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The Tech Bubble Is Brooding – Tekedia Intelligence Predicts 2014 For It To Happen

By
Tekedia Editors
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1

 

Tekedia Intelligence has concluded its study on the triggers and enablers of tech bubble. Our data shows that the industry is headed for a bubble.  But it will take three years for it to mature. There will not be any tech bubble until after 2014 especially in the United States.

 

Last few weeks, we reported that the industry is healthy because the big players are choosing well. They are investing in very healthy and strong companies and jacking up the valuations of those companies. In that report, we quoted the Economist thus:

 

But trouble may be brewing out of sight: although 80% of publicly-listed tech companies are trading within their historical valuation ranges and recent IPOs are few in number, valuations in the private market are skyrocketing too. There is a lot of hype surrounding the upcoming IPOs of high-profile Internet companies such as Facebook (which is valued at around US$76bn, more than Boeing or Ford), Zynga, a virtual gaming company valued at around US$9bn, and Groupon, which sells online coupons to its subscribers and is valued at around US$15bn-20bn. By contrast, Twitter, a highly popular social-networking site also tipped for an IPO in the near future, is valued at around US$7.7bn, although it has yet to find a profitable business model.

 

Immediately, we commissioned our own study using our economists who looked at some numbers in the US. We looked at the recent data available in AOL Tech Crunchbase. In other words, we wanted to know what people were raising in new startups.  Our data is surprising. Raising funds have become easier even for the smallest and simplest idea in Silicon Valley.

 

A start-up company called Color – that makes apps so that people can share photos without logging in got
$41 million. The product was so bad that the bad comments exceeded the good ones. Yes, investors are looking for the next Facebook and why not spread money around? They are putting money in any idea that flies across them. This is a very bad sign in making. More on Color later today as we have a post on it.

 

The arrival of LinkedIn in the stock exchange was a wake up sign in the tech world. It traded in the three digits before it cooled. That euphoria was a sign of non-fact based exuberance and that is a sign of bubble. Pandora is holding up since it launched, but Tekedia things those companies are not receiving good analytical valuations. They are over priced because they trade many multiples than their revenues. Though Skype got billions more than its 2010 revenue, Microsoft is such a healthy beast for us to worry. The investors are those that will crack the market and not the behemoths like Microsoft.

 

So, these are our numbers which do not look good and some happenings in the industry:

  • The Russian Yandex raised $1.3 b at its IPO. This is a search engine for Russia and it leads the market there. But recall that Russia is a risky place to do business because of government controls. Yet, investors hoping to catch the next Google put that money

-U.S. is now the place for foreign companies to raise tech funds.  In U.S., they like technology. Contrast with Nigeria where all tech companies lag the market. Chams is a junk stock, the same goes for Omatek and many other technology firms in the Nigerian Stock Exchange.

  • In 2010 U.S. exchange, aggregating all the IPOs, 32% were American companies, China provided 21%, UK 9% and Germany 6%.

 

The valuations are beyond reason for some. Most of these companies have no revenue model. The  numbers we picked from some legacy companies in the Second Market confirms our fears.

 

SecondMarket is an SEC-regulated alternative trading system, registered broker dealer and member of FINRA, MSRB and SIPC. SecondMarket has brought significant market structure to these asset classes, and in the process, improved liquidity for sellers and enhanced opportunities for investors.

 

The numbers in SecondMarket is troubling. People are hedging their fortune on the likes of Facebook, Zynga,etc without caution. Yet, these ones are healthy and will survive the crash. The worries are the small fringes that receive millions.

 

Of course, there are still good deals in the market. Blackberry acquisition of Scoreloop is a good one. Scoreloop is a German gaming company. Price was not disclosed but insiders noted that it was tens of millions for a company with no major revenue.

 

The complete report, :The Tech Bubble Is Brooding, from Tekedia will be released when we finish the formatting in PDF. It will come as a PDF document and available free on our site. But remember that in 1998, the ramp up to the Tech Bubble , we had 19% of all IPOs to be tech and 17% foreign. Today, it is 32% and 39% foreign. Either Americans are not creating enough companies to go public or that people have figured that American tech investors are not getting the valuations rights, we will help you answer those questions.

