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A Few Technology Stocks to Keep an Eye On

June 20, 2014 | About:
shash63

shash63

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The computer peripheral industry has been an important part of the overall computer hardware manufacturing industry. After a market decline in 2010, the computer peripheral industry has been growing steadily. The global market for this industry is estimated to reach $245 billion in 2015, growing at a rate of 7.9%. The consumer shift to the latest technology and economic recovery contributed to industry growth. Three computer peripheral companies are launching new products and completing mergers and acquisitions to generate revenue growth and cost savings. Let’s discuss them in detail.

Product launch expects to bring revenue growth in controller’s segment

Electronic For Imaging’s (EFII) second biggest segment, Fiery Controllers, contributed 35% of total revenue. This segment provides controllers for digital printers. The company’s big clients in this segment are Xerox, Ricoh, Konica Minolta, and Canon, contributing 80% of this segment’s revenue. These clients are expected to launch new products in future, thus creating further potential for revenue growth.

It entered the ceramic tile market last year after acquisition of Cretaprint for $52 million. Cretaprint provides digital printers for ceramic tile decorators. The company launched a beta version of its Fiery pro Server in the second quarter. This device allows ceramic tile printers to print accurate color samples and to custom design tiles at a retail store. This product launch is expected to bring $250 million in revenue opportunity annually. Apart from providing digital printers, the company also generates more than $100 million annually by selling ink for graphics, packaging, and labeling printers. The company launched proprietary ink for ceramic tile printers in the second quarter. Both these product launches will expand the company’s current market of $500 million in the ceramic tile industry, and it will act as a revenue growth driver from the digital printers segment, which is expected to grow at 10% in 2014.

Acquisition and introduction of new platform brings new growth prospects

In January, Nice Systems (NICE) had announced that it is in discussion with Verint Systems (VRNT) for possible acquisition. This acquisition will cost Nice Systems $1.5 billion. After this acquisition, the combined sales of both companies is expected to be around $1.5 billion annually, and it will control 70% of the voice recording market, and 50% of the video recording market. This acquisition shouldn’t face any hurdles as Verint System recently purchased the controlling stake of its holding company, Comverse Technologies, thus becoming an independent company. This deal will make it simpler for Nice System to acquire Verint Systems.

The company’s analytics business contributed 26% of revenue in 2013. This segment is expected to grow 20% year-over-year in 2014. The launch of the customer engagement analytics platform this year will support this growth. The platform collects and analyzes big data related to customer engagement. Thus, it helps organizations map customer preferences and behaviors. Due to the low penetration level of 25% of the company’s customers, the analytics business has the potential to sell $3 of additional products on every $1 of sold recording.

Acquisitions providing strong future growth in revenue

Stratasys (SSYS) acquired MakerBot for $403 million. This acquisition enabled Stratasys to offer affordable desktop 3D printers, thus catering to the market’s low end. Apart from gaining access to the entry level 3D printing market, it also provided Stratasys an access to Makerbot’s online user generated community. This community operates under the name Thingiverse.com, and it has the largest collection of downloadable digital design. It is expected that revenue from Makerbot will increase to over $75 million in 2014.

The company became a leader in 3D printing after it merged its operation with Israel based company, Objet, in December 2012. This deal was an all-stock deal, where the Objet identity ceases to exist. This deal will result in Stratasys’ shareholders holding 55% of shares and Objet's shareholders holding the remaining 45% of shares. Currently the combined entity has market share of 57% in the 3D market. This acquisition resulted in an increased distribution reach of the combined entity, and sales will benefit from more than 260 resellers and agents around the world. In addition, it is expecting cost synergies of $8 million annually, starting by 2014, due to reduction from shared expenses, better allocation of resources, and reduction in future recruitment costs

Conclusion

All three have implemented various strategies to sustain the growth in computer peripheral industry. Segmental revenue of Electronic For Imaging's Fiery Controller is expected to grow due to new clients’ product launches.


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