Highlights from the Gilder Forbes Telecosm Conference

By Ian Wyatt, Big Idea Investor | FMCN | Oct 04, 2005 | comment

HIGHLIGHTS FROM THE GILDER|FORBES TELECOSM CONFERENCE

In late September, I had the wonderful opportunity to attend the 9^th Annual Gilder Forbes Telecosm 2005 conference.  Telecosm is not your typical investor conference, but rather a gathering of technology executives, venture capitalists, institutional investors, and technology entrepreneurs. 

With our investment strategy at Rising Star Stocks closely tied to new and emerging technologies, Telecosm is an outstanding way for me to stay on top of the latest trends that will allow us to place our investment dollars on some of the best and brightest ideas that are on the verge of coming mainstream.

If you're interested in the latest and greatest technologies and outstanding emerging growth investment opportunities, I encourage you to start a 30 day complimentary trial to Rising Star Stocks and immediately receive a free copy of my 38-page Special Report titled Four Disruptive Technologies for 2005 as a special signup bonus.  Just click here now to start your trial membership and get your copy of the report today.  Inside you'll find analysis of our top four technology stock picks for 2006 and beyond!  

The conference is led by technology futurist and editor of the Gilder Technology Report, George Gilder.  Other notable speakers during the two day conference included Forbes editor-in-chief Steve Forbes, Wired editor-in-chief and author of The Long Tail Chris Anderson, Forbes publisher Rich Karlgaard, former venture capitalist turned author Andy Kessler, and Forbes/Wolfe Nanotech Report editor Josh Wolfe, as well as executives from Broadwing, Equinix, Cogent Communications, Intel, Qualcomm,  National Semiconductor, and Sun Microsystems.

Presenter: Steve Forbes

Forbes President and Editor Steve Forbes has always been one of my favorite speakers at these investor forums.  I first had the opportunity to meet Steve and hear him speak at the 2003 Telecosm conference, and again this August at the Washington D.C. Money Show. 

Since running for President of the United States in 1996, Steve has continued to push his flat tax agenda through his magazine, television show (Forbes on Fox), and most recently through his book Flat Tax Revolution: Using a Postcard to Abolish the IRS. 

Steve is a true believer in capitalism ' an enthusiastic and optimistic promoter of entrepreneurship, and the ability of the American people to achieve great things economically if only the U.S. government would get out of the way and allow the people to create business, invest capital, and take risks with meaningful rewards. 

The global economy is experiencing outstanding growth in recent years, and the U.S. is no different ' growing GDP at 3.5 ' 4% annually since the Bush tax cuts of 2001.  The U.S. has been experiencing increased productivity, largely due to technology developments, with small and medium cap-ex spending increasing.  U.S. corporations are strongly positioned, holding more than $2 trillion in cash.  Turning to the American people, they are also financially stable despite what the media may report, according to Forbes.  With total liquid assets after subtracting debt at $27 trillion, the U.S. people clearly have a significant amount of money in non-real estate holdings such as mutual funds, stocks, bonds, and CDs. 

Turning to the global economy, Steve appears to be a big proponent of China, but is concerned that the Communist government may not be fully embracing capitalism and entrepreneurship (they are, after all, still Communist).  In order to achieve long-term success, he believes that China needs to reform, support entrepreneurship, and begin embracing new companies by strengthening property rights. 

Forbes believes most economists and talking heads have the trade deficit all wrong, and that it is a meaningless metric to consider when determining a country's prosperity.  Many equate a trade deficit with losing money, which Forbes believes to be an erroneous finding.  Steve argues that since trade inherently calls for the entering into a financial transaction by two parties, both of whom believe is in their best interests, the idea that running a trade deficit is the same as losing money is ridiculous.  He points out that in 350 of the last 400 years the U.S. has run a trade deficit ' and at the same time has grown into the world's greatest economy. 

As author Andy Kessler said so succinctly in Running Money, 'We think, they sweat.'  The idea is that we develop technology and innovations here in the U.S. and then offshore the manufacturing to countries like China and Korea.  Goods are manufactured overseas, providing significant cost savings to the American consumer, and then imported back into the U.S. (creating a trade deficit).  While the U.S. would run a trade deficit on such a transaction, the bulk of the profits are made by the U.S. companies, and the U.S. consumer is the main beneficiary of the cheap offshore labor that drives prices lower. 

Presenter: Josh Wolfe

Forbes/Wolfe Nanotech Report Editor and nanotech entrepreneur Josh Wolfe provides us with some great insights into the nanotech world, a sector we wrote about in our recently released Special Report, Four Disruptive Technologies for the Next Decade (get your complimentary copy of our 38-page Special Report today when you join Rising Star Stocks for a 30 day free trial membership ' just click here now).  It should be no surprise that nanotech was one of the four technologies we discuss in this report.

