NEW YORK (TheStreet) -- NetGear (NTGR - Get Report) CEO Patrick Lo has grown tired of all the breathless talk about cloud computing bolstering the prospects of Internet security stocks. In Lo's view, the next really big thing will be the 'Internet of Things.'
"We've heard so much about the 'Connected Home', we've heard about Wi-Fi connected smoke detectors and cameras, as well as thermostats," Lo said in an interview. "That's the beginning of the connected home, the 'Internet of things.' And we believe absolutely in the next two, three years, that will become more and more popular, and that will drive more and more sales of interconnecting devices such as ours."
Lo is betting that such focus can revive the fortunes of a stock price that has gained 2.8% over the past 12 months while the Nasdaq surged 31%.
Netgear's chief rival, Cisco (CSCO - Get Report) hasn't fared much better, rising just 1% over the same period. Yet while Cisco is concentrating on connecting 'things' in the office, Lo's company is looking at the home as it looks to design new gear. One such product, called the 'Nighthawk,' is designed to prioritize Internet speeds according to type of device.
The Nighthawk tri-band router, which is based on Broadcom's (BRCM) XStream technology, is expected to be available this summer.
"What it does is provide three lanes of traffic," Lo said. "The very slow one for the very slow devices, the mid-range and the high-end for the Netflix (NFLX), or for the gamers you can go to the higher speed without being bogged down by the slowest speed devices. It's a breakthrough and it's the precursor for the real Internet of things at home."
In other words, the gamers get the equivalent of an HOV lane. And speeding things up is high on Lo's agenda, especially during the spring and summer when sales are typically slow. Sales in the company's first quarter jumped 24% due to holiday buying though Lo doesn't expect second-quarter growth to post that high."The purchases generally are a lot slower, especially among consumers in Europe," says Lo. "We do believe in Q3 with the arrival of the Nighthawk X-3, that we'll be on much firmer and better footing on the retail side." NetGear is also banking on its service provider business following deals with U.S. Cellular and Sprint (S), though he acknowledges that expectations are high for this unit to compenstae for slowness in the company's commercial and retail lines. "Those deals are really, pivotal because we are providing them with something we call the LTE 4G router," Lo said. "Today, if you really want to get 30MB, 50 MB or 100 MB, you either subscribe to Fiber or you subscribe to VDSL. That's assuming you live in cities, where there is wired infrastructure. If you are living in a rural area, however, that's not an option. With this LTE 4G router, you have the option to get 40MB or 50MB beamed down through wireless into your housing in rural areas. That's a breakthrough we believe will have a significant impact in the future."
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts