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As podcasting becomes more popular, several companies are poised to benefit, according to Standard & Poor's. The most obvious is Apple Computer (AAPL
), given its strong relationships with the rising number of consumers who already download all types of media onto their iPods. Apple will likely continue to boost its revenues as more content is made available.
S&P has a hold recommendation on Apple shares. Megan Graham-Hackett, who follows the stock for S&P Equity Research, believes that Apple's revenue growth rate will remain above peers' over the next 12 months, reflecting the iPod's success and the potential for Apple to enter new markets leveraging that success. However, she believes Apple shares already reflect this good news (See BW Online, 1/9/06, "How Apple Could Mess Up, Again").
SET-TOP BOXES. As Apple sells more iPods, television makers sell more flat-screen TVs, and distributors build their pipes to improve transmission, the companies that provide the technology needed for these new products could also see a ramp in sales. These include tech outfits such as Broadcom (BRCM
; ranked 4 STARS, buy), Texas Instruments (TXN
; ranked 4 STARS, buy), and Qualcomm (QCOM
); ranked 4 STARS, buy).
Broadcom makes chips or integrated circuits that address all major broadband communications markets, including digital cable and direct broadcast satellite set-top boxes, and cable and digital subscriber line (DSL) modems. Broadcom will likely benefit as content distributors compete to bring more options to their customers, in S&P's view.
Qualcomm, another chipmaker, focuses on technology for mobile phones. S&P believes Qualcomm has become adept at evolving its CDMA intellectual property into wireless applications for data and Web-based capabilities.
SHOPPERS' HUNGER. The company plans to begin commercial operations in 2006 for the delivery of low-cost multimedia content. Qualcomm expects to invest $800 million over five years to build and operate MediaFLO, its technology to broadcast video to cell phones. In December, Verizon Wireless said it will launch MediaFLO in about 50% of its U.S. markets this year to offer real-time mobile TV services.
Texas Instruments, meanwhile, is strong in the digital signal processor (DSP) market, according to S&P. DSP has enjoyed fast growth, driven by strong demand for devices such as wireless phones, modems, and computer-networking gear.
TI, a leader in semiconductors for advanced TVs, will also likely benefit from shoppers' hunger for such sets, spurred by the falling prices of flat-screen TVs as well as more availability of HDTV programs and other new content.
HOW AND WHERE. Finally, content providers such as Disney (DIS
; ranked 4 STARS, buy), which have the rights to and the control over content, may also cash in. As customers have more choices over how and where to get entertainment, they're likely to consume more.
Studies have shown that many people will watch a movie in the theater, buy the DVD, and watch again when it is on television. Mobile offers an additional revenue stream for content providers as data transmission speeds up.
S&P has a buy recommendation on Disney shares. S&P equity analyst Tuna Amobi thinks Disney's projected double-digit earnings growth through at least fiscal 2008 (ending September) is highly attainable.
"We see increased efforts by content providers for higher-growth digital platforms," Amobi says. "While digital models continue to emerge, in 2006 we expect further initiatives to make TV shows available via iPods, VOD [video on demand], and DVRs."