You’ll remember last time that we spoke with Jeb in May, he told us about an opportunity in NQ Mobile, and the stock’s run up 174% since then, from about $8 per share to $24 per share. It’s time to get an update on what happened, but more importantly, the latest opportunities that Jeb sees in the technology market, too.
So welcome today, Jeb.
Jeb Terry: Thanks. Thanks for having me. Glad to be here.
LB: I gotta tell you. Great call on NQ, and I wanna give you the opportunity to really just tell us what happened, and, also, are you still bullish on the stock?
JT: I’m extremely bullish on the stock, and, too, what has driven it to where we are today, and what might drive it forward, is still part of some of the things we talked about in the past, which have, if anything, become even more intensified, and that basically is all things mobile.
The smartphone is a truly transformational device, globally and locally, and even more so than the original internet was, and I think NQ is the poster child for that.
Here we have a company headquartered, with roots in China, in Beijing, but with a dual headquarters here in the United States. So if you were to go to the office here in the United States, in Dallas in fact, you’d see, essentially, a global workforce.
And so NQ, yes, it is a Chinese company, but it’s really from its origin and execution a global business, and that’s in fact the way tablets and smartphones are propagating
LB: So our listeners are aware of this – this isn’t some small micro-cap, thinly traded stock. We’re talking about a $1-billion market cap. And, to your point, they do have a global footprint.
So what are some of the near-term catalysts that you see for the stock working in its favor?
JT: Well, there are several things. In fact, part of it is just – the old saying is, “You don’t need to be smart. Let’s just get in the way,” and so where there’s a trend, and where there’s a rising tide, companies are gonna benefit.
So very simplistically, there’s gonna be 350 million smartphones sold in China this year. That number’s gonna go to 450 million next year. And NQ just announced today that they have renewed and extended their preload agreements with Lenovo, Huawei and ZTE, in addition to the fact that they’re preloaded on Samsung smartphones in China.
Now those four companies represent as much as 50% of the smartphones in China, so out of 450 million phones next year, half of them are gonna have NQ security software preloaded on them.
Now think about that for a minute. That’s gonna be over 200 million phones. The scale of China is something that never ceases to amaze me. It’s hard for us in the United States to grasp what is happening with this because these phones are not just phones.
There’s 1.2 billion phones in China, but only 30% of those are smartphones. And so we know that that 1.2 billion total phones are gonna be 1.2 billion smartphones, so that’s gonna mean internet access. That’s gonna mean all the things people do with phones, smartphones, here in the United States.
So look around the room. See what people are doing with their phones. That’s what they’re gonna do in China. They all need the software that NQ touches or enables, including the security on the phones, in order to do transactions.
LB: Apple is just out with its latest iPhone with the biometric sensor baked in. What’s your opinion? Game-changer?
JT: No. Let’s just say it’s incremental. However, it is – I don’t mean to trivialize it.
Let’s use these two examples. So Apple at its core makes its money from hardware, and so clearly they would have a biometric feature that is an element of their hardware offering. And so the fingerprint reader in Apple is a critical step in the ultimate adoption of biometrics.
So I don’t wanna trivialize that or minimize that. It is a very, very important step because Apple is the most iconic brand, and everyone else will follow. And the fast followers are hard on their heels, so you won’t have to wait long to see that feature or features with biometrics being implemented.
So you have the hardware people now who have a green light from Apple that says not only is it okay, but it’s now really lit up the development community to find uses for it.
Now let’s flip over to NQ for a moment – and I don’t mean to say they’re the only ones in this, but let’s understand this. NQ has voice recognition already launched in China.
Now remember the scale of China. This is a very, very large universe to be implementing onto. The partners they have – Samsung, Lenovo, Huawei – they are as big – when you combine ‘em, they’re bigger than Apple.
So we’ve got a software solution from NQ, voice recognition, and then we have a hardware solution from Apple, fingerprint recognition, and we have a sense from a company that you’re familiar with Lou, ImageWare, that there’s gonna be bi-modal. There’s gonna be more than just one way to authenticate biometric.
So these are very important evolutions in the preparation of what will be the ultimate commercial payment and commerce platform that smartphones represent.
And this is really transformational. I mean people need to let this sink in for minute. This is far bigger than the wired internet, far bigger than that.
LB: Let’s talk a little bit about eBay’s acquisition of Braintree. What do you see the significance of that, immediately for mobile payments, but I think there’s a broader implication here, too, in terms of opportunities for us as investors?
JT: Well, there is. I have a saying that we all wanna be early, and we think that being early is the way to wealth, and so often, as you and I’ve talked in the past, early has the same number of letters as is wrong. Well, there’s another aspect to this. It’s that, being early, often you’re dealing with a solution that’s in search of a need, and that’s really where we’ve all been in the payment space, the idea of payment.