Wolfe believes that nanotech is the source for the next technology revolution, following in the footsteps of the PC, Biotech, and Internet/Communications markets.  According to Josh, nanotech is the next big thing, and is on the verge of explosive growth after +20 years of scientific progress. 

Nanotech is more than simply scaling down and making things small.  Wolfe defines nanotech as 'the engineering of matter at scales of less than 100 nanometers (nm) to achieve size-dependent properties functions.'

The U.S. is leading the way in government spending, and other countries are responding by upping their investments in nanotech. Total U.S. spending is one quarter of the total investment in nanotech global research, with U.S. scientists releasing one half of all research papers on this technology. 

Wolfe believes that we are on the verge of explosive growth in nanotech, and believes that the media will bring nanotech mainstream with individual investors.  He expects dot com type hype and an excitement within the next one to two years, and anticipates a Netscape type IPO within the same time period.  He believes the nanotech IPO market should heat up in late 2005 and 2006.  While there is lots of excitement in the nanotech space, Josh notes that it is likely that only one in ten funded nanotech companies will succeed.  For nanotech investors seeking diversity, his research and investment firm LUX will soon be launching an electronically traded fund of nanotech companies.  We'll be sure to let you know the details when the fund is launched. 

Hot Topic: Last Mile Services

One of the most interesting topics of this year's Telecosm conference was last mile Internet services ' or solutions for increasing bandwidth in the home. 

We have previously discussed WiMax in Rising Star Stocks and currently follow Alvarion (Nasdaq: ALVR), a provider of hardware for point-to-point and wireless WiMax. 

At the conference we came across a very interesting last mile solutions company.  The publicly traded company licensed its technology from Lucent, and its management team is largely comprised of ex-Lucent execs.  The company provides a residential gateway for high speed broadband access at speeds significantly faster than DSL or cable internet.  The company's solutions can provide last mile connectivity over copper phone lines at 25 mb/second, and at 100 mb/second over Ethernet! 

To learn more about this company, and their last mile hardware solutions, I encourage you to review the just-released October 2005 issue of Rising Star Stocks.  Join Rising Star Stocks.  Today you can start your free 30 day trial to Rising Star Stocks, immediately download the October issue of the newsletter, and also receive a complimentary copy of our just released Special Report titled Four Disruptive Technologies for the Next Decade.  Just click here now to start your 30 day trial today.

Best Regards,

Ian Wyatt
Publisher
Big Idea Investor

After being featured in the September 2005 issue of Rising Star Stocks, Globalscape (OTC BB: GSCP) returned an incredible 264% in just one month's time!  Could this last-mile Internet broadband solutions company be the next rising star to soar to new heights? Join Rising Star Stocks for a 30 day free trial today and receive more information on this up and coming company and other emerging micro-cap stocks!

INVESTMENT IDEA: FOCUS MEDIA HOLDINGS

By Ian Wyatt, Editor-in-Chief, Growth Report

If you are a regular reader of Big Idea Investor, then it is no secret to you that the Growth Report is especially bullish on the prospects of the Chinese economy.  In fact, so bullish are we on China we that we recently released a 52-page Special Report titled China Investment Report: Inside the Booming Chinese Internet Sector.  Our Special Report includes reports on seven of our favorite Chinese stock picks.  The report can be yours if you accept a 30 day free trial to the Growth Report today.

Don't want seven Chinese stock picks for free? Then how about one that's not in our Special Report?  Our investment idea this week is a Chinese company that specializes in targeted advertising.  And no, they do not operate a search engine.

Advertisers in China continue to seek competitively priced advertising that allows them to reach affluent, white collar workers with disposable income. Advertisers in China are faced with numerous challenges. First, consumers are for the most part not brand focused - meaning that price is often the determining factor when making a purchase. Second, products are often times copied and resold by other retailers. Third, without widespread pay-for-television, it is difficult to target consumers with appealing demographics.

CCTV is China's dominant television advertising platform, reaching over 300 million households. While CCTV does remain the standard television ad platform, many advertisers are not satisfied reaching every television watching household in China, and would rather target people with the 'right' demographics.

With this in mind, Focus Media (Nasdaq: FMCN) aims to provide a solution for advertisers seeking exposure to consumers with higher quality demographics at a cost that is appealing to advertisers.

Founded in 2003, Focus Media has grown rapidly from a startup to a national out-of-home TV advertising network reaching 20 million viewers per day according to Sinomonitor. The company came public in July 2005, raising $111 million through an offering of 7 million shares at $17.00 per share. Focus Media operates in two business segments focused on providing out-of-home television advertising to consumers. The two segments include commercial and point of sale.

