NEW YORK (TheStreet) -- At the end of 2013, I made ten predictions I thought would come true in 2014 in the tech sector, ranging from wearable technology to IPOs to the messaging app boom.
Predictions for the year are something everyone does -- it's fun, and it gets people talking, but very few people hold themselves accountable. As a whole, I didn't do as well as I did in 2012 and 2013, but I nailed some, including predictions related to Apple (AAPL) , HP (HPQ) , Intel (INTC) and others. I missed so badly on some that the only fitting punishment would be to eat the whole damn fruitcake -- the one that Aunt Edna has brought for the 30th year in a row, even though no one eats it.
Here are my original 2014 tech predictions, before you go any further.
Without further ado, here's a look at how I did for 2014 -- what I got right, what I got wrong and what I screwed up so badly I'm ashamed to go out in public on days ending in Y.
Apple iWatch Launch
I'm pretty confident that this one will happen, perhaps as soon as March of this year. Apple CEO Timothy D. Cook has previously said Apple is moving into new product categories, and has hinted that the wrist is an interesting space for wearable technology. "The wrist is interesting," Apple's CEO said during a tech conference earlier this year. "You still have to convince people it is worth wearing."
The company has reportedly been ramping up production on its iWatch team, as it looks to compete with the likes of Google (GOOG) , Nike (NKE) and others in the space, and rightfully so. Many believe the sensor field will explode this year from a product and revenue standpoint, and Apple is poised to benefit, according to Rich Tehrani, chairman of the Wearable Technology Conference.
"Apple's entry into the smartwatch space will take the smartwatch from its current 'geek technology' focus into the mainstream markets," Tehrani said in an emailed statement earlier this year. "The likes of Fossil and Swatch have nothing to be concerned with so long as Sony and Pebble are the industry smartwatch leaders. Once Apple gets into the game, the smartwatch will become mainstream and will, in fact, directly target the Fossil and Swatch customer base. Apple intimately understands that the wrist is about fashion, not about technology."
Earlier this year, Morgan Stanley analyst Katy Huberty wrote that a smartwatch from Apple could be worth as much as $10 billion to $15 billion in annual revenue for the consumer tech giant, assuming a $200 price point.
Even the three blind mice could see this one comin'.
Apple announced the the Apple Watch (I got the name wrong, but so did everyone else) in September, in conjunction with the iPhone 6 and Apple Pay announcement.
Cupertino, Calif.-based Apple isn't going to launch the actual Watch until the early part of 2015, but given the hype in wearable technology, be it from Samsung (SSNLF) , Intel, Fitbit and others, Apple is entering a market that's about to take off. Research firm IHS said it believes the market will be worth $60 billion by 2018.
Grade: A (Not an A+ because I got the name wrong and said it would launch in 2014, when it's actually launching next year). Feelin' fine and dandy like sour candy about this one.
Jawbone, Fitbit, or Both Get Acquired
Going back to the wearable technology space, Fitbit and Jawbone are two of the more prevalent names in the industry, with the Fitbit Flex Wireless Activity + Sleep Wristband among the most popular items on Amazon (AMZN) . Jawbone also has a wristband device of its own, Jawbone UP.
Both of these devices track how you sleep and your activity, such as steps taken and calories burned. Via apps to your iPhone, you can upload what you eat and drink, while tracking your nutritional information right from your smartphone.
In August, Fitbit raised $43 million in new venture capital funding, with Softbank Capital leading the round. Not to be outdone, Jawbone raised more than $100 million in September, in a combination of debt and equity financing. Both of these companies will need exit strategies for their venture capital investors, and given Apple's eventual entrance into the space, an acquisition for one of the two looks increasingly likely.
Potential buyers include Nike (NKE) , which already makes the Nike Fuelband, a similar product. Under Armour (UA) is also another potential acquirer, having recently started to up its investment in the technology space, acquiring MapMyFitness for $150 million last month.
Of the two companies, I believe Jawbone is more likely to get acquired than Fitbit, given that Yahoo! (YHOO) CEO Marissa Mayer is on the company's board, and we all know that Marissa loves a good acquisition. Or several.
Wow, just a smidge off the mark here.
Not only were neither Fitbit nor Jawbone acquired, they're pumping out more products to get their faces out there even more.