Well now with PayPal buying Braintree and some of the evolutions we’re gonna see, the full-scale rollout of ISIS is now flipped. It’s flipped so that we now have needs in search of solutions. In other words, people are now saying, “I want to be able to have mobile commerce enabled on this device that I carry on my person or have by my bed, pervasively.” And so they don’t have to be educated as to the need, so the needs are searching solutions.
And that is a very, very key understanding that we need to have because what happens now is the profits are gonna start to migrate away from hardware, as that becomes more monetized, and more toward software as we find better and better uses for this hardware in this bandwidth.
LB: I know you’ve gotten up to speed recently on Uni-Pixel, which is a company that our readers are very familiar with. Can you share your thoughts using that philosophy in relation to Uni-Pixel as an example?
JT: It’s a perfect example. Let’s think for a second. We’ve had this really phenomenal – the advent of the smartphone is the most rapidly, let’s just include collectively smartphone and tablet – it’s the fastest-adopted technology – and I’m gonna say this, and it’s absolutely factual – it’s the fastest-accepted technology in the known history of man. I mean, it’s incredible.
And so what has driven that? Okay, well, we’ve had the internet. That’s old. We’ve had online commerce. That’s old. We’ve had voice. That’s old. What really is it that has triggered this technological transformation? I will tell you it’s the user interface. What about that user interface?
The user interface is something that is uniquely tactile. It is the touchscreen, and it’s common across these platforms. It’s independent of Asian characters or Roman characters. It’s language-independent. It’s geographically – anybody on the planet, any kid, any infant – any of y’all with two- or three-year-old children or grandchildren, watch them go to work on these, have fun with these devices because of that tactile, intuitive user interface, which –
JT: – and the core element of that is what? It’s the touchscreen. If that doesn’t work, all things stop.
And so Uni-Pixel is splendidly positioned in my view, and I think it’s a classic example of the point we made about being early and not so early. Let’s go that way. We’re no way late with Uni-Pixel.
But Uni-Pixel, obviously, was driven up to $40 a share on the expectations of what can happen, and then people get impatient with execution. But the die is cast. We know with 450 million smartphones in China alone – I mean next year there’ll be at least a billion phones sold in the world, new smartphones and tablets – all of them have to have touchscreens.
And so Uni-Pixel represents this, I think, very well-positioned play that they’re enabling a key element of the entire user experience with these devices. We know there’s gonna be billions of these devices, ultimately five billion at least, in the world, all of them with a touchscreen. There’s gonna be multiple winners, and Uni-Pixel appears to have the IP, and positioning, and now the ability to scale production to be a key participant in that.
In a relatively short period of time, defined in quarters not years, people are gonna be able to look back on Uni-Pixel and the frustrations over the last 12 months, or frustrations over the last five years if you were an early investor, and it’ll all go away because the stock will be multiples higher.
LB: Before I let you go, I did wanna ask: Are there any technology trends, or trends in the market in general, that you’re tracking right now that you think readers should be aware of or that investors don’t fully appreciate that you wanna bring to our attention?
JT: Well, the bulk of our portfolio has some element of the mobile connotation, and that’s throughout the entire food chain.
So some of the things we’re involved in – if you think about bandwidth, again you have to have bandwidth to enable all the mobile, so we have a play in a company called Towerstream. If you’re gonna have – obviously, if the phone’s gonna work, then Uni-Pixel is a terrific play on that.
If you wanna have the software that makes these things productive and usable tools, then there’s a company called hopTo, which is just on the eve of launching a very, very interesting productivity tool.
There’ll be others like it because the platform is at this point just too pervasive and compelling so that developers – it’s not gonna be just about developing free games, which there’ll be a lot of, but it’s gonna be – it’s evolving into a very important work tool, productivity tool, for all people on all continents. So I’m looking more and more at those software opportunities.
LB: So definitely, I agree. Keep an eye on mobile. It’s that big. There are so many different opportunities in there just because of the different facets of the mobile revolution.
Well, folks, there you have it, a timely roundup on all things technology, including Apple’s latest innovations and developments in the mobile payment space.
If you haven’t done so already, I encourage you to check out Jeb’s website at www.aberdeeninvestment.com. And if you’re an accredited investor with $250,000 or more in search of a new small-cap growth manager – and I say this just after knowing Jeb for over a year now and just researching together with him – I can’t think of a better choice.
So, again, check out his website and look out for our next interview with him.
Thanks again for joining us today, Jeb.
JT: You’re welcome. It’s been a pleasure.