billion purchase of Nest, a maker of a so-called learning thermostat.

What’s in store next in this vast field we can maybe only imagine (Samsung, by the way, has already built a WiFi-enabled washing machine that you can operate from your phone, in case you had any ideas), but one can certainly understand why Cisco intends to get in on the act.

You may be enticed to do the same after perusing a few of the new motifs in the Community Catalog.

1Richard Waters, “Cisco Unnerves With Profit Margin Squeeze,” FT.com, Feb. 12, 2014.

2Don Clark, “Cisco CEO John Chambers Still Biggest ‘Internet of Things’ Cheerleader, WSJ.com, Jan. 7, 2014.

3Fidelity Worldwide Investment, “Investing in the ‘Internet of Things’,” December 2013, http://www.fidelityilf.com/market_news/21Century/pdf/internet-of-things.pdf, (accessed Feb. 26, 2014).

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