Fitbit recently unveiled three new fitness trackers, the Fitbit Charge, Fitbit Charge HR and Fitbit Surge to stay competitive with offerings already in the market and those coming to market (cough cough Apple Watch). Fitbit's products are getting better -- read the recent review of the Fitbit Charge -- and Jawbone continues to expand its product lineup as well.
Perhaps there's still a change for a company like a Nike or an Under Armour to buy these high-growth companies to get into the wearables space, but it's more likely they go public than are purchased.
Snapchat Valuation Bubble Bursts
This one may already be starting to happen.
Snapchat, the popular messaging app that allows users to send 6- or 10-second messages to their friends, and then have them disappear, has been all the rage recently. Facebook (FB) recently tried to acquire the company for $3 billion, while Google (GOOG) reportedly offered $4 billion for Snapchat.
Based in Los Angeles and co-founded by Evan Spiegel, Snapchat recently raised $50 million in new funding, giving the company a valuation of approximately $2 billion. Snapchat had hoped to raised $54.5 million.
Though I'm not a venture capitalist by any stretch of the imagination, it does seem odd to me that the company would raise money at a valuation lower than what Facebook and Google were offering to pay.
Snapchat's potential business model is difficult to see right now, given the messages disappear after users open them. It's not an open platform, a la Twitter (TWTR) or Instagram, which sold to Facebook for roughly $730 million. It will likely experiment with in-app purchases and potentially even ads, but the advertising model is different than Twitter, Google or Facebook, simply because the messages go away.
Given the exceptional run-up in equity markets in 2013 and increased confidence in Silicon Valley, it's hard to see how valuations go higher if the business model doesn't support it.
Yeeeesh, this one was way off the mark too.
Snapchat is reported to have raised money at a near $10 billion valuation according to The Wall Street Journal, with the funding round led by respected Kleiner Perkins Caufield & Byers. Yahoo! is also reported to have invested in Snapchat's latest funding round, a move that has irked some shareholders, though that may be a case of "not seeing the forest for the trees." (Hey, it worked for Alibaba (BABA) , didn't it?)
Los Angeles-based Snapchat has started to develop its business model, one that right now is based off advertising (big shock) and person to person payment transfers (also another big shock). CEO Spiegel is still young, but after having passed on reported offers from Google and Facebook, while getting money from one of the top VC firms in Silicon Valley, it's clear he knows what he's doing.
Grade: Big fat F
Must Read: Snapchat: A Race For Retinas, Not Revenue
Square Goes Public
Square, the San Francisco-based mobile payments company, is poised to go public. Around the time of the Twitter (TWTR) IPO, details were leaked that Square was considering going public in 2014. The company could be worth as much as $4.5 billion, after raising funds last year at a valuation of $3.25 billion.
The company already has Larry Summers on its board, and recently added former Goldman Sachs (GS) CFO David Viniar to its board, further fueling speculation that the company is readying itself for the public markets.
The Jack Dorsey-led company is not profitable, and gives a good chunk of its revenue to MasterCard (MA) and Visa (V) , which is an investor in Square. As of May, Square was processing $15 billion in transactions on an annualized basis, but that number could be higher now. Based on a 2.75% flat fee, that would put Square's annual revenues at around $550 million, but given the nature of its agreement with MasterCard and Visa, that number is probably closer to $150 million.
Dorsey has previously said he has plans for the company to become profitable by 2015, but did not say whether those plans include additional capital raises to achieve that goal.
If I were a betting man, I'd put the likelihood of a Square initial public offering in 2014 at better than 60% odds, given the nature of the equity markets, and the need for expansion into the hot mobile payments space. Though I was able to predict with some reasonable accuracy of when Twitter would file its documents (I said November, the company did it in September and went public in November), I'm much less certain about this timing. Best guess? The company files its documents in August, and goes public around October.
Well, Square didn't go public, so that's wrong. But the company has had an odd 2014, with rumors of a sale and concerns about the company's long-term viability and future.
In August, the company bizarrely put out a blog post trying to defend itself, including comments on the state of the business and about reports that it tried to sell itself or was looking to postpone its initial public offering.
"Like you, we're a growing business," Square said in the post. "You invest in your future, and so do we. We're well-capitalized and putting our money to good use: investing in people and new products. Reports that we tried to sell the company, or of a delayed IPO? False. We're here for the long-term."
The San Francisco-based company recently raised funding at a reported $6 billion valuation after having reportedly been worth $4.5 billion as late as November 2013, based on private market transactions. Sources have said Google (GOOGL) has looked at acquiring the company in the past.
