Nine Great Innovations, Opportunities and Challenges for 2012 - Slide 3

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GP Bullhound predicts that stand alone hardware or content propositions will find it increasingly difficult to compete as the trend of closely integrated hardware and content solutions accelerates.

Whereas the Apple iPhone smartphone remains the leading example of this successful integration, we’re starting to see a number of other sectors and vendors to follow.

The tablet and eReader markets are examples where purchase decisions are increasingly made based on the content ecosystem that the tablet can provide, rather than technological differences between the tablets. The wildly successful Kindle Fire, one of the few tablets in the market able to take a slice of the iPad’s dominant market share, is currently retailing for $50 below cost with Amazon’s margin being made on their content. This has also been an important differentiating point for the likes of Amazon and Barnes and Noble with their Kindle and Nook devices, respectively. Such pricing strategies highlight the importance of creating a content ecosystem.

Carrying over into the mobile sector, HTC acquired a number of content companies in 2011, including Saffron Digital, a UK video streaming company, which it bought for £30m, Onlive, the California-based games company, for $40m, and also $10m on a 10 per cent stake in KKBox, the Taiwanese online music service. HTC’s CEO, Peter Chou, was recently quoted in the financial times as saying “having leading-edge technology is no longer enough. It needs to be a holistic experience of hardware, software and content. What users really care about are the day-to-day experiences.” Motorola also acquired SetJam, a television and movie directory.

Retailers and media companies have also made acquisitions to integrate with their channels. For example, Tesco acquired Blinkbox in April, integrating online and physical copies of DVDs; Media-Saturn acquired 24/7 Entertainment, the mobile content distributor; and Time Warner acquired Flixter in a plan to boost their cloud-based content plans.

Companies to Watch: Spotify, we7, YUDU, ‘txtr, Smashwords, Easypress Technologies, SoundHound, and SoundCloud

As technology analysts and advisors, GP Bullhound expects a volatile 2012 with pockets of great innovation, opportunity and new successes, but also continued challenges as commoditization will wreak havoc to some industries, and hype will remain in others creating near-term opportunity and in some cases long-term issues.

We are entering the new year under rather unusual circumstances. The macroeconomic outlook remains cloudier than ever due to unprecedented uncertainty around a number of major global economic and political situations including the fate of the Euro and the European economies, the status of the U.S. recovery and the role of the U.S. dollar, nervousness in recently outperforming emerging markets, like Brazil, and the global impact of a slowdown in China just to mention a few.

Some things do remain the same however such as the continued global Internet trend, the rapid mobilization of users and applications and the inevitable trend of increased online social interaction.

In 2012, GP Bullhound expects Internet to continue its inevitable shift from being an information and content channel to a trusted platform for socializing, sharing, communicating and most importantly for 2012, consuming. Furthermore, they expect a lot of opportunity to come out of the rapid adoption of mobile online activities, particularly in emerging markets. They also expect to see some much needed innovation in the enterprise software arena, which is now well behind the consumer technology curve.

The macroeconomic outlook however remains cloudier with unprecedented levels of uncertainty on a global scale. In an ever-more connected and competitive global technology world, there will be little room to hide without differentiated products or services. The value of IP will continue to rise, while commoditization will punish the me-too players. As a consequence, they are seeing investors and acquirers becoming increasingly willing to travel far to find best-of-breed companies, supporting an anticipated rise in cross-border acquisitions and investment activities. All in all, they look forward to an interesting 2012.

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