OPNETs (OPNT) Analytic Capabilities Seen As Strong Point; Makes Their Products Unique For The Market, According To Industry Expert
March 9, 2010 - The Wall Street Transcript has just published Business & Application Software Report offering a timely review of the Multimedia Software sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Gabriel Lowy brings more than 20 years of experience to the Noble Financial research team. Consistently recognized as a leading analyst by Starmine, "Best of the Street" by The Wall Street Journal and ranked in 2004 as the "Best Analyst in America" by Forbes, Mr. Lowy has gained a reputation for framing and articulating macro sector views in a way few other analysts have accomplished.
Throughout his career as a technology analyst, he has developed proprietary valuation models, advised managements on strategic market and financing options, and performed valuation analysis and opinions on M&A proposals and transactions. Over the years, he has written and published more than 300 market and competitive research products to a distinguished international institutional client base. Mr. Lowy received both his B.S. and MBA in strategic planning from NYU.
TWST: As the economy recovers, are we likely to see a pick up in virtualization adoption?
Mr. Lowy: Not specifically virtualization. And the reason for that is that virtualization technology continued to grow through the downturn because it's an enabler. Virtualization itself is not a be-all-end-all technology, but rather it's a means to enhance. That means to enhance is that it allows me to reduce my infrastructure, thereby saving energy, improve the productivity of my IT department, reduce my cost structure.
So that obviously is a very appealing investment to make even in a downturn because it's allowing me to save substantial money on infrastructure investments. So as the economy improves, it's not so much that it will drive more virtualization spending, but rather it will drive spending to those peripheral technologies that make the virtualization investment worthwhile. So one of those examples would be application performance management.
TWST: If that's the case, what kind of growth do you expect to see in this space over the next year or two, as things hopefully get better?
Mr. Lowy: We think this space itself can grow somewhere in the 6% to 8% type of range. Then the better companies that we think will take market share will be able to grow their revenues in the low-double-digit area.
TWST: Given the reasonably good growth rate, is that likely to lead to M And A in this space, as bigger companies look to pick up smaller ones?
Mr. Lowy: It has already been going on for a few years. CA (CA), for example, has been quite acquisitive in this area, putting together different pieces of the puzzle that they are now looking to tie into a unified platform. NetScout (NTCT), which is one of the other leaders in the company, was really built through the merger of two companies about two and a half years ago; they bought a company called Network General.
HP (HPQ) has been acquisitive in this area. So there has been quite a bit of consolidation already; there will probably be some more. But I think we've seen most of it. So we are going to see a situation where the leaders start to separate themselves from the pack.
TWST: What's going to set them apart? Will it be the quality of the offering?
Mr. Lowy: The quality of the offering is important, although in this particular space there aren't a whole lot of different ways to skin the cat. So what would set them apart is either a unique focus on certain niche vertical markets or a focus on how they go to market. One company, for example, like Compuware (CPWR), stresses a go-to-market with end-user monitoring. So doing the monitoring from the end user's perspective - and not only just within the corporate firewall, but now out beyond to the Web and cloud offerings - so that will be a differentiator.
Another company, like OPNET (OPNT), will differentiate itself by the depths of its analytics capabilities, so that they can do very rapid, on-the-fly troubleshooting and diagnosis of what the problem is in anticipation of calls coming into the help desk when the application performance degrades. So companies will take different go-to-market approaches and strategies, and target markets to differentiate themselves.
TWST: As you talk with investors, are they interested in this space?
Mr. Lowy: Yes, and that interest has been growing as investors have caught up with what companies are doing. In other words, as companies have been connecting performance management with their investments in virtualization, I would say over the last six months or nine months, investors are starting to recognize that there is a unique way to play this through a number of different companies that have given this market visibility.
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