Israel-based Magic Software Enterprises (Nasdaq: MGIC) appears to be making strides in the right direction. It recently extended its uniPaaS platform to serve as a smartphone-based application. That move positions Magic Software to better capitalize on booming demand for smartphones. In addition, the company posted record profits for the first quarter of 2011.
A brief look at the numbers
Magic Software offers cloud and on-premise enabled application platforms and business integration solutions.
Magic started the year pretty much where it left off last year -- solid growth. Revenues increased 29%, to $25.5 million from $19.7 million a year ago. Looking at last year's trend, Magic went from strength to strength as the year rolled on.
Last year it acquired an IT consulting and staffing services businesses, worth $13.7 million, which translated into higher revenues for the firm from IT services. This trend seems to have continued in 2011, as its business gains momentum and it looks to take on even more clients.
Operating margins went up to 12%, from 9%, on a year-on-year basis, implying an improvement in operational efficiency. Net income went up by almost 68% from a year ago, to $3.1 million.
So Magic seems to have started the year with guns blazing. I believe these numbers will keep going up as it continues to expand its global footprint and looks to launch new products in both the cloud computing and mobile app space.
Growth market
Magic's foray into mobile apps may pay huge dividends in the long run. Earlier, its uniPaaS platform was available only on Research In Motion's (Nasdaq: RIMM) BlackBerry gadgets, but the company is expected to make those available on devices accommodating Google's (Nasdaq: GOOG) increasingly popular Android platform, as well as Apple's (Nasdaq: AAPL) iOS and Microsoft's (Nasdaq: MSFT) Windows' smartphone platforms by next year.
This sector has been expanding rapidly. According to Gartner reports, 72% more smartphones were sold in 2010 compared to 2009. With many new smartphones set to launch this year, we can expect growth rates to stay in the stratosphere in 2011. Magic will look to take advantage of this as much as possible.
Also, according to a MarketandMarkets report, the global cloud computing market is expected to grow to $121.1 billion in 2015, from $37.8 billion last year, at a CAGR of almost 26.2%. We can expect some of this growth to percolate down to Magic as well as larger cloud-heavy operators like Citrix Systems (Nasdaq: CTXS) and salesforce.com (NYSE: CRM).
The Foolish bottom line
A three-star CAPS stock, Magic definitely seems on track to take advantage of the expected boom in the industry, and should therefore see continued growth on both its top and bottom lines. With a strong start to the year, I expect its upward trend to continue. Investors should keep a close eye on this stock in the coming months.