The company's commercial network is the core business. The commercial network totals 23,000 displays in 14,000 locations. The company directly manages its network in 23 cities, and in 13 of these cities, Focus Media's network covers 70% of commercial buildings. The current focus has been on tier one cities, or those with populations greater than one million people. However, as the company maximizes exposure in the larger cities, the strategy has been to expand into smaller cities as well.

Focus Media contracts with commercial office building owners or managers and rents space in a building's lobby and/or bank of elevators in which the company installs flat panel audio/visual televisions. The company incurs the cost of installing and maintaining flat panel displays on the premises. Property owners or managers receive a fixed fee for renting the space, and do not share in the revenues from advertising that Focus Media sells on the network. Most property managers or owners view the installment of the flat panel devices as an enhancement to the property, and view the additional income as icing on the cake.

Focus Media then sells commercial space on its network to advertisers who wish to reach consumers at a time when their attention is focused on the advertisement. Advertisers have found individuals who work in locations where Focus Media's network is in place to have desirable demographics - workers with greater disposable income than the average television viewer.

Get Growth Report's complete report on Focus Media Holdings today, which includes full financial and valuation analyses, when you sign up for a 30 day free trial to Growth Report today! You'll also receive access to Growth Report's 52-page China Investment Report ' Click here now ' it's free!

The company's direct network operates on a 12-minute cycle, with advertisers typically purchasing a 30 second spot that rotates for 12-hours of the day when employees would be in commercial buildings. The company also sells 5 second and 15 second spots to advertisers. Advertisers purchase space on a per city basis. For example in Beijing a 30 second full day rotating ad costs advertisers $30,000 per week, while a 5 second ad in Shenzhen would cost $4,700 per week. The company's rates are based on the demographics of a specific city network, and also upon the total viewer numbers.

Launched in May 2005, Focus Media's Point of Sale advertising network aims to provide advertisers with the ability to target consumers at the point of purchase ' at the time they are in a store considering products for purchase. Studies indicate that some 60 ' 70% of purchase decisions are made while the consumer is at a store, and point of sale advertising can influence a purchaser's decision.

While conventional point of sale advertising might include posters or large display areas, Focus Media is taking this to the next level by installing flat panel displays in retail locations and selling airtime to advertisers in a similar manner to what the company has done in the commercial space.

Under similar terms to its commercial business, Focus Media pays retailers for the right to place its displays within their stores. For the retailer, this is again extra revenue generated outside of core operations, with nearly 100% gross profit margins. Additionally, Focus' display advertisements may spur additional sales of products, boosting in-store sales. In a typical hypermarket (a large retail store selling a wide variety of goods), Focus will install 30 ' 50 display units, mostly 17' LCDs along with a few large 42' plasma displays. In supermarkets, the company will typically install fewer than five LCDs, and perhaps one or two in a convenience store location. Displays are placed at the locations throughout a store where management believes the company can best influence a purchaser's decision.

Advertisers are charged on a per store per day basis, in a tiered system that accounts for the location and quality of a store. Focus also groups locations together to make it easy for advertisers to, for example, target top quality stores in Beijing and Shanghai only.

Focus Media currently has roughly 12,000 displays through its point of sale network. As of the end of the second quarter, the network included 1,835 retail stores, including 439 hypermarkets, 674 supermarkets, and 722 convenience stores.  The company plans to invest $14 million in the point of sale advertising network in an aggressive push to ramp revenues in this new division.

We are optimistic about the prospects for Focus Media.  We believe the company is offering an attractive alternative to local and global companies that wish to reach viewers through television commercials.  Focus Media aims to target a higher demographic user than regular television by placing its flat panel displays in locations that will be trafficked by consumers who earn more money and have greater disposable income than the population on a whole.  With a network that reaches some 20 million consumers per day, Focus Media is able to offer advertisers a wide reach among consumers in China's largest cities, and is currently doing so for prices that are competitive or even discounted to alternatives. 

Focus Media is currently on the Growth Report's watch list.  Join Growth Report for a free 30 day trial membership and we'll be sure to alert you by email if or when we add shares of Focus Media to our investment portfolio.  Start your free 30 day trial today by clicking here.

Are you interested in more Chinese companies?  Growth Report recently released a 52-page detailed report titled China Investment Report: Inside the Booming Chinese Internet Sector.  This special report, along with our complete report on Focus Media, which includes complete financial analysis, is available to you today with a free 30 day trial to the Growth Report.  Click here now ' it's free!

Comments on this article

There are no comments for this entry yet.

Add your comments