Sohu.com Inc (SOHU), BMC Software, Inc. (BMC): Three Computer Services Firms that Stand Out

The computer services field is typically loaded with a tremendous amount of competition. However, there are several companies that have either managed to find a niche, or dominate in a sub-sector that is riddled with competition.

Sohu.com Inc (NASDAQ:SOHU) is an interesting play that relies heavily on the viability of China’s internet industry. It operates the popular internet portal Sohu.com Inc (NASDAQ:SOHU), and various games, social networking sites and property information. The company has undertaken aggressive growth strategies that could either increase the firm’s revenue, or turn users off. One such strategy includes paid online videos and paid search.

The firm has momentum in generating revenue. Over the last four years, Sohu.com Inc (NASDAQ:SOHU) has more than doubled its revenue, which was over $1 billion last year. The company will likely continue to grow revenue through diversification, and the popularity of its services are a testament that the company is able to make the most out of each revenue stream it chooses. This firm is not only a strong way to invest in the computer services market, but also in the Chinese economy.

BMC knows how to keep clients coming back

The company’s integration of the customer’s specific requirements with the IT management tools have generated clients that continually come back for more business. Furthermore, the mainframe business has continually shown that it can perform well and provides a solid backbone for the company. This foundation allows BMC Software, Inc. (NASDAQ:BMC) to have a steady revenue stream as it works through other complications.

However, BMC Software, Inc. (NASDAQ:BMC) has struggled to seamlessly integrate acquisitions. In fact, according to Morningstar, miscalculations and missteps have caused the company to be distracted and suffer from execution issues. That poor integration of acquisitions resulted in sales force attrition rates around 40%. In the very competitive computer services industry, it is important that firms are able to grow with little resistance. I’d keep my eye on this company, but it will need to improve its ability to integrate with acquisitions before I make a purchase.