1 Stock to Capitalize on This Booming Tech Trend

Many people are now using their smartphones and tablets at work. As IT departments nationwide accommodate this bring-your-own-device trend, Aruba Networks (Nasdaq: ARUN  ) stands to benefit.

Aruba specializes in enterprise solutions that unify wired and wireless infrastructures into one cohesive network -- specifically, securely connecting devices via wireless. This expertise positions the company well because the enterprise WLAN (wireless local area network) market is growing -- particularly in the enterprise segment, demanding the solutions Aruba can provide.

The demand
According to Forrester, by 2016 some 350 million workers will use smart devices. Just over half will take their own personal devices to work. Currently, most IT networks are fragmented: Each network has its own infrastructure, management platform, and security. This fragmentation puts a lot of stress on IT departments -- not only to connect these devices to the network but also provide security on them. This is Aruba's forte.

The product
Aruba offers a centralized infrastructure of wireless, wired, and remote networks. This infrastructure is designed so that all the employees on any device (desktop, iPhone, iPad, Android, laptop, VPN, and so on) can run through a single network. This allows IT departments to authorize network access, monitor the activity (i.e., see how many employees are playing Angry Birds on their iPads), and apply security policies over just one network instead of for separately for wireless, wired, and remote devices, thus solving the fragmented IT network (and possibly the Angry Birds epidemic).

The downside to a centralized network is security. Security and wireless have not meshed well in the past, thereby causing companies to have a major concern over security of wireless devices. This is why Aruba's emphasis on security is paramount to their success.

The competition
The competition in the WLAN and LAN space is highly competitive; the 800-pound gorilla Cisco (Nasdaq: CSCO  ) alone owns about half the market. Yet Aruba has grown its market share -- strengthening its second-place position with 12% market share in front of Hewlett-Packard (NYSE: HPQ  ) and Motorola Solutions (NYSE: MSI  ) , both with less than 6% market share. Gartner recently positioned Aruba as a Leader in the 2012 Magic Quadrant for Wired and Wireless LAN Access Infrastructure (see the PDF report). The recent market penetration and Gartner's research show that Aruba has the capability to be a disruptive force in the WLAN space.

Why Aruba?
In danger of repeating myself, two things that Aruba focuses on, and with which it sets itself apart, is getting people onto Wi-Fi (WLAN), away from wired devices, and on keeping those wireless connections secure:

  1. By recognizing the market trend into more of a wireless world, Aruba's technology has seen rapid acceptance by enterprises, growing revenues by more than 30% the past two years.  
  2. The focus on security has proved to be a great value for Aruba. Aruba has become the most widely used WLAN by the U.S. military -- not to mention major software companies such as Microsoft and Google.

Security will continue to be an important issue, if not the most important issue, as this wireless market expands. And the reputation of being secure will be crucial to success in this market.

Foolish bottom line
The Dell'Oro Group forecasts that WLAN market revenues will reach close to $10 billion by 2016 (a 50% jump from 2011 revenues), with the enterprise segment consisting of just over half of that mind=boggling number. This expanding market gives Aruba exceptional growth potential over the next several years; however, some risks still stand in the way.

If Aruba starts losing market share to competitors or returns to being unprofitable, it could spell disaster. Overall, I think short-term headwinds (IT spending, macro environment, and the like) have punished Aruba's stock, allowing investors to be a part of this growth story at a reasonable price.

If you wish to dig deeper into Aruba Networks with me, let's continue this chat on the ARUN Board.

Add all these companies to My Watchlist.

Aruba is well positioned to take advantage of the coming mobile revolution -- but it's not alone. To discover another company poised to capitalize on our collective shift to on-the-go computing, grab a free copy of our special report, "The Next Trillion-Dollar Revolution."

Foolish intern Nick Pugleasa doesn't own shares of the companies mentioned in this article but is considering an investment in Aruba Networks. The Motley Fool owns shares of Cisco Systems, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Google and Microsoft and creating a bull call spread position in Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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