If you're a longtime reader, you know that I'm a "collector" of investing adages and aphorisms – you know, things like "Bulls make money, bears make money – but pigs get slaughtered" … or "Buy on the cannons, sell on the trumpets."
These long-held sayings are usually clever, are often amusing and are always easy to remember. And they can really help you make money.
One of my favorite tech-investing adages holds that "You can always spot the pioneer – he's the one with the arrows in his back."
The message: If you're going to invest in a company whose technology is out on the cutting edge, you have to make sure your research is solid. Be as certain as you can that the technology isn't ahead of its time, will find a market and isn't about to be leapfrogged by a better, more-market-friendly technology.
In that report, we predicted that EMC would continue to gain global market share in its core disk-storage business – putting additional distance between it and its rivals.
And that's just what's happened.
New research by Piper Jaffray Gartner shows that EMC's market share reached a record 34.2% in the fourth quarter, meaning the Hopkinton, Mass-based tech firm is expanding its already-hefty lead in this key business.
And external storage is just one of its areas of focus.
EMC is also boosting its business in the area of data security. And as we've told you in our "Cyber-Hacking of America" reports, this focus – coupled with its existing relationships with big companies and with government agencies will make EMC a big beneficiary of the cybersecurity-spending explosion.
Indeed, EMC is on the prowl for security-related acquisitions. And unlike most firms, EMC has shown it knows what to do with the companies that it buys.
Despite some industry wide weakness in the storage sector, EMC bucked the trend and turned in a record fourth quarter – even reaching the $6 billion in quarterly revenue mark for the very first time. It hit that mark thanks to growth of 8% on a year-over-year basis and 14% on a sequential basis.
Some analysts have been worried that Oracle Corp. (Nasdaq: ORCL) – a rival of EMC's in certain areas – might be gaining ground. But Oracle reported a big revenue miss last week causing its shares to sell off. Five sessions later, Oracle is still down a hefty 9.67%.
EMC CEO Joseph M. Tucci said his company "remains squarely at the center of the most disruptive and opportunity-rich shift in IT history, propelled by the benefits of cloud computing, big data and trusted IT. These high-priority IT spending areas are core to our strategic focus and represent market segments where EMC has established leadership positions and competitive advantage."
As readers also know, we are very partial to stocks where we see the potential for more than one catalyst to ignite a rally. And that's certainly the case with EMC.
It already owns 80% of virtualization firm VMware Inc. (NYSE: VMW). Now those two companies are looking to generate growth and unlock value by spinning off a venture called "Pivotal Initiative" – a mash-up of "Big Data," analytics, and other related elements that currently sit inside EMC and VMware.
Though no time frame was established for an initial public offering (IPO), Pivotal is expected to be a standalone venture by April. EMC's discussion of this plan at a recent "strategy day" was extremely well received by investors.
The Pivotal businesses had revenue of $300 million last year. But company officials believe it can grow to become a $1 billion business in five years – and said that may be a conservative estimate. The market for this venture will be about $8 billion this year and is expected to exceed $20 billion by 2017.
EMC would take two-thirds of the revenue, while VMware would get one-third.
Tucci, the EMC CEO, said that "with our ambitions, we are facing giants" like Oracle, Microsoft Inc. (Nasdaq: MSFT) and International Business Machines Corp. (NYSE: IBM). But, by creating Pivotal, and having it work with EMC and VMware, "we can get a lot of benefits."
Sounds to us like Tucci has a plan to be very aggressive, and stay ahead of his rivals – without getting arrows in his back.
That's exactly the kind of profit play we like to find.
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About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.