The company still generates around 90% of its revenue from payments (with much of that going to Visa and Mastercard, ultimately leaving the company in the red). But according to sources, the company is expanding its revenue sources to become more than just a payments company. It's almost becoming a one-stop shop for back-end support for businesses, including charging for online appointments, offering phone support, receipt feedback and other database products. Square also recently launched its own lending arm, known as Square Capital, which helps provide financing for small businesses already using Square.
Final Grade: C
Dropbox, Box IPO's Flop
Judging by my predictions, 2014 seems to be more about private companies than public ones, and this prediction is no different.
Dropbox and Box, both based in Silicon Valley, serve a very important market, allowing customers to store and share their photos, documents and videos in the cloud, and then bring them anywhere they go.
Both offer free storage to their users, with Dropbox starting at 2GB and Box offering 5GB worth of storage, but document sharing is a commodity, and ultimately, a utility. Apple offers its own service, iCloud, and actually tried to buy Dropbox in 2009, before being rebuffed. Google, Microsoft (MSFT) and others also offer free file hosting and sharing services.
Though revenue growth for either company isn't public, it's thought that Dropbox did $240 million in 2011, and Forbes reported Box did around $70 million in 2012. Dropbox offers three types of accounts: Free, Pro, and Teams, which is offered toward businesses. Dropbox allows users to store 2 GB of data for free, all the way up to 18 GB if you refer other users. The Pro plan starts at $9.99 per month for 100 GB worth of storage, and increases from there.
These aren't huge numbers, and the growth rates aren't known, but I suspect three to six months out from their initial public offerings, investors will be looking very differently at these companies than they did prior to their IPO's, largely because it's pretty difficult to tell one service from another.
I got this one pretty straight on, even if neither of them went public.
Box tried to go public, filing its first S-1 in March, as it looked to raise $250 million in hopes to expand its business. However, that's all that happened, as a series of unfortunate events led to Box never going through with its IPO. First, there was the great "tech wreck" of spring 2014, and Box said "market weakness" helped push back the IPO. Then, as the press and investors began to take a closer look at Box, they realized the business wasn't ready to go public.
Box delayed its IPO a few more times.
Ultimately, it decided to postpone its IPO, with CEO Aaron Levie telling publications that the company is misunderstood, even if there are other similar software-as-a-service companies that are already public.
Dropbox, which turned down a nine-figure offer from Apple before Steve Jobs passed away, hasn't filed IPO documents (that we know of), and is working on building its company to a profitable state.
Final Grade: B+ (Neither went public, but if one or both had, that would've been a nightmare.)
HP Enters the 3-D Printing Market
HP (HPQ) is struggling to stay relevant, as the company is seeing its PC and Printing segments continue to decline with no end in sight. CEO Meg Whitman has made some recent comments about expanding the company's forays into other areas, including 3-D printing, which could happen early next year.
"And what we're doing is focusing on what's the value proposition by market segment, whether that be consumer or industrial," Whitman said on HP's most recent earnings call. "What's the competitive differentiation and we've got some very interesting things coming. So stay tuned in 2014."
The additive manufacturing market (which 3-D printing is categorized as being in) has been growing like a weed over the past 20 years, expanding at a compound annual growth rate (CAGR) of 18%. But it's only been in the past few years when the industry has really started to take off, with media and investors taking notice. Over the past three years, revenue from 3-D printing has more than doubled to $2.2 billion, and is poised to continue its growth, according to Deutsche Bank analyst Sherri Scribner.
Given the sharp run ups in equity prices of companies like Stratasys (SSYS) , ExOne (XONE) and 3-D Systems (DDD) , it only makes sense for HP to try and attract investor interest in this manner, and show that the company is spending its R&D budget in the right areas.
This one was pretty easy to see coming too, since HP CEO Meg Whitman all but announced it in late 2013.
HP announced the Multi Jet Fusion in late October, as it seeks to enter the growing additive manufacturing (read: 3-D printing) market. The manufacturing sector in the U.S. was worth about $2.1 trillion in 2013, so HP is going to do whatever it can to get into the market.
Unfortunately for HP, its investors and 3-D printing enthusiasts, it won't be ready until 2016. In the mean time, maybe HP can print some more hopes and dreams until it's actually got something real.
Final Grade: A
Carl Icahn Gets What He Wants From Apple
Activist investor Carl Icahn made headlines over the summer when he announced he had a large stake in Apple, calling the stock "extremely undervalued." Since that time, Icahn has asked for a $150 billion buyback, but recently lowered his demand for the size of the buyback.
