One privately-held company called CrowdOptic provides market-based solutions to advertisers in large venues, such as stadiums. However, that same technology, using algorithms and related formulas to assist in identifying and catching the perpetrators of the Boston incident, may have even broader applications going forward; the technology may be plenty broad enough to attract the attention of large computer hardware and software companies. I am going to look at a few of the large players in these industries, most of which have pristine balance sheets that would enable cash purchases.
Market players
Oracle Corporation (NASDAQ:ORCL) is a global hardware and enterprise software producer and retailer. In 2012, 57% of the company’s sales were from outside of the U.S. Oracle Corporation (NASDAQ:ORCL)’s most recent quarter, the second quarter of its fiscal year, was a bit of a disappointment. Revenue came in at slightly under $9 billion and earnings were $3.1 billion, or $0.65 per share. Analysts had been expecting earnings of $0.66 per share on revenue of about $9.3 billion.
The reason given for the shortfall had to do with several thousand new salespeople being unable to close deals, a situation that one assumes was remedied in the current quarter. Perhaps for that reason analysts look for a very strong third fiscal quarter, with sales of $11.3 billion and earnings of $0.88 per share.
Oracle Corporation (NASDAQ:ORCL) has a fairly heavy debt load due to its many acquisitions. That debt equals some 42% of capitalization. But cash on hand is also heavy at over $33 billion. Share price weakness brought on by the disappointing quarter has brought the PEG down to a reasonable 1.1. I see Oracle as a slow-growth company, and suitable therefore to risk-averse owners.
Hewlett-Packard Company (NYSE:HPQ) did something in the first fiscal quarter of 2013 that largely escaped the company in 2012; it earned money. Specifically, earnings came to $1.2 billion, or $0.63 per share. In the rear view mirror are last year’s massive write down from its Autonomy purchase and a variety of other write downs. Now the issue becomes whether or not Hewlett-Packard Company (NYSE:HPQ) can earn the sort of income it was making last decade. Trends are not favorable, as shipments worldwide fell from 15.7 million in the first quarter of fiscal 2012 to 12 million in the first quarter of 2013. Market share fell from 17.7% to 15.7%.
Looking ahead, Hewlett-Packard Company (NYSE:HPQ) continues to update and introduce new products. But there is little sign that true product revenue growth will occur. As for Hewlett-Packard Company (NYSE:HPQ) growing its enterprise business, I see it as having both far larger (International Business Machines Corp. (NYSE:IBM)) and more savvy (Oracle, among others) enterprise competitors, and the growth of that end of Hewlett-Packard will be difficult to achieve. The company also has “just” $12.4 billion cash on hand, compared with over $21.7 billion in long-term debt. Hewlett-Packard is not for me.
One big, but often overlooked tech company I have had my eye on is SanDisk Corporation (NASDAQ:SNDK). It manufactures flash drives, storage equipment, and related computer and smartphone parts. Its products are increasingly being used by new lightweight tablets with solid-state drives. SanDisk Corporation (NASDAQ:SNDK) is a leader is solid state hard- drive technology.
In its first fiscal quarter of 2013, SanDisk Corporation (NASDAQ:SNDK) set a record with revenue of $1.3 billion, up 11% from the first quarter of 2012. Non-GAAP profits came to $207 million, or $0.84 per share, up 33% from $156 million a year earlier.
Solid-state drives reached 20% of sales, up from 3% in 2011 and 10% in 2012. The margin on these instruments is high, and as the solid-state business continues to climb, SanDisk’s net margin, which had been in decline the past few years, should improve to the 16%-to-18% range this year and beyond. Not only that, but SanDisk Corporation (NASDAQ:SNDK)’s products are ubiquitous in “smartphone” situations, both as original equipment and as add-on memory drives.
SanDisk Corporation (NASDAQ:SNDK)’s balance sheet is in commendable shape, with long-term debt of just $790 million and cash on hand of $995 million. It is trading at a PEG of just 0.45. For many investors seeking a long-term position in the technology sector, I believe SanDisk to be a suitable choice, despite the lack of a dividend.
Juniper Networks, Inc. (NYSE:JNPR) is a different type of tech company; it focuses not just on consumer products but also Internet infrastructure. It recently reported solid, if unspectacular first-quarter results. Revenue came to $1 billion, a 3% jump from last year. Profits of $91 million, or $0.18 per share, were a solid 20% above expectations, and a six-fold increase from last year’s same quarter. The news, however, was not all good.
Over the course of the first quarter, Juniper Networks, Inc. (NYSE:JNPR) burnt through some $360 million in cash, meaning that over the past 12 months, Juniper has used about $1 billion in cash to fund its operations. There were no acquisitions and capital spending took no significant jumps. Some of that cash has been going into share repurchases, as Juniper spent $130 million on its share-repurchase program in the first quarter.
Juniper Networks, Inc. (NYSE:JNPR) relies on the health of the world economy perhaps more than any other company I have discussed today. Some 25% of its revenue comes from its three biggest customers, Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T) and China Mobile. Goldman Sachs recently downgraded Juniper, citing competitive concerns. I agree with the big brokerage, and am no better than lukewarm on Juniper.
Conclusion
The companies discussed above have a big opportunity to thrive in the current environment where technology can be used to fight crime. However, they need to be focused on innovation, and they need to execute on that innovation. Oracle Corporation (NASDAQ:ORCL) is a good choice for conservative, risk-averse investors. I believe Hewlett-Packard Company (NYSE:HPQ) should be avoided until it shows signs of true revenue growth coming from new product offerings. Investors should consider SanDisk Corporation (NASDAQ:SNDK) for long-term growth. In today’s uncertain global economy, investors should remain cautious about investing in Juniper Networks.
The article An Overview of 4 Large Tech Firms originally appeared on Fool.com and is written by Bill Edson.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
