Magic on the Move

Magic Software (Nasdaq: MGIC  ) is making the right moves in the cloud-computing space. It recently tied up with Microsoft (Nasdaq: MSFT  ) and U.K.-based Netential, allowing these third parties to add Magic's products to their portfolios. The expansion in Magic's customer base bolsters its position to take advantage of the growing cloud-computing market.

Let's first delve a little into Magic's numbers and then see what lies ahead for the Israeli company.

A look at the numbers
Magic's five-year revenue growth rate stands at 9.2%, but in the past 12 months, revenues have grown by 53.9%, to $94.4 million. Earnings in the past year have grown by 45.5%, to $10.6 million. Higher revenues have primarily resulted from the acquisition of an IT consulting and staffing services business.

Magic's operating income in the past year has more than doubled to $10.7 million. Magic is definitely growing rapidly.

Expected growth
The world is shifting more and more toward mobile and cloud computing. Magic sees its fortunes rising with that tide and it expects revenues to grow by 29% this year.

Magic's software allows customers to integrate cloud services into their existing products. Magic is partnering with Microsoft to help strengthen the latter's already successful SharePoint business, which currently rakes in almost $1.3 billion a year.

According to Bloomberg, CEO Guy Bernstein says Magic will look to partner with pure technology companies, particularly targeting growth from the U.S. market, from which it currently generates nearly 50% of its revenues.

The wider market
Magic is banking on its mobile apps business to pay dividends in the long run. It recently extended its uniPaaS platform to be available on smartphone devices accommodating Google's (Nasdaq: GOOG  ) Android platform, as well as Apple's (Nasdaq: AAPL  ) iOS. It was earlier available only on Research In Motion's (Nasdaq: RIMM  ) BlackBerry gadgets.

This sector is expected to grow further as more and more smartphones are slated to hit the markets. Last year, 72% more smartphones were sold as compared to 2009, according to a Gartner report. A MarketsandMarkets report sees the global cloud-computing market growing to $121.1 billion in 2015, from $37.8 billion last year. This should help bring in revenues for Magic as it looks to expand its customer base.

The Foolish bottom line
Magic is making strides in the right direction to take advantage of the expected growth in the industry. Its deals with Microsoft and Netential, and its increased focus on its mobile apps business, should help drive growth in the long run as it looks to increase its customer base. Investors should take note.  

Shubh Datta doesn't own any shares in the companies mentioned above. The Motley Fool owns shares of Google, Apple, Research In Motion, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 10, 2011, at 8:27 AM, victorfi wrote:

    Magic is one of the companies that will grow fast

    in the next years despite of the slowdown

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