Don't let it get away!
Help yourself with the Fool's FREE and easy new watchlist service today.
In a previous article focusing on the redevelopment plans for the massive real estate held by Sears Holdings (NASDAQ: SHLD ) , the secret plans to develop some of the less desirable stores into data centers wasn't even discussed. With so many plans under way to create value mostly unannounced by the company, it can be difficult to cover all of the opportunities in one article. The company as well has made interludes into working on big data projects further highlighting the potential of re-purposing existing real estate into highly valuable alternatives.
If one were to review Sears' corporate website,big data and data centers have limited coverage. The new CIO mentioned that Sears is at the forefront of the big data initiatives, but very few details are ever acknowledged. Once one reviews the details of a couple of subsidiaries, Ubiquity CE and MetaScale, one quickly realizes that the company has made vast progress in redeveloping not only the real estate, but also other assets including technology used to improve internal systems.
Ubiquity CE Plans
In another move to utilize closed or unproductive Sears and Kmart retail stores, Sears formed a data center unit called Ubiquity Critical Environment or Ubiquity CE. With dozens of stores that have been closed for years, the company hopes to turn the ones close to population centers and business hubs into data centers, disaster recovery space and homes for large wireless towers. Under the company description, the Ubiquity CE website mentions access to a massive real estate portfolio without mentioning Sears. The COO for the company built and managed Microsoft's 700,000 square feet, 120MW data center in Chicago providing excellent leadership for the new group.
The first store turned into a data center will be in the south side of Chicago. The 127,000 square foot store closed in June to be retrofitted. The interesting part of the set up is that these stores already have power access and are linked to fiber optic cables. Not to mention that a great deal of stores offer access to a huge proximity of highways and shoppers providing access to cars and pedestrians around mall locations. Another interesting nugget is that 71% of the US population lives within 10 miles of a Sears store providing an ideal location for wireless towers.
Exploring Big Data
The company originally announced back on April 24, 2012 the intention to add a subsidiary called MetaScale in order to provide managed services and data solutions to brick and mortar enterprises looking to establish and grow their big data expertise. In essence, Sears is attempting to commercialize its experience of internally developing big data functions for operations. The company was successful in converting a batch process previously using a mainframe to an Apache Hadoop environment, reducing costs by $2 million per year and allowing availability of more real-time data.
The business was borne out of demand from companies inquiring how Sears had transformed its own business. Ironically though the MetaScale website and news articles suggest the business is booming yet Sears hasn't mentioned MetaScale in any official releases since the original announcement.
Exploring Big Data and Data Center Values
The sectors involving big data analytics and data center operators command premium values in the current market. Sears has every reason to explore these business units and apparently wants to do it in relative anonymity via these subsidiaries. A couple of good examples of the values of large firms in these sectors include big data firm Splunk (NASDAQ: SPLK ) and data center firm Equinix (NASDAQ: EQIX ) .
One reason Sears might be moving in this direction is that both of these much smaller companies have stock valuations in line with the market value of the vast assets of Sears. While Splunk is seen as the industry leader in big data software solutions that MetaScale is unlikely to replicate, the ability to turn an expected revenue base of $280 million in 2013 into a stock worth over $6 billion has to be appealing.
Equinix has turned a leading position in data center services into a $9 billion market valuation. The company operates data centers in 31 markets around the world and generates around $2 billion in annual revenue. Without any financial details on these subsidiaries, it would be unreasonable to suggest Sears will ever see any valuations near those levels.
Based on the readily available real estate assets and the knowledge of big data operations, Sears is boldly moving into the big data and data center areas. The combined valuations of Equinix and Splunk Inc. more than double what Sears is currently valued at, making the transition all the more desirable. More importantly, the development of Ubiquity CE and MetaScale involve making existing assets more productive without requiring massive capital outlays. Don't be surprised if Sears eventually spins off these operations in the future, but for now don't expect the company to discuss them at any length.
The New Industrial Revolution
With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disrupters since the personal computer in 3 Stocks to Own for the New Industrial Revolution. Just click here to learn more.