When you are looking and thinking about data centers, cell phone towers and fiber optic networks, you’re really trying to capture the essence of how digital communications are evolving at an unprecedented rate.

Kevin Kelly, CEO

5G ETF / Index News

Big Investing Opportunities in 5G, Cloud Computing and E-CommerceETF Trends

  • With the evolution of 5G, cloud computing and e-commerce growing rapidly, trillions of dollars will be spent in the next few years to facilitate the massive build out of infrastructure and technology to support these disruptive industries.
  • “It’s data centers, cell phone tower networks and the fiber optic networks that are going to connect all of this,” Sean O’Hara, President, Pacer ETFs Distributors, Pacer ETFs said. “They are going to be the major receivers of these dollars that are going to be spent.”
  • With competition heating up in the disruptive ETF space, advisors need to lift the hood of ETFs in this area to find which are best positioned.
  • Pacer ETFs’ new real estate focused ETFs help investors gain exposure to the growing e-commerce space by investing in data center and distribution center REITs, along with higher quality retail real estate.
  • “When you are looking and thinking about data centers, cell phone towers and fiber optic networks, you’re really trying to capture the essence of how digital communications are evolving at an unprecedented rate,” Kelly said.

5G News

Crown Castle Reports Second Quarter 2019 Results and Raises Outlook for Full Year 2019– Press Release

  • CCI is top constituent in the SRVR index.
  • “Our current tower leasing activity is our highest in more than a decade and we believe this level of activity will carry into next year,” said Crown Castle CEO Jay Brown
  • Crown Castle had an earnings trifecta – Beat on Revs, Beat on Earnings, and Raised Guidance.
  • Reason they are down on earnings: CCI’s small-cell outlook is getting crimped by longer-than-expected municipal approvals, which have pushed out construction lead times. Though worrisome, this trend is not demand-related. Crown Castle’s small cells and fiber revenue will continue to get a boost from the rollout of 5G, as carriers need this infrastructure for metro networks.
  • From the call: Crown Castle also believes the macro-opportunity for small cells is “far greater than what’s happening currently,” and expects to see the overall need for small cells to grow significantly over the coming years as networks transition from 4G to 5G.
  • Benchmark Commentary: There is a FCC ruling adopted in September 2018, which in part imposed a shot clock on state and local governments to respond to small cell authorizations and installations.
  • Benchmark Commentary: One of the important benefits of the FCC order is it requires municipalities and utilities to timely respond and deal with these permits and process of applications which should speed up the municipal adoption.
  • Reason not to worry: The good news is that tower leasing remains strong on 5G network builds and capacity upgrades, which should extend into 2H and 2020.

Cloud News

Microsoft Proves “If You’re Not First, You’re Last” Wrong – Being Second in the Cloud is Real Nice – Bloomberg

  • Given Microsoft’s “strong ambition,” it plans to increase operating expenses by 11% to 12% for the fiscal year, and will raise capital spending to build out data centers, Chief Financial Officer Amy Hood said.
  • In the fourth quarter, commercial cloud revenue — a measure of sales from Azure, internet-based versions of Office software and some smaller products — rose 39% from a year earlier to $11 billion. Profit margins in the business widened by 6 points to 65%.
  • Azure cloud sales rose 64%, compared with 73% growth in the previous quarter and 76% in the one before that.
  • The continued deceleration has caused some concern among investors because Azure revenue was routinely more than doubling as recently as two years ago.
  • In the fourth quarter, commercial cloud revenue — a measure of sales from Azure, internet-based versions of Office software and some smaller products — rose 39% from a year earlier to $11 billion. Profit margins in the business widened by 6 points to 65%.
  • Since the close of the quarter, Microsoft signed new cloud deals with Providence St. Joseph Health and ServiceNow Inc., which said it will use Azure to deliver cloud products to some government customers — the first time that company has used third-party data centers for its business.
  • Worldwide public-cloud services sales are expected to grow 17.5% this year to $214.3 billion, according to Gartner Inc.
  • In the infrastructure part of the market, Amazon and Microsoft are increasingly pulling away from other competitors — although Azure remains several times smaller than Amazon Web Services.
  • Microsoft is not a member of SRVR but a top tenant in SRVR data centers


SAP’s Cloud Bookings Drop – Executives Come Out Fighting as Shares Slump on Growth – Bloomberg

  • SAP fell the most in nearly five years on signs that its $10 billion bet on cloud-based software faces headwinds.
  • After buying U.S. startups Qualtrics International Inc. and Callidus Software Inc. to bolster its portfolio, SAP instead posted slower growth in new cloud bookings.
  • SAP’s new cloud bookings rose 15% at constant currencies, a drop from the 26% gain in the first three months of 2019.
  • SAP is not a member of SRVR but a top tenant in SRVR data centers.

IBM Sales Drop at Cloud Infrastructure Unit and Executives Aren’t Ready to Discuss Red Hat  – Bloomberg

  • IBM’s Global technology services fell 6.7%, same as in first quarter.
  • $34 billion Red Hat deal hasn’t factored into earnings yet.
  • After lagging in the cloud market for more than a decade, IBM is pegging its future to a hybrid cloud strategy that will allow it to offer services on both private and rival public clouds.
  • Revenue in the global technology services unit, which includes cloud infrastructure and technology support, was $6.8 billion, down 6.7%, from a year earlier. The division shrank by the same amount in the previous quarter.
  • IBM is not a member of SRVR but a top tenant in SRVR data centers

eCommerce News

Amazon’s Two-Day Shipping Standard Slips for Some on Prime Day – WSJ

  • Amazon.com delivers with Prime deals, but not on shipping speed.
  • Within hours of Amazon’s Prime Day event, which started early Monday, shoppers were greeted with longer-than-expected delivery times as purchases flooded the company’s site.
  • In April, Amazon said it would spend $800 million on warehouses during the second quarter to make one-day free shipping the standard for Prime.
  • Problem is, Amazon wasn’t even able to deliver in two days or less.
  • Amazon is not a member of INDS but a top tenant in INDS warehouses and distribution centers.

Robots Are Scaling Warehouse Shelves to Get Stuff to You Faster – Bloomberg

  • A logistics company is searching for locations across North America to build its multistory robotic warehouses.
  • Robots — and humans — started working this month at Quiet Logistics’ new 440,000-square-foot (41,000-square-meter) fulfillment center in the Los Angeles area.
  • It’s the firm’s first property on West Coast, and a model for as many as seven more the company aims to build near population centers by 2022, with the goal of getting goods to consumers faster.

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