5G Equipment Rulings Are Giving Nokia and Ericsson a Boost
Though it refused to explicitly ban the use of Huawei or ZTE's infrastructure equipment in upcoming 5G deployments, the German government has set rules that state 5G equipment can only be purchased from "trustworthy" suppliers that can be counted on to comply with the country's security and privacy rules. A U.S. official says American authorities are pleased with the action, and that it effectively rules out the use of Chinese vendors.
Likewise, the Japanese government recently required Japan's mobile carriers to "take sufficient cybersecurity measures including responding to supply chain risk," when deciding on which 5G equipment vendors to use. That stipulation is seen as prohibiting the use of Huawei and ZTE's equipment.
There were still probably be a number of non-Chinese markets in which Huawei and ZTE's 5G gear will be deployed; it's worth noting that for the time being at least, the U.K. and the EU aren't joining the U.S. in supporting a full ban of Huawei and ZTE's equipment. But it does increasingly look as if government restrictions, together with the concerns that some major carriers have about using Huawei and ZTE's equipment even when they're legally able to do so, will drive share gains for Nokia (NOK) and Ericsson (ERIC) as 5G buildouts gain steam over the next couple of years.
Nokia and Ericsson are slow-growing telecom equipment giants that are unlikely to produce dramatic returns for investors. But they also have fairly low valuations that arguably limit their downside risk. And with the help of some regulatory decisions, they could get a bigger top-line boost from 5G rollouts than what markets currently seem to be assuming.
Walmart's New Robots Are Part of a Trend Benefiting Chipmakers
Walmart (WMT) just announced that (following successful tests) it plans to deploy 3,000 floor-cleaning, shelf-scanning and goods-unloading robots at its U.S. stores. The company also plans to add another 900 "pickup towers," which act as giant vending machines for picking up orders placed via Walmart's website and apps.
Walmart is far from the only major retailer to make heavy use of its robots within its stores and/or warehouses; Amazon.com (AMZN) now has over 100,000 robots deployed within its fulfillment center. To an extent, such moves are part of a broader trend towards using robots to automate tasks and provide data that companies can use to make business decisions and run more efficiently.
Such deployments create opportunities for chip suppliers such as NXP Semiconductors (NXPI) , Cypress Semiconductor (CY) and Qorvo (QRVO) , just to give a few names. The aforementioned robots are powered by CPUs or microcontrollers (MCUs), and also tend to be equipped with some combinations of sensors, cameras and radios.
In addition, the robots will often be managed, and have the data they share analyzed, by a cloud-based IoT platform. In Walmart's case, the company has already been using Microsoft's (MSFT) Azure cloud platform to analyze data from HVAC and refrigeration units to lower energy consumption, and also to analyze route data from trucks. It wouldn't be surprising if Azure if also used to analyze some of the data created by the robots that Walmart just announced it's deploying.
Uber's Tempered IPO Ambitions Still Don't Guarantee a Smooth Ride
Uber is now looking to sell about $10 billion worth of stock through an IPO featuring a valuation of "between $90 billion and $100 billion," Reuters reports. It adds the ride-hailing giant will launch its IPO roadshow during the week of April 29, paving the way for shares to start trading on the NYSE in early May.For comparison, Uber's bankers reportedly told the company last fall it could be worth up to $120 billion. Rival Lyft's (LYFT) rocky debut likely tempered the expectations of Uber and its underwriters a bit. But even if this hadn't happened, a $120 billion valuation felt like a stretch for a company that's still reporting massive losses and has been seeing slowing growth in its core ride-hailing business.
While Uber's gross bookings rose 37% in Q4 to $14.2 billion, its revenue rose just 25% to $3 billion, thanks to a lower take rate. Moreover, Q4 revenue growth was well below a full-year growth rate of 43%, as growth rates start to slow for its successful UberEATS food-delivery business.
And though Uber has talked a lot about its efforts to pare its losses, the company still reported an adjusted Q4 net loss of $768 million, compared to a $939 million adjusted net loss for Q3.
Uber's status as the unquestioned ride-hailing leader in the U.S. and many international markets should work in its favor as it goes public, as should UberEATS' momentum. However, based on the latest reports, the company is still looking to be valued at about 8 to 9 times its trailing revenue at a time when its growth is decelerating and adjusted losses are being posted at around a $3 billion annualized rate.
Prior to Lyft's IPO, I argued that Lyft's shares could have a bumpy post-IPO ride. Unless the numbers in Uber's upcoming public IPO filing are a lot better than expected, I think the same could hold true for Uber if it goes public at a near-$100 billion valuation.To see Tech Check coverage from the previous trading day, click here.
