Given the popularity of smartphones and other mobiles devices, particularly in conjunction with the Internet of Things (IoT), the volume of information available in today's connected world is nearly limitless. This has created a huge opportunity for providers that offer a means of not only storing big data, but supplying the tools necessary for in-depth analysis, and ultimately actionable results.
According to IDC, big data and the associated analytics market will generate nearly $151 billion in revenue in 2017 and soar to over $210 billion in just three years. The upside in big data means some of the tech industry's biggest hitters are going all in and several of them, including IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), and Cisco (NASDAQ:CSCO), also pay shareholders a handsome dividend.
Leading the charge
Like many in the big data market, IBM's fast-growing cloud sales are the basis from which much of its analytics and cognitive computing solutions are implemented. Fueled by its Watson super-computer, IBM's cognitive solutions sales of $4.1 billion last quarter equaled 23% of its $18.2 billion in total revenue.
And cognitive computing delivered via the cloud should keep growing. As CFO Martin Schroeter put it last quarter, IBM "continued to make investments in the first quarter to expand our cognitive and cloud platform," and investors can expect more of the same in the months and years ahead.
Investors will eventually come to realize what matters is how well IBM delivers on its strategic imperatives, which include big data, analytics, cloud-related sales, and security. Combined, the key drivers of IBM's growth accounted for $7.8 billion in the first quarter, equal to 43% of total revenue. Toss in a nearly 4% dividend yield on top of its big data results and IBM warrants serious consideration.
New leader, new direction
When Satya Nadella took the CEO reins from Steve Ballmer in early 2014, Microsoft had already committed over $6 billion in today's dollars for Nokia's phone business, a move Nadella was not enamored with. It wasn't long before Microsoft bit the bullet and wrote off some $8 billion and exited the phone manufacturing business.
Microsoft promptly instituted its "cloud-first" mantra, which, similar to IBM, includes a comprehensive suite of big data analytics solutions. In a partnership with big data platform provider Hortonworks, Microsoft's HDInsights analyzes reams of data. Microsoft's SQL Server now comes with a simple connector for relatively easy big data processing.
Last quarter, the intelligent cloud unit's server and cloud services revenue, home to Microsoft's big data-related offerings, climbed 15% and was the driving force behind the division's 11% increase in revenue to $6.8 billion. Continued development of Microsoft's artificial intelligence capabilities should help it keep the positive big data momentum going, and its 2.25% dividend yield is icing on the cake.
Behind the scenes
While IBM and Microsoft are blazing a big data analytics path, Cisco has focused on what it does best: offer the nuts and bolts needed to help customers make what can be a messy transition a breeze. Partnering with a number of tech leaders, including IBM, Cisco's "out-of-the-box performance" solution for big data and analytics is just one of its product offerings.
Last quarter's deals for Advanced Analytics and artificial intelligence firm MindMeld should also give Cisco's big data efforts a boost, which is already receiving kudos from industry pundits. From an investor's perspective, Cisco's big data and IoT efforts haven't resulted in significant expenses as is the case with folks like IBM. Cisco's operating expense last quarter declined 8%, driving a 9% improvement in per-share earnings to $0.50.
As for its dividend, Cisco's 3.65% yield is right up there with IBM's and at just 16 times trailing earnings -- the industry average is 28 -- it's also a sound value for income investors in search of growth. When it's all added up, Cisco is one of the best under-the-radar big data stocks around.