Tech stocks took a huge hit today, following the house’s failure to pass a bailout plan intended to rescue the nation’s financial system and the Dow tumbling 778 points. To give a sense of how it hurt the broader telecom, wireless and communications-related stocks, of the 25-or-so stocks I regularly monitor, only one increased. Clearwire (NSDQ: CLWR) jumped nearly 8 percent or 90 cents to close at $12.50 a share, and that was likely because Sprint (NYSE: S) launched its first commercial WiMax network in the U.S. But companies like Motorola (NYSE: MOT), Nokia (NYSE: NOK), Palm (NSDQ: PALM), Qwest, Qualcomm (NSDQ: QCOM) and Sprint all saw double-digit percentage declines.
So, the big question is will the nation’s financial problems be temporary, or will it hurt the wireless industry long-term? The timing is interesting because wireless is undeniably hitting a stride, and is entering a new phase with the popularity of the “mobile Internet” and the iPhone, which has educated people that they can use their phones for more than calling and texting. What do you think? Do you have any examples?
Supporting information for both sides of the argument after the jump…
Yes, wireless will be affected:
– In this scenario, at the end of the day, wireless startups and mobile companies facing periods of growth won’t be able to go unaffected because they may not be able to get the funding they need if there’s a banking crisis and they don’t have access to capital. If company’s aren’t able to go public, and if other companies don’t have the capital to make acquisitions, there’s going to be fewer incentives for VCs to invest. But more troubling is that even for the best ideas, the money might simply dry up, as TechCrunch notes. Typically, the limited partners in a fund commit to contributing a certain amount of funding to a fund, but don’t actually pony up the money until VCs decide to make an investment and call for it. But as we saw in the last boom/bust, wealthy individuals and institutions backed out on their VC commitments after they saw their stock and real estate portfolios decline.
No, it won’t. Wireless will be resilient:
– Emerging markets will be the saving grace, and the mobile-phone industry will boom despite the current global financial crisis, reports CNet, which quotes a report from Portio Research. In the report, which came out today (and would imply that it did not take into account today’s news), the analyst firm predicts that 80 percent of the world’s population will own a cellphone by 2013, representing 5.8 billion people. China and India will be the big contributors. “The mobile industry continues to confound expectations with spectacular accelerating growth,” the report stated. However, the prediction is for revenue margins to fall, meaning that the majority of people won’t be using high-end data services for the most part. ARPU (average revenue per user) will decline from $23.20 in 2005 to $15.80 by the end of 2013. Still, most believe that for a majority of people in developing countries, their first interactions with the Internet will be over the mobile phone, not a PC.