Four Alternative Smartphone Stock Picks

NEW YORK ( TheStreet) -- Apple ( AAPL) and Microsoft ( MSFT) have both had recent stellar smartphone moments, with Apple releasing an iPhone OS 4 update last week and Microsoft unveiling its two Kin phones yesterday. (The Kin One is pictured below.)

Yet many investors consider these stocks less than choice buys. Apple, which is trading at about $242.29, is expensive, and Microsoft's stock, which barely moved yesterday after the company's showy launch of two new youth-oriented phones, hasn't been very dynamic, gaining less than 1% in the last three months.

Cisco's Flip Camera Thrives Despite Apple Attack: Forbes

Plenty of other companies, though, are poised to benefit from the surging mobile phone boom. They're just a little less obvious.

With AT&T ( T) pumping a billion dollars into its network this year, telco infrastructure is set to be the next big battleground in the smartphone war. Networking, virtualization, cloud technology and even managed wireless services will all be key weapons.

Juniper ( JNPR) is one key player, a company that has clinched deals to support mobile data users on the Verizon ( VZ) Wireless and Sprint ( S) networks.

For companies like Cisco ( CSCO), VMware ( VMW), EMC ( EMC) and Aviat Networks ( AVNW), smartphones will likely equal dollar signs in the very near future.

Read on for more about these picks.


Stock price: $26.53

12-month stock performance: Up 50%

Advanced smartphone services place great strain on telco networks, something that bodes well for the likes of Cisco.

"It's mostly the network guys that stand to benefit ," Kaushik Roy, an analyst at Wedbush Morgan, told TheStreet. "Cisco, Juniper and the infrastructure-builders like Ericsson ( ERIC) and Alcatel-Lucent ( ALU)."

The San Jose, Calif.-based Cisco already partners with the biggest telco brands and announced its ramped-up smartphone strategy at the recent CTIA event in Las Vegas. AT&T said it is working with Cisco to build its new 3G MicroCell device, which will route wireless phone calls and data connections over a broadband connection.

>> Who Owns Cisco?: Ken Fisher

MicroCell is just one part of Cisco's broader networking push. Cisco recently launched a slew of new hardware and services as part of its 'borderless networks' strategy, which aims to build a secure communications infrastructure for mobile workers. The company has also cited next-generation smartphone services as future growth drivers.


Stock price: $57.25

12-month stock performance: up 90%

Hardly an obvious player in the smartphone space, virtualization trailblazer VMware is nonetheless well-positioned for the new era of mobile communications.

"The convergence of mobility and virtualization is coming faster," explained Vanessa Alvarez, an analyst at tech research firm Frost & Sullivan. "Businesses are looking to leverage their virtualized environments for both on-premise employees and mobile workers."

Virtualization, which lets multiple operating systems run in the same computer, has been one of the fastest-growing technologies of recent years. Touting its technology as a way for users to streamline their hardware, VMware has risen from relative obscurity to more than 170,000 customers in just over a decade.

The software maker is also aiming its technology at smartphones. VMware has already launched a product that lets systems administrators manage their virtualized infrastructure -- from a smartphone.

"Some of the initiatives VMware is looking at today are how to extend their VDI (virtual corporate desktop) to not only access your corporate desktop from any PC, but from any mobile device/smartphone by simply connecting to a PC from the cloud," explained Alvarez, in an email to TheStreet.

With analyst firm Gartner predicting that more than 50% of smartphones will be virtualized by 2012, there's upside ahead for VMware.


Stock price: $19.17

12-month stock performance: Up 43%

With new and sophisticated services appearing on smartphones, there is a lot of talk about the long-term impact on telcos' storage requirements. Hitachi's ( HIT) HDS storage subsidiary has already highlighted smartphones as a growth driver, something which could also spell good news for rival EMC.

"There are links between smartphones and burgeoning growth in data storage and other service areas," wrote Charles King, principal analyst at Pund-IT Research, in an email to TheStreet. With Research In Motion ( RIMM) talking up its high availability of BlackBerry services, the analyst says that storage will prove crucial.

"Storage players like EMC have natural roles and opportunities as providers of the storage infrastructures behind these services," wrote King.

>> Who Owns EMC?: David Einhorn

EMC, based in Hopkinton, Mass., has thrown its weight behind cloud computing, partnering with AT&T and setting up its own cloud business unit, touting services that could be used for smartphones.

Aviat Networks

Stock price: $6.62

12-month stock performance: Up 50%

Wireless specialist Aviat recently told TheStreet that smartphones and next-generation networks are helping drive its business.

Among its portfolio of products, Aviat provides managed network services, which aim to ease the pressure on services providers' infrastructures. With a limited amount of spectrum available for wireless services, firms in the telecom sector are looking for ways to boost bandwidth and data services -- ideally without breaking the bank.

Network Operations Centers, or NOCS, are key to this effort. RIM, for example, uses its own NOCs to maintain high service levels for BlackBerry users, and Motorola ( MOT) has also been ramping up its NOC efforts.

Creating a NOC from scratch, however, is something that most companies would rather avoid says Matt Thornton, an analyst at Avian Securities. "You're not going to build out your own NOC because it's massively capital intensive," he told TheStreet.

With its own NOC in North Carolina, Aviat says that it can offload the burden of operating and managing service provider networks, something that could prove crucial in the smartphone explosion.

-- Reported by James Rogers in New York


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