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Tickers in this Article: SCUR, INFA, CVLT, DELL, SAP, IBM, ACN, BOBJ, CSCO, MFE
Gathering and analyzing data for business intelligence and then keeping it secure from competitors (and perhaps the odd rogue or disgruntled employee) is big business. Three small firms, CommVault (Nasdaq:CVLT), Informatica (Nasdaq: INFA) and Secure Computing Corporation (Nasdaq:SCUR), play a large role in helping companies interpret data from otherwise difficult systems and databases. Let's take a look at how they help keep companies' secrets secure, and how they may help you secure big returns.

Upgrade To A Key Product
CommVault, one of the leading providers of data management software, recently announced a major upgrade to its flagship product. Formerly known as "Qinetix", this platform will now be called "Simpana". The upgrades were to the smart client capability, and improving the indexing, categorization and search functions. These upgrades should further cement CVLT's already prominent market position and competitive advantage for disaster recovery, litigation support and archiving.

The market seems to put a great deal of faith in CVLT's capabilities as evidenced by its market capitalization of $800 million (about 5.5-times the company's sales of $151 million). This kind of testament is possible due to the the scarcity of comparable firms in this market niche. (To read more about market caps, see Market Capitalization Defined and Determining What Market Cap Suits Your Style.)

CVLT does face some challenges and associated risks going forward: Dell Inc (Nasdaq:DELL) accounts for 19% of CVLT's business. CVLT becomes more vulnerable should that percentage continue to increase, because it has a vested interest in making sure resellers maintain a proper perspective. CVLT also has to correct a shortcoming in its Sarbanes-Oxley capability. However, as long as CVLT continues to execute its business plan, over-exposure to major resellers will become less of a problem.

Big Time Partners
Informatica has one of the best data integration products on the market, which enables its corporate, governmental and educational customers to gather, standardize and profile their data. The company enjoys close working relationships with companies such as SAP AG (NYSE:SAP) and Accenture Ltd (NYSE:ACN). Because of that, the company's market capitalization of $1.6 billion is 4.7-times its sales of $339 million.

That kind of premium seems like a leap of faith given that INFA has only made a profit in three of the last 10 years. Those losses have now reached a cumulative $125 million. The good news is that INFA also has over $400 million in cash and $200 million in recently issued convertible notes.

Looking ahead, INFA could see its partners as potential competitors. For example, IBM (NYSE:IBM) views business intelligence as a value-added addition to its own product suites. INFA has chosen to compete on the basis of price which is problematic given the low switching costs that customers have and low barriers to entry for new competitors.



Getting Big At Any Price

Organizing and integrating your data is great, but then you have to keep it secure. Secure Computing Corporation is the one of the largest firms in this field. SCUR focuses on three aspects of computer security: authentication products, content filtering and add-on network appliances.

As SCUR is focused on the high-growth areas of network appliances and content filtering, it is attempting to partner with firms such as Cisco Systems Inc (Nasdaq:CSCO) and McAfee Inc (NYSE:MFE). Aside from organic growth, SCUR has made a couple of expensive acquisitions just this year with Cyberguard and CipherTrust, and SCUR carries a fair amount of debt as a result. However, these acquisitions also enable SCUR to reach more customers globally and increase content security.

Comparing the market's "faith index" is enlightening: SCUR's market capitalization of roughly $600 million is about 3.2-times its sales of $176 million; while its closest competitor, and number one in the business segment, Websense Inc's (Nasdaq:WBSN) market cap of just over $1 billion is 5.5-times its sales of $178 million.

Too Many Players?
With all the players involved in software in general and data integration and security in particular, one has to wonder if a shakeout of some form isn't in the future. The big question will be, who is going to be the consolidator and who is to be consolidated? Faith only goes so far, and at some point these small firms will have to show big results to justify that faith.

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