Stuck In Traffic? How To Profit…

| November 5, 2009 | 0 Comments

Yesterday morning I called my mom on my new mobile phone from Verizon.  My parents are visiting Scottsdale in February, and we needed to discuss travel plans.

Of course, mid-conversation the line goes dead.  I’m sure you’ve had this problem too!

I look at my phone and see there aren’t any bars.  So, I do the humiliating wireless walk around the office courtyard to find a signal.  I’m holding the phone up over my head.  I walk a few steps this way.  No signal.  I walk a few steps that way.  No signal.

Finally, after walking around in circles like a chicken with my head cut off, I got a signal.

This isn’t the first time I’ve had a call dropped since I joined Verizon.  The biggest irony is I just transferred my wireless service to Verizon because they’re supposed to have the best network.

Of course, Verizon’s not the only network having dropped call issues.  In fact, the network having the biggest problems with dropped calls right now is AT&T.

AT&T’s iPhone customers are complaining about dropped calls and slow data connections.  A recent survey showed that up to 30% of iPhone calls in New York City are dropped.

Talk about a problem!

Today’s networks just aren’t ready to handle the huge increase in mobile data traffic.

The proliferation of smartphones, messaging devices, streaming audio and video, netbooks, and laptops is causing an explosion in mobile data usage.  Carriers are scrambling to upgrade their networks to 3G and 4G.  But, the additional capacity alone won’t deliver fast enough data rates to ensure quality service for customers.

One smartphone generates as much data traffic as 30 regular phones.  And, one laptop with a data card generates 15 times more traffic than one smartphone.  That’s the equivalent of 450 regular phones.

Cisco Systems (CSCO) predicts mobile data traffic will grow fivefold from 2008 through 2013.  By that time, it will have reached 2 exabytes (2 billion gigabytes) per month.

If network operators don’t start working on this problem now, we’re going to see massive overload.  This would negatively impact everyone with a cell phone.

One solution to the problem is Deep Packet Inspection (DPI) technology.

DPI enables network operators to more efficiently manage traffic on their network.  By using DPI, they can move certain traffic into the fast lane and other traffic into the slow lane.  And, they can block harmful messages entirely.

Here’s how it works.

When data (email, webpage, music, video, etc.) is sent through the internet, it is broken down into small pieces called “packets”.  Each packet contains a header and a data field.

The header shows the source and destination of the data.  The data field shows the identity of the source application as well as the content of the message.  (I know it’s technical, just bear with me for a moment.)

In the early days of the internet, DPI was used only to filter out spam, viruses, spyware, and other dangerous messages.  Now, network operators want to use it to ensure a high quality experience for their customers.

Of course, this raises privacy and net neutrality concerns.  Many are opposed to giving network operators access to the private information contained in the data field.

But, the surge in mobile data usage is exposing the pressing need for DPI.

A number of networks are already using DPI.  Many more are implementing it every day.  And not too long from now, we should see an explosion in DPI.

How can we profit from this trend?

Several companies provide DPI solutions.  Most of the pure plays in the space are very small companies.  However, one technology giant offers exposure to the coming boom in DPI.

Cisco Systems offers several products with its version of DPI called Cisco Service Control technology.  With a market cap of $138 billion, CSCO is the 800 pound gorilla in the networking industry.

The company reported quarterly earnings yesterday after the market closed.  Revenue and earnings declined, but they came in much better than analysts were expecting.

More importantly, CSCO’s CEO said business is recovering and customers are buying more network equipment.

Here’s what he said, “There will be a good chance we will look back to see Q3 was in fact the bottom, that Q4 was the tipping point, and the recovery started in Q1 of fiscal 2010.”

CSCO is now forecasting revenue will grow 1% to 4% in the next quarter.  That would be the company’s first quarterly increase in revenue in over a year.

The company also offered three other signs of growing optimism.  They’re going to start hiring workers again.  They’re stepping up the pace of acquisitions.  And, they’re going to buy up to $10 billion of company stock.

Analysts are scurrying to raise earnings estimates.  Rising estimates are usually a strong catalyst for a stock.  Take a closer look at CSCO.  It’s one way to profit from DPI technology.

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Category: Stocks

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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