Sohu could be the Chinese version of Google Inc (NASDAQ:GOOG) and Facebook Inc (NASDAQ:FB) combined
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.
athenahealth, Inc (NASDAQ:ATHN) is an internet-based health practice management application. The service is provided through athenaNet and facilitates billing, clinical services and other similar services. The services are very rare, and that contributes to the firm’s 97% retention rate, and the vast majority of customers report a positive experience with the company. That client retention will help the firm keep its competitive position in this sub-sector.
This company’s health will last for at least several years, as its services are needed in a climate that is full of health-care reforms, aging software and complex insurance processing requirements. Furthermore, health care IT integration is becoming a common practice. Despite a disappointing second quarter, I am a long-term bull on this company.
Keeping an eye on progress
I usually check the health of my stocks every day, and read nearly all news reports about each. That becomes particularly important in the computer services industry, as there is a slew of mergers and acquisitions to look out for. While it is difficult to know the precise effect one of these deals could have on a company, you want to purchase a stock that is at least actively pursuing growth. All three of these firms meet that bill, but you also need to keep a close eye on how well they are integrating.
The article 3 Computer Services Firms that Stand Out originally appeared on Fool.com and is written by Phillip Woolgar.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Athenahealth and Sohu.com. The Motley Fool owns shares of BMC Software. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
