Data production is growing exponentially with market researchers pointing to a 4,300% annual increase in data generation by 2020. As the switch to digital technologies gains steam, it will be up to network optimization specialists like Riverbed Technology
Fool writer Lee Samaha thinks the turning point is an increase in spending on data center infrastructure, with Cisco Systems
Riverbed Technology snapshot
|Market Cap||$3.5 billion|
|Revenues (TTM)||$774 million|
|1-Year Stock Return||9.5%|
|Return on Investment||8.7%|
|Est. 5-Year EPS Growth||20.9%|
|Dividend and Yield||N/A|
Source: FinViz.com. N/A = not applicable; Riverbed doesn't pay a dividend.
Setting the table
The mobile computing revolution was in danger of passing Riverbed by. Essentially a one-trick pony, this network optimization specialist was going to see Akamai
The wireless network equipment maker diversified its product lineup just in time to see customers hold back on making purchases as the economy blindly stumbled along. At a time when mobile communications and computing were soaring, Riverbed found itself in the midst of a product transition phase. But that's coming to an end now, and 2013 ought to be the time where its technological edge gives it a competitive foothold. Analysts are now upgrading their view of its future, seeing government purchases picking up ahead of schedule and its data center offerings pushing it forward as big data becomes big business.
It's a big tent
According to the market analysts at IDC, big-data technology and services will grow from a sleepy $3 billion business in 2010 to almost $17 billion by 2015 -- a 40% compounded annual growth rate. IBM
In addition to the huge amounts of data, there has been significant growth in the systems and technologies required to leverage data. And at 19 times earnings estimates, and with its enterprise value trading at 17 times its free cash, Riverbed might not be the same bargain stock it was just a few months ago, but it has greater growth prospects now that it has a better handle on controlling them.
I made a CAPScall on the company in June, believing the turnaround opportunity was ripe, and even though Riverbed's stock has advanced 34% since then (compared to a 7% rise in the market), I think this is only the next step on its next leg higher.
Tell me in the comments section below if you agree Riverbed Technology is best able to capitalize on an expanding flash memory market.
A sky-high opportunity
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