How UK investors can play the new technology boom.
When considering the runners and riders in the new technology cycle, it's natural to think first of US companies -- particularly those listed on the tech-dominated NASDAQ index.
But not every interesting outfit is listed on the US stock exchanges. Key companies like Facebook and Twitter haven't floated anywhere yet, forcing enthusiastic (and rich) investors to hunt for shares off-market.
More interestingly for those of us who don't have Goldman Sachs' number on speed dial, the UK also boasts some cracking tech companies that are worth a closer look.
True, London's modest software hub in Silicon Roundabout doesn't yet hold a candle to Silicon Valley, Seattle, or even New York's Silicon Alley -- about the only pure website play in the UK is the low-tech price comparison website Moneysupermarket (LSE: MONY).
Head up to Cambridge, however -- Silicon Fen, if you must -- and you'll find industry leaders like ARM (LSE: ARM) and Autonomy (LSE: AU) that have beaten the Americans at their own game.
Here's a brief look at those two companies, plus six other ways to back a new technology boom without leaving Blighty.
The global leader in the design of lightweight, low energy microprocessors, chips based on ARM's technology are in over 95% of mobile phones worldwide. Add in exciting new categories like the iPad and more mundane gizmos like digital cameras, and it's no wonder that more than 15 billion ARM chips have been shipped since 1990.
The share price has risen over 130% in the past year, though, and on a P/E of around 45, you have to be very bullish not to think it's already up with events at 464p.
If size is everything, then Imagination Technologies (LSE: IMG) is the poor man's ARM; it's valued at around £1 billion, compared to £6 billion for ARM.
On a P/E basis however it's neck-and-neck, with Imagination also on a lofty rating of 45. Imagination's share price is underwritten by takeover potential due to the very substantial holdings of both Intel and Apple.
Last month, Imagination did its own takeover, paying £17 million cash for ray-tracing hardware specialist Caustic Graphics.
Unlike the previous two chip designers, CSR (LSE: CSR) is well down from its glory days in 2006, when the share price -- currently 357p -- touched £15 on the back of its superior Bluetooth technology.
It has recently been diversifying away from Bluetooth with strategic acquisitions, particularly into wi-fi, yet it still boasts a big cash hoard and a relatively lowly P/E of 15. Worth a closer look.
The smallest of these four chip makers with a market cap of just £340 million, Wolfson Microelectronics (LSE: WLF) is also the only recent loss maker. Analysts expect a return to profits in the current year; you'll pay a pricey P/E of 35 against their estimates to get on-board.
Wolfson specializes in making audio chips for everything from MP3 players to mobile phones.
Surely the second worst IPO of 2010, Promethean World (LSE: PRW) plunged from its listing price of 200p in March 2010 to end the year at 65p after warning that US educational spending on its digital whiteboards had materially slowed, and that things were getting worse in Europe.
The company is a key player in this novel sector, however, and its US rival Smart Technology has fared equally badly. Promethean will give an update this month; even if better than expected, it may be some time before management regains investors' trust.
Moving from hardware to software, Autonomy is widely recognised as the leader in intelligent data retrieval for corporations. What's less unanimously agreed upon is whether it's over-valued, with some analysts arguing profits are flattered by acquisitions.
Its share price is well off its highs on such worries, as well as a more cautious outlook for growth. Earnings estimates are all over the place, but if you're a true believer then the consensus P/E of 22 for 2011 earnings may be a bargain.
Autonomy spin-off Blinkx (LSE: BLNX) will turn profitable this year. As a result, shares in the video search specialist have more than quadrupled over the 12 months.
The P/E is a stratospheric 58, although this drops to around 23 for the year to 2012. Admittedly, the current share price will be peanuts if Blinkx ends up being the Google of video. Personally, I suspect Google will prove to be the Google of video!
I admit it's a long time since anyone considered £91 billion Vodafone (LSE: VOD) to be a technology company as opposed to a quasi-utility, let alone a growth one. Yet the boom in smartphones and the desire of social network junkies to check their status wherever they go -- plus more weighty applications such as business users wanting to access email on the move -- is enabling mobile giants to charge a premium for data traffic, reversing years of stagnation.
More immediately, Vodafone will benefit from the iPhone in the US moving to Verizon, which is 45% owned by the British giant, as well as the ongoing disposal of non-core assets.
A dividend yield in excess of 5% is the icing on the cake, although some will be frightened by Vodafone's massive debts.
More from Owain Bennallack:
> Owain owns shares in Promethean World.
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