Wary of IP Companies? Hold Back on the Cynicism for Just a Moment…

Greg is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

In the small business arena, companies offering wide area network support and data management are popping up everywhere, so much so that it’s easy to be skeptical of these startups. Those of us who make the decisions on network support services tend to quickly look these companies up and down and then quickly turn our heads in the opposite direction.

“I can’t risk my data to a company that will disappear next Thursday,” we mutter to ourselves after politely dismissing the smiley recent-college-grad-turned-entrepreneur who walks away from our offices hopeful for a call back. Small startups run by many young business owners seem to all be cut from the same cloth. They love to talk about cloud computing (it really is one of those terms that seems to make people nod, isn’t it?), while they sip on their designer coffee and rattle off technical terms thinking they’ve impressed us. And yes, they certainly do know their stuff when it comes to IT, but those of us who have a little more skin in the game have to be wary when it comes to trusting our data with a startup. Not to mention, we want a little more than they can offer, especially with regard to complex Internet Protocol handling.

Unfortunately, we tend to bring that cynicism from the practical business arena to the marketplace, and we continue to turn our heads when something similar but better pops up in the news feeds.

But when a handful of these companies’ publicly traded counterparts – the “older brother” types
offering similar services who have been around for more than three years and are succeeding with major clients – start showing a run of steady, moderate gains over several weeks, cynics like us finally start to feel confident about finding reliable network support services. We may even decide to start spending money again.

Take Infoblox (NYSE: BLOX) as an example. Not quite at the half-year mark yet (they entered the public market in April), this company has made steady gains all this month, and investors in its IPO will be pleasantly happy at the progress it has made since June. Focusing on the complexities of network managements given to the rise of mobile devices and cloud computing (yes, their marketing folks, too, like to use this quippy hashtag, but the engineering team has a practical approach to handling the Cloud’s complexities), Infoblox has continued to innovate and offer network solutions. In a time of great shift in wide area networks, the company remains dynamic in its problem-solving approach, and made mostly positive financial predictions for 2013.

Why talk about this? Last week Infoblox announced its intent to make a Second Public Offering available (without receiving the proceeds), to distribute its shares more widely. It may be a good opportunity for those holding off at the time of the IPO to carefully approach a thus-far-successful stock.

More experienced competitor Riverbed Technology (NASDAQ: RVBD) has shown similar gains to Infoblox over the last month, an encouraging sign for mid-sized Internet Protocol companies and their stock holders. On Monday, following a strong end to the previous week, the company issued a press release promoting additional solutions for Cloud-based networks.

As a baseline, while Riverbed watched its price take a $7 hike since late June, IP giant Cisco Systems (NASDAQ: CSCO) has stammered in the same amount of time, still managing a small gain. However, despite Cisco's disappointing performance in the latter half of September -- which resembled its summer struggle -- given the overall outlook for IP stocks, it would be wise to consider it in the same way as Riverbed and Infoblox. It would be unwise to simply jump ship for the greener grass on the shores of the Riverbed; there's a good chance the IP industry stocks will gain together, as the former two have done for the most part.
So to step back for a moment, those of us looking for data storage and support should perhaps check the cynicism at the door, or at least pull back on the reins. The industry is somewhat safe, and while working with brand-new startups is always risky, there are solid solutions out there. And for those of us who are willing to face a moderate risk for a legitimate chance at profit, the network support IP companies are worth a second look. 

copyhubwriters has no positions in the stocks mentioned above. The Motley Fool owns shares of Riverbed Technology. Motley Fool newsletter services recommend Riverbed Technology. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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