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Why I am underperforming my own investment in NETGEAR

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April 12, 2008 – Comments (0)

I'm underperforming NETGEAR for 3 months starting March 17th.  So far my underperform rating is winning by over 6 points.  I am doing this in spite of the fact that I own well over a 100 shares of Netgear and I plan on strengthening my position this year.

I am doing this because my underperform pick will continue to win up into the 3rd Quarter.  In the 4th Quarter, I will switch and OUTPERFORM Netgear for 5+ years.  I will take a hit every so often but in the end... my 5+ year OUTPERFORM rating will win because of FEMTOCELL!

I am not going to bail out on NETGEAR and sell off my stock and "panic" over router competition. 
NETGEAR remains an intriguing company that seems to be a head of the curve from all of the others.  Why do I think so?

Let's investigate, for example, what the heck NETGEAR is doing with TATARA Systems regarding Femtocell.  I mean.. What the heck is Femtocell and why should any investor give a hoot?

http://www.abiresearch.com/abiprdisplay.jsp?pressid=709

Nicole Fabri, PR contact for abiresearch.com, writes,  "In the near future, femtocells—small cellular base stations designed for use in residential or corporate environments—will be adopted by operators with great enthusiasm. The lure is of greater network efficiency, reduced churn, better in-building wireless coverage, and the abilities to shape subscriber data usage patterns and to build platforms upon which fixed-mobile convergence services can be realized. A new study from ABI Research forecasts that by 2011 there will be 102 million users of femtocell products on 32 million access points worldwide."

NETGEAR's announcement regarding "Femtocell" is huge.  But... If you are a short term investor thinking investing in NETGEAR will get you rich quick.  You are in a world of hurt.  Expect MONTHS of the "House of Pain" on this stock to come.  Sorry folks..  It's too early to invest in Netgear for a "Short term" boost to your portfolio.

However, NETGEAR will be a slow and steady investment as this Femtocell technology begins to take shape.

Nicole Fabri continues writing towards the end of the piece, "The most interesting characteristic of femtocells, adds Carlaw, is that they can form the basis of a viable option for realizing converged fixed-mobile services. They give operators a cost-effective way to support fixed-mobile substitution, as well as a platform in the home upon which additional features such as Wi-Fi and IPTV can be layered.

However, Carlaw adds a note of caution: "This is a very nascent market and as such there is a pressing need for some standardization, or at least a common recognition of what a femtocell's minimum requirements should be.""

Now imagine the day NETGEAR + TATARA Systems create that "standard."  Can you envision this happening and implications of NETGEAR getting an International Standard for Femtocell requirements?  

....Drool

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