With the increasing demand for data security, efficiency, and the growing use of software-as-a-service, IT companies are constantly upgrading technologies in their services and products. Also, they are taking initiatives to cope with the rapidly changing demand emerging from breakthrough technologies like Big Data and Cloud Computing. I have discussed three such companies, which have dealt with these changes perfectly and were successful in defending their market shares.
Recently, the company posted its first quarter net income of $174 million, leading to an increase of 13% in revenue from the past year and total sales of $1.19 billion. This upside was mainly due to the focus on hybrid-cloud and network-virtualization products. VMware, Inc. (NYSE:VMW) is making a shift from private clouds to hybrid clouds with its own cloud offering, the “vCloud hybrid service.” Currently, it is in beta stage and is expected to be fully launched by May 21, 2013. This service is likely to increase the company’s revenue by 15% in 2014.
Also, VMware, Inc. (NYSE:VMW) has an additional advantage of its present customer base, which is around 480,000. Quite interestingly, 100% of Fortune 100 clients use VMware, Inc. (NYSE:VMW) services, and if we talk about Fortune 1000 companies, 84% of them are VMware, Inc. (NYSE:VMW) customers. This enormous customer base will shift to its new hybrid cloud service from existing public cloud, which, consequently, opens incremental revenue opportunities. From a long term perspective, VMware, Inc. (NYSE:VMW) will achieve the total addressable market (TAM) of more than $50 billion in 2016, which, in 2012, was $19 billion, a CAGR of almost 15%–20%.
Another opportunity for VMware is enterprise license agreements (ELAs), which usually have an average tenure of three years and average deal size of around $1 million. Agreements worth $717 million in 2010 are due for renewal this year. I believe these renewals will act as a tailwind for the company, as more than half of them will be signed in the second quarter of 2013, and will increase the company’s overall revenue by the end of 2013.
Citrix Systems, Inc. (NASDAQ:CTXS)
Networking and cloud computing will remain positive revenue drivers for Citrix Systems, Inc. (NASDAQ:CTXS) in the fiscal year 2013. It is estimated that 23% of the company’s total revenue will be from networking and cloud computing products and services, which is 42% up year-over-year. Moving forward, these services will further help Citrix Systems, Inc. (NASDAQ:CTXS) to push its total revenue by more than 14% in 2014.
Citrix Systems, Inc. (NASDAQ:CTXS) is a very strong player in the application delivery controller (ADC) market, and earlier it stole a major market share from Cisco Systems, Inc. (NASDAQ:CSCO). Further, it got dominance over this market when Cisco decided not to further develop ADC in late 2012. Cisco partnered with Citrix Systems, Inc. (NASDAQ:CTXS) for its ADC solution. Consequently, Citrix Systems, Inc. (NASDAQ:CTXS) ADC has seen sales growth of 24% in 2012, and there should be further upside to it in the year 2013 with little or no current competition.
Besides this, Citrix is also a leader in the virtual desktop infrastructure (VDI) market with its XenDesktop (XD) product (mobile and desktop segment). This product’s licensing has seen a growth of 9% year-over-year in the fourth quarter of 2012, and is estimated to become a larger revenue contributor with 15% increase year-over-year in the second quarter of 2013. With several advantages like a centralized datacenter, security, and centralized system management over traditional desktops and laptops, the overall VDI market is expected to grow to over 74 million users by 2014. This increase in the market size and demand will most likely bring good returns to investors as well.
Informatica Corporation (NASDAQ:INFA)
Informatica Corporation (NASDAQ:INFA) has been facing operational issues since the third quarter of 2012, and has recently implemented some sales management changes to address the same. With these changes in sales execution, the company expects positive trends in the first quarter of 2013. The company has seen some lags in its license revenue business earlier, but with new modifications, it expects a growth of 10%-15% over the coming years in its license revenue.
Informatica Corporation (NASDAQ:INFA) is a leading provider of enterprise data integration software and works in a highly competitive market. To maintain its position in the market, the company has recently launched “PowerCenter Big Data Edition,” which is five times more productive and equally efficient than Hadoop, a Java-based programming framework and Big Data leader. With constant innovation over Big Data service, it attracted some early purchasers like Facebook Inc (NASDAQ:FB) and Opentable, which makes Informatics more positive and competitive in the future.
Conclusion
All three stocks look promising to me, as they have drafted their strategies with the futuristic demand of a sound and safe infrastructure development.
VMware, with its own hybrid cloud offering, vCloud Hybrid Service, and Citrix, with its Virtual Desktop Infrastructure (VDI), have already made a big dent in the market to capture a higher share. Though Informatica Corporation (NASDAQ:INFA) has been facing some operational issues for a long time, it is now taking itself toward the growth path with efficient Big Data service, PowerCenter Big Data Edition.
I have a positive outlook for all three companies and expect good returns from them at the current share prices. I would recommend them as a “buy.”
The article Buy These Stocks if You Want to Bank on Big Data and the Cloud originally appeared on Fool.com and is written by Shweta Dubey.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