 

This is Tekedia – we have a foundation of having won a 2010 “Book of the Year” when our founder edited a groundbreaking book that shaped the future narratives of nanotechnology and microelectronics. We have that tradition and you will like this report on tech bubble.

Averting The Dangers Ahead – Preventing Food Crises in Africa Through Technology And Regulations

By
Tekedia Editors
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0

In a recent study by the London based non-profit, Oxfam, focusing on food supply around the world in the future, it noted that we are not addressing the food supply sustainability model very well. Oxfam said that the world is “sleepwalking” as it relates to food.

 

Rising food prices could escalate tensions around different regions of the world.  The Arab Spring was precipitated among other factors by food shortage and its prices. Oxfam in a paper titled, “Growing a Better Future” noted that prices of staples may rise up to 120% -180% of their present costs by 2030.

 

The key contributing factors are climate change, population, market price speculations, poor distribution channels and we add, lack of technology for preservation of food. Tekedia thinks that lack of technology to preserve harvested produce in Africa is a major concern for all policy  makers.

 

Oxfam concludes that this trend can be revered if government enforces the right regulations, especially in the commodity market where Wall Street speculates the prices out of reckless abandon, and addresses the problems of the small farmers. One of those will surely include helping them to preserve their produce better by coming up with better tools and technologies that will make it affordable and not relying on electricity which they do not readily have.

 

Without any intervention, about 239 Africans will be affected even as prices of maize, rice , wheat and other produce rise in some cases by three digit percentages. For example, while accounting for the impact of climate change while destroys the land nutrients, maize can see its price go up by at much as 126% in the next two decades.

 

You can read the full report by vsiting Oxfam website.

 

Oxfam is an international confederation of 15 organizations working together in 98 countries and with partners and allies around the world to find lasting solutions to poverty and injustice.

 

We work directly with communities and we seek to influence the powerful to ensure that poor people can improve their lives and livelihoods and have a say in decisions that affect them.

 

OEM PC Vendors, Zinox and Omatek, Need Intervention To Survive

By
Tekedia Editors
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1

This completes the report we started before.

In the 2011 Nigerian Information Technology Exhibition (NITEX), it was very obvious that Nigeria has talents and businessmen and women that can execute at any level.

NITEX is the premier event for software developers, software architects, solution providers, OEMs, IT vendors etc. NITEX-2011 will serve as an excellent opportunity to promote latest technologies as they relate to organizations, ranging from SME’s, large enterprise and multinationals.

NITEX offered a window on what the challenges are in the nation. The PC industry in the nation has grown as more people continue to buy. Analysts have reported that the developing world will sustain the global PC growth despite the erosion of the market coming from tablets. In East Africa, the PC market is expected to grow by 75% largely due to Kenya.

In this midst, it looks very good because the industry is expanding. However, the local players in Nigeria are not smiling. Increasingly, the PC industry in Nigeria has turned to be a dumping ground. There are many international brands as we open our doors to electronics. And many people are going for cheaper products which in most cases seem affordable than even the local ones.

The government has written the policy to help the locally made products  but enforcing it is different from making it. It is not just computers, but software. Tekedia thinks that the only people that will save the industry is simply the government. The local OEMs have lost the public and it is going to be tough to get it back. They have to innovate in price and service to have a chance. Of course their scales are too small to compete with the behemoths like HP, Dell and Lenovo in the PC industry.

Tekedia thinks we must give credit to the local players for pushing and competing in a challenging environment like Nigeria. It is commendable that Zinox and Omatek have done well as they did. What they have to do now is to lobby government better to enforce the “Buy Nigeria” directive made in 2006 by the government in the software and hardware industry. SystemSpec the software company seems to be doing well as it is monopolizing many software contracts from the government.

A small history of the industry shows that though many started this business, only Zinox and Omatek are left behind. There are others, but their share is too small.  We recall the era of NEAT Computers in Port Harcourt, Brian Systems, Balogtek, among others. Right now, Zinox and Omatek with some other little brands are riding the waves. And they are having tough times.

