With the vast number of data and digital storage manufacturers entering the market today, some of the pioneers in the computer and technology industry have either had to step up to the competition, or be left behind in the proverbial digital dust.
Delivering storage solutions
One of the more successful players in the technology sector today is Seagate Technology (STX). This Dublin, Ireland-based manufacturer and marketer of hard disk drives entered the industry in 1979, and since then, has made a name for itself worldwide. The company's products are utilized in numerous areas, including both desktop and notebook computers, gaming consoles, digital media systems, and portable external storage systems.
The company recently announced its financials, beating analysts' expectations by $0.10 on earnings per share, as well as performing above its revenue estimates. In just the fiscal third quarter alone, Seagate generated more than $675 million in operating cash flow, and it also paid $379 million for the early redemption of some long-term debt obligations.
One reason for Seagate's success may be reflected in the company's overall strong execution, due in large part to the continued advancement of cloud, mobile, and open source computing trends. This offers Seagate a tremendous amount of forward looking opportunities for both growth and overall profit, given the company's leading storage technology portfolio.
Seagate could be considered a winner in several different areas for investors. Its respectable dividend yield of 4% is quite healthy, and it is comparable to many of the large dividend-paying giants in the technology industry, and the shares are up already by more than 21% year-to-date. In addition, Seagate's share price has a great deal of growth potential as the stock trades at a low forward looking P/E ratio of 7 times, which makes the current price ideal for starting a long-term position.
Big Blue may be taking a back seat
Once considered "the" technology giant, "Big Blue" International Business Machines (IBM) has been taking a back seat to some of the newer tech companies that have emerged over the past several years. But, this does not necessarily mean that this company is a bad investment. In fact, for many reasons, investors may want to consider this firm's shares for their sheer growth potential alone.
Founded in 1910, IBM today operates in five primary segments. It is through the Global Technology Services area that it offers IT infrastructure and business process services that include tech support services, as well as business process services.
In mid-April of this year, IBM's first-quarter earnings report came out, and the company beat on both the top and bottom lines. The drop in earnings, though, was due in large part to the result of currency effects -- and especially the Yen. At the time of its earnings report, the company also reiterated its profit forecast going forward.
Yet, while first-quarter earnings were not as profitable as investors might have hoped, the company did see its operating margin grow to more than 25% -- making it the second most profitable company in its peer group.
As IBM's dividend yield is only in the neighborhood of 2%, it may not make the top of the list of investors who are seeking healthy dividend income. Share price, however, could be another story. The company currently trades at a forward P/E of less than 10 times -- much lower than its peers’ average of 18 times. In that sense, IBM shares are certainly a value buy at the current prices.
Staying competitive in a digital environment
In another case of a tech giant that is struggling, Hewlett-Packard's (HPQ) investors have essentially been punished by the company's recent poor overall performance. This company that provides products, software, and technology services to individuals and small and large businesses has appeared to be in a downward spiral for some time now.
This well known technology company has been suffering from a number of issues over the past several years -- many of these problems were simply the result of some very bad decisions made by upper management. Yet, while the declining market for PCs may seem to add a bad light to HP as a potential investment, there could be some good arguments for adding this company's shares to a portfolio.
One reason is that the company's share price has already essentially been beaten up, giving it the opportunity to move upward in the future. This means that unless things get a whole lot worse for HP, there could be some good upside here.
In addition, a large part of HP's losses were due to the writing off of some of the company's bad acquisitions. Therefore, when looking solely at the company's cash flow, Hewlett-Packard was actually profitable. That, combined with the fact that consumers are continuing to use PCs in some fashion, it is unlikely that even the newer devices like tablets will completely replace the personal computer any time soon.
Currently, HP is also paying its investors a dividend of $0.53 per share, which equates to a dividend yield of 2.60%. This could mean a nice solid income to shareholders -- even while waiting for the shares to appreciate.
The bottom line
While IBM and HP may have some work to do in order to remain competitive, Seagate appears to be off and running with no end in sight in terms of opportunities to continue its growth. And this could provide a nice reward for Seagate's investors -- even those who did not jump in before the company's most current growth spurt.
With a healthy balance sheet and recent results that are reflective of strong operational performance, Seagate could be a real winner for investors who seek growth and income over both the short and long run time frames.