There's a wide range of runners and riders for investors looking to back the smartphone revolution.
In an earlier article I looked at how Apple's iPhone and the associated App Store has finally proved the vast potential of powerful smartphones to deliver software and media straight into consumers hands.
But Apple doesn't have the field to itself.
One attractive aspect of mobile for investors is the wide diversity of companies competing in the sector. This means that you can place your bets depending on how you think things will play out.
- For example, if you think hardware will prove the most profitable niche, you can invest in phone manufacturers like Nokia and Motorola.
- In contrast, if you think the handsets will become commodities and that platform holders will triumph just as Microsoft eventually did in the PC space, you can plump for the likes of Vodafone.
- Or maybe you think content is always king? In that case you can invest in creative companies who are exploiting mobile platforms, such as France's Gameloft.
The potential investment space is vast for anyone prepared to look across to the US and Europe. What follows is therefore just a quick introduction to some of the companies you might consider if you believe in the smartphone revolution and their relative attractions.
Apple (Nasdaq - AAPL) -- Price: $164.60
Buy US-listed Apple stock and you get two bites at the mobile opportunity -- its booming hardware business and the growing revenues from its 30% share of App Store sales. Apple shares have risen nearly 10-fold over the past five years though, as iPod sales and the launch of the iPhone and later the App Store built on the renaissance kickstarted by the fin-de-siecle iMac.
One unusual risk of investing in Apple is the health of its talismanic CEO Steve Jobs -- partly balanced by the company's extraordinary $31 billion in cash pile.
Nokia (Xetra - NOK) -- Price: €8.68
Nokia is the world's largest manufacturer of mobile phones, but you wouldn't know it from its recent performance. Profits fell 90% in the first quarter of 2009 and a further 66% in the second. As the de facto volume manufacturer, Nokia blames the worldwide recession for denting demand. Equally, however, despite grasping the potential of smartphones early, Nokia has failed to compete with Apple and Research in Motion, while cheaper Asian manufacturers threaten its low-end business.
In May, Nokia launched its Ovi store, its answer to Apple's App Store, to mixed reviews, and it's also trying to take on the Blackberry's messaging capabilities. One consolation might be that former US arch-rival Motorola (NYSE - MOT) is doing even worse.
ARM Holdings (LSE: ARM) -- Price: 125p
ARM Holdings is a bit of conundrum. The company designs and licenses microprocessors to manufacturers, and it makes most of the CPU chips in mobile phones. You'd imagine the explosion in mobile telephony would therefore have put a rocket under the share price, but the Cambridge-based company is up only 25% over the past five years. While ARM has outperformed the index in the bear market, its dominance certainly hasn't made it the Intel of the mobile era.
An alternative keep an eye on is Wolfson Microelectronics (LSE: WLF), which makes audio chips for the iPhone among other things. It last month reported plunging revenues and a gloomy outlook though.
Google (Nasdaq - GOOG) -- Price: $444
Google has rewarded investors with a 300% gain since it floated five years ago on the back of its dominant search advertising business.
Many investors think the party will continue as mobile multimedia goes mass-market and we all start surfing the Web from our couches, both directly -- mobile search could prove as lucrative as Internet search -- and also indirectly, due to Google's involvement in the open-source Android mobile operating system (though it's not taking any revenue share directly).
Vodafone (LSE: VOD) -- Price: 129p
Vodafone is the world's largest telecoms network company by turnover, and boasts 315m customers around the world. The £75 billion giant is peddling its own App Store rival, too, and it argues its direct ownership of the network and its billing relationship with customers will give it a distinct advantage over hardware manufacturers like Nokia and Apple.
All mobile phone operators are desperate to avoid becoming utility-like service providers -- so-called 'dumb pipes'. But after years of unconvincing attempts, the jury must be out on whether that's a realistic ambition.
Research in Motion (Nasdaq - RIMM) -- Price: $73.44
Canada's Research in Motion (RIM) has been the most convincing of the incumbent mobile companies in recent years. It has consistently improved its Blackberry devices, most latterly with the very well-received BlackBerry Curve, and its Blackberry App World is getting into its stride. RIM dominates the US smartphone market with over 50% market share, though it lags both Apple and Nokia in Europe.
Earlier this week Fortune magazine named RIM the fastest growing company in the world, with an 84% growth in earnings-per-share over the past three years.
Gameloft (EPA - GFT) -- Price: €2.73
Gameloft is one of the purest plays on mobile content available. The €200m French company has dominated the high-quality end of mobile phone games for years and, having established itself on iPhone, it's rushed to release games for Google Android and Blackberry App World, too.
Gameloft is also releasing downloadable games for traditional consoles such as Wii and Xbox, bringing it into the same territory as games behemoth Electronic Arts (Nasdaq - ERTS). The latter is its main rival on mobile platforms, but EA is also a far wider play on electronic games as it releases its big-budget games for all consoles, dwarfing its mobile revenues.
Imagination Technologies (LSE: IMG) -- Price: £1.55
Shares in Hertfordshire's Imagination Technologies are up over 300% in the past six months, after substantial stake-building by both Apple and Intel sparked talk of a bidding war. The company designs and licenses image-processing chips, with Apple last year signing up one of its high-end PowerVR processors for the iPhone.
Pre-tax profits jumped 56% in the year to 30 April, but takeover speculation looks likelier to underpin the share price for now than its operating performance.
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