Our data shows that if the government does not help the local OEM vendors in Nigeria, they will exit the stage for the foreign ones by 2017. Together, they are losing market share in the range of 5-7% annually. Zinox used to dominate up to 70% of the educational PC sector, that has come down to less than 50%. Obasanjo helped these companies as he promoted them, showed up in photos and we hope they will get help from the present admin which also has shown genuine interest in supporting local vendors in other areas. A good example is the Innoson Motors which the administration has visited and commended in many ways. Anything short, we will all be buying foreign.

 

—end–

 

 

 

 

Tekedia Intelligence Concludes That All Local PC Vendors in Nigeria Could Exit By 2017

By
Tekedia Editors
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0

 

In 2010, IDC reported thus:

 

The Q2 2010 IDC report posted on the company’s web site reveals that Zinox laptops are the fastest growing and best selling Notebooks in the Nigerian market. Zinox is strongest in the laptop market where it leads six other international brands, including HP, Acer, Toshiba, Dell, Lenovo and LG Electronics, with a 53.6% market share and a year-on-year growth of 799 per cent, while its closest competitor, HP, achieved a 23.6 per cent market share.

 

Yes, Zinox through government projects is doing well. It has found lucks in many of its no-compete bids and riding the wave. But do not be deceived, there is no major product innovation  going on n either Zinox or Omatek. Omatek trades as a junk stock in the Nigerian Stock Exchange and was losing money until it managed to come back in black in the last few quarters.

 

These companies had the best of intentions. They fought and gave this nation hope and identify, but their governments failed them. Nigeria is a dumping ground of PC and electronics. And that is the problem for the local players. How can you compete in a place where one foreigner buys a ticket , enters the nation and within an hour is smiling before compromised journalists that it has introduced a new PC line in Nigeria.

 

Immediately that happens, the market share of the local players are eroded. Zinox does not make much money in PC, it does through government deals like the INEC one. Omatek seems not to know how to get these jobs and by focusing on PC, it is having tough time.

 

As we look into this industry, we see challenges for the local OEMs (original equipment manufacturers)  – there is no benefit in making anything in Nigeria. They will surely collapse without any major intervention by the government. People think that PC is immune to the same conditions that forced Michelin out of making tires in Nigeria. No, the condition is the same. If you look at the business model of Zinox, you will notice that the bulk of its profit does not come from things that are made in Nigeria. The items it supplied INEC for the elections were not made in Nigeria. That business unit of PC that it makes in Nigeria is not a cash cow and that seems shaky right now.

 

Check back for the concluding part of this report.

 

Zinox is Nigeria’s No. 1 Selling Notebook, Says IDC

ISP Business Cools In Nigeria – 21 ISPs Operating With Expired Licenses

By
Tekedia Editors
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0

One thing has happened since competition went to the high temperature in the ICT sector in Nigeria: many local players went under. For anyone to tell you that business is booming for all the early investors in this sector, that person is not honest. The problem is simple: the ecosystem is difficult and extremely unfriendly.

 

Where do you start? You run a generator. You pay multiple taxes. You get nothing from the government.

 

This  is exactly what is happening in the Internet Service Providers business. They invested millions thinking that the future will be under then. It just the same thing that happened to the cybercafe. Of course we know what happened in the latter. When people began to have their phones as Internet hubs, the model of cybercafe was disrupted.

 

According to Vanguard, there are more than 21 ISPs that have gone under. Why not, these companies have no cybercafe to serve. People are getting the Internet via phones.

 

Already, about 21 Internet Service Providers were said to be operating illegally in the country due to expired licences. The licences granted to them in 2005 were only valid for five years, and many of them became invalid between December 2010 and April 2011. The ISPs currently find it hard to renew their licences.” he pointed out.

 

This calls into question vision and planning. What looks like a good business can be disrupted and that is why you need to have a strategy and stay in shape. And of course be adaptable. That is the only way of being sustainable.

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