Apple has already announced plans to return $100 billion in cash to shareholders over the next three years, through dividends and share repurchases, but the company has hinted in recent months that it would revisit this in the calendar first quarter of 2014. "As we've said in the past, the Board and the Management team will consider a wide range of issues and be thoughtful and deliberate and we will announce any changes to our current (capital return) program in the first part of the new calendar year," Cook said during Apple's most recent earnings call.
With Icahn initially asking for $150 billion in a buyback, many, including myself, felt he was being short-sighted. At a much smaller amount, say an additional $20 billion or so (must be nice to think of $20 billion as small), then it's feasible that Apple could up its buyback program, appease Icahn, and all parties will be happy.
That may be tough to do without raising additional debt, given CFO Peter Oppenheimer has previously said Apple's domestic cash is likely to decline, and has stopped accumulating.
"Finally, given that our capital return program must be funded from domestic cash, and as a result of our payments to date, the cash that we can net domestically and return to shareholders has stopped accumulating," Oppenheimer said on Apple's most recent earnings call.
Ultimately, I think both parties find a way to get a deal done, but at a much lower number than $150 billion.
"I love the stawk at this level, and it's a no-brainah." -- Fake Carl Icahn
Yes, this was pretty easy, even if Carl didn't get exactly what he wanted from Apple, as I predicted.
Apple did indeed increase its buyback and dividend in April, making its capital return program $130 billion by the end of calendar 2015. It boosted its buyback program by $30 billion to $90 billion, slightly more than the $20 billion I'd expected. In addition, Apple boosted its quarterly dividend by 8%, making it among the "largest dividend payers int he world," according to the company.
Perhaps in a show of good faith to retail investors, Apple also split its stock seven-for-one, the first time Apple split its stock since 2005. The increased buyback and dividend, the stock split, and optimism about the company's product lineup have made 2014 excellent for Apple shareholders, with shares up more than 40%.
Final Grade: A+
John Chambers Steps Down as Cisco's CEO
Cisco (CSCO) CEO John Chambers has had a rough 2013, but 2014 could be a whole lot worse.
Equity markets have soared in 2013, but Cisco has largely stayed out of the rally, only gaining 4.28% year-to-date, compared to a 23.26% gain in the S&P 500 (SPY) .
Cisco's first-quarter revenue last month was woefully short of expectations, as the company loses market share to competitors, and struggles in China. Its second-quarter guidance offered investors no solace, as the company expects to generate revenue between $10.89 billion and $11.13 billion, well below the expectations of $12.6 billion.
In an analyst meeting on Dec. 12, Cisco cut its forecast for revenue growth over the next three to five years, indicating growth between 3% and 6%. It had previously said revenue would grow between 5% and 7%, so clearly there's a lot of work to do for Chambers and his management team.
Chambers has led Cisco to become a networking and switching utility for the enterprise, but it's largely been passed by companies such as F5 Networks (FFIV) , Brocade Communications (BRCD) and others, who have eaten Cisco's lunch.
To be fair, the company is fighting back, having launched its own software defining network (SDN), and is pushing towards making products that are focused around the cloud and especially mobile. It's also heavily invested in the Internet of Things (IoT), whereby regular appliances, such as refrigerators, washing machines and dishwashers become connected to the Internet.
That doesn't mean that the pressure on Chambers, 64, isn't great to turn Cisco's ship around. If Chambers cannot right size Cisco's product portfolio, its operating expenses, and reestablish its presence in emerging markets, especially China, than perhaps it's time for Cisco's board to look for replacements.
Potential replacements include Rob Lloyd, Cisco's President of Development and Sales, and Chuck Robbins, senior vice president of the Americas. If Cisco's board of directors really wanted to shake things up, they could look outside the company, potentially at Pivotal CEO Paul Mortiz or Brocade's Lloyd Carney.
Well, good ol' John hasn't stepped down (yet), but it's increasingly clear that the company is positioning itself for a post-Chambers world.
Cisco is now having Rob Lloyd, the company's president, given interviews. Perhaps that's in light of the company's CFO Frank Calderoni stepping down effective Jan. 1, but Lloyd, who I mentioned as a potential successor, is ratcheting up his media profile, and rightfully so.
