Technology Trends

Top Technology Trends For 2008

If you're looking for the biggest and best investment opportunities, the information technology sector would be judged by most to be your best bet. Even with all their ups and downs, technology stocks still offer investors enormous gains. And, there seems to always be at least one strong, emerging technology niche - even when the overall market is ice cold. The challenge with investing in technology, however, lies in the nature of technology itself...it's always changing. While I don't have the corner on emerging technology trends, I do have some educated guesses about major technology themes this year.

Before we dive right into my 2008 expectations for the information technology sector though, I did want to recap and grade my 2007 forecasts.

2007 Prediction #1. Web 2.0 will become the norm rather than a novelty. I think I was half right here. It's surprising how few companies are still not maximizing their web presence by building sticky websites (not that it would work for all companies, like GE for instance). We are seeing more 2.0-ish stuff though. Facebook and MySpace continue to be prime examples.

2007 Prediction #2. Internet-based cable television will start to become the preferred service choice. Yep, we saw more players pop up into the arena, and we saw more users adopt the technology. I think the pace will quicken in 2008.

2007 Prediction #3. Integration of all the gizmos. Apple's iPhone....need I say more? OK - I will. LG Electronics rolled out their sleek touch-screen, all-purpose phone later in the year. I see more on the way.

2007 Prediction #4. Practicality will topple novelty. My only 'grey area' forecast, I have to honestly say, was more wrong than right. Bells and whistles - useless though they may be - are still in demand. Facebook and MySpace - my prime examples of 'good' web 2.0 - are also my good examples of silliness...most people still use those sites strictly for entertainment, without any particular gain.

So what's in the pipeline for tech in 2008? Here are my best guesses.

Prediction #1: The transmission of data (plus telephony and television) via the Internet will finally start to bottleneck enough to make our capacity problems very evident.

To the average user (me and you) all seems well when it comes to our ISP...we turn the computer on, and we browse the web just like always. Under the scenes, however, the infrastructure (coaxial cables and telephone lines) are almost to the point where they're maxed out. In short, capacity hasn't kept up with the ability to create data to transmit.

The investable opportunity here is clear. Companies that can (1) shrink the size of files to be sent, or (2) increase the capacity with which we send data, stand to gain from the still-underestimated problem. Broadcast International (OTCBB: BCST) does the former, while Verizon (VZ) is still working on the latter. There are hundreds of other companies with their hat in the ring though. As IPTV and VOIP grow (and compound the problem), I can see even more players surfacing.

Prediction #2. Solar power will finally be recognized as a viable source for electrical power production.

We saw solar power stocks kick into high gear in late 2007. They consequently gave much of that gain back in early 2008, but their potential turned a few new heads. Now that they're on the radar, they should have an easier time making forward progress.

To be clear, I still see solar power as a young and shaky industry...many players could fall before it's a self-sustaining venture. But, if you can find the right player, I think your portfolio could do quite well. Not that any of these solar power stocks are better (or worse) than others, but I'm watching SunPower (SPWR), First Solar (FSLR), Evergreen Solar (ESLR), and LDK Solar (LDK).

Prediction #3. 'Local' Internet will start to emerge, though still should be mostly undetected by the casual surfer.

As small as the world has become thanks to free transmission of information over the web, the need for 'local' (geographically speaking) services has never gone away. Though the Internet has traditionally given the same search results to residents of Hawaii that it gave to resident of Maine, that hasn't been much help if you're looking for a place to get some new tires put on your car.

Thus, the idea of localizing search results was introduced a couple of years ago....with very little success. While I don't think it will be a splash in 2008, I do think enough competitiveness has been injected into the notion that localized search can make a dent.

Prediction #4. Open-source software and applications will really start to dethrone the industry-standard Microsoft stuff.

The idea of free 'alternative' operating systems - mostly Linux - has been greatly aided by Nicholas Negroponte's 'One Laptop Per Child' mission; his XO laptop costs about $200..less than the cost of the Windows software alone for a new PC or laptop. Moreover, this free software can be almost as good if not better than comparable applications that you'd normally pay for. Seeing how much it doesn't have to cost to acquire technology, corporations are starting to rethink their software budgets. Don't think for a minute this trend doesn't have Bill Gates and Steve Jobs worried.

Of course, I don't know how much profit there is when your product is free, so I don't see a lot of investability here. I guess the part you need to know as an investor is that this could be trouble for Microsoft (MSFT) or Apple (AAPL). Of the two, I think Microsoft is most vulnerable. I think Apple could shrug off any major problems, as the crux of their business seems to be drifting towards devices and entertainment....like the iPhone, iTunes, Apple TV, and computers that actually work.

Are those four emerging technology predictions the only four I have for 2008? Nah - they're just the four most interesting, and perhaps the most meaningful. As new ideas emerge, I'll be sure to detail them in future editions of 'Technology Trends'. Until then, I hope information technology treats you and your portfolio well in 2008.