Cisco managed to beat fiscal first-quarter results that topped estimates, but there's a telecom spending slowdown that's going to occur in 2015, with Cisco feeling some of the brunt of it.
"We do think it's a very unusual dynamic right now in the service providers," said Cisco President Rob Lloyd in an interview with TheStreet. "There are many large U.S. service providers stating that their particular capex will be down in 2015. Our readout in the guidance in the second quarter is that it will be a factor and if you add to that net neutrality, that's another factor that comes to bear."
For its fiscal second quarter, Cisco expects to earn between 50 and 52 cents a share, with revenue expected to grow between 4% and 7%. Analysts surveyed expect the San Jose-based Cisco to earn 53 cents, with revenue growing 8.3% year over year.
Cisco tends to underpromise and overdeliver (UPOD), but it's clear the company needs to do something drastic to get Wall Street excited about it again -- be it a breakup or a Chambers replacement, which seems more likely by the day, with guidance like that.
Final Grade: Incomplete
Intel Becomes Relevant in Mobile... Finally
We've all heard the stories from Intel, about how the Silvermont family, led by Bay Trail, is going to be the company's savior, helping it to compete with ARM Holdings (ARMH) -based chips. We've also laughed when we've heard those stories, including yours truly. With new CEO Brian Krzanich at the helm, I believe that 2014 may be the year Intel wins some design awards that make you actually stand up and take notice, as opposed to playing second-fiddle to the aforementioned chipmakers.
Make no mistake, I'm not expecting Intel to become dominant in mobile. What I'm saying is that Intel will no longer be the laughingstock in a room full of iDevices. I realize I'm going out on a limb here, but maybe Krzanich finally gets Intel's act together and trusts his gut. Unlike the last guy.
Krzanich has made mobile a major priority for Intel, with the company pushing into wearable devices, purchasing Basis earlier this year for a reported $100 million. Intel has also moved into other areas, such as messaging apps (Pocket Avatar anyone?), partnered with SMS Audio on headphones, and is working with Luxottica (LUX) on wearable technology.
However, the world's largest chip maker still isn't relevant in smartphones and tablets, and recently announced that it would be merging its mobile chip business with its PC business, as it still can't get a meaningful foothold with any big smartphone or tablet makers. During the quarter, the mobile business generated just $1 million in revenue, down 99% from the year-ago quarter.
Intel is going to do all it can to get relevant in mobile, and with Mike Bell and his team leading the company's New Devices Group, mobile may not mean what we thought it did (wearables and not smartphones and tablets) 12 months ago.
Final Grade: B+
Yahoo! Buys Business Insider
My last prediction of 2014 may ruffle some feathers in the media and tech world, but that's what makes them fun, right? No one wants to read another boring old prediction piece.
Yahoo! (YHOO) CEO Marissa Mayer has shown a propensity to spend and acquire businesses, acqui-hires, and personalities left and right this year.
The biggest acquisition this year was Tumblr, which Mayer spent $1.1 billion on, mostly in cash. Most of her acquisitions have been related to improving Yahoo!'s mobile experience, including Summly, Jybe and others, as she seeks to make Yahoo! a daily habit.
More recently, Mayer has been acquiring talent, most recently David Pogue of the New York Times and Katie Couric. Given Yahoo!'s exceptionally strong balance sheet (thanks Alibaba (BABA) !!) and her penchant for acquiring talent, a Yahoo!/Business Insider deal makes sense. The two companies already have a close relationship, with Business Insider CEO and Editor in Chief Henry Blodget appearing frequently on Yahoo! Finance programs.
A few years ago, Blodget penned a piece allowing Yahoo! to buy BI for $150 million, but obviously nothing came of it. A deal between the two parties has always seemed like an inevitability to me, based on type of content, synergies, and their already close relationship.
I have no idea if this deal happens or even if the two parties have talked, but it just seems like a no-brainer to me.
Well I pretty much screwed this one up.
I got it right that Mayer would keep acquiring talent, with the latest purchase being BrightRoll, a company that'll help Yahoo! better monetize video traffic. However, it seems like Yahoo! is done acquiring content for now, and is going to let Tumblr be the growth driver of the future, and not buy page views (smart move Marissa!).
Instead, Business Insider raised $12 million in funding in March, led by Jeff Bezos (yes, he of Amazon and the Washington Post) at a reported valuation of $100 million. (Business Insider is a competitor of TheStreet).
Final Grade: D
--Written by Chris Ciaccia in New York
>Contact by Email.