Why Businesses Want What Gigamon Offers
Stephanie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Gigamon (NYSE: GIMO) recently joined the ranks of information systems service providers Juniper Networks (NYSE: JNPR) and Cisco Systems (NASDAQ: CSCO) by going public. But unless you're a business interested in learning more about the traffic on your servers, chances are you've never heard of them. Here's a breakdown of what the latest technology IPO offers investors.
With an initial price range of $19 per share, Gigamon burst onto the scene in early June, with investors almost immediately pushing the stock up to $23 per share. The interest was enough to capture the attention of investors everywhere--even those who don't normally buy into tech stocks.
Who is Gigamon?
Founded in 2004, Gigamon achieved phenomenal success during one of the most challenging economic periods in the past century. In 2011, the company celebrated its seventh year by posting 50 percent year-over-year growth and 22 sequential profitable quarters.
The success has continued, with Wall Street Daily's Louis Basenese naming the company an "IPO to watch" in December of 2012. CNBC's Jim Cramer echoed the sentiment in June, urging investors to, "call your broker immediately" to purchase shares in the IPO.
Along with its competitors, Gigamon specializes in an area that is expected to be the next big thing in technology: Big Data. Big Data is the effort of channeling the 2.5 quintillion bytes of data created each day so that businesses of all sizes can harness it.
Evaluating the competitors
One way to determine if Gigamon is a good investment is to take a look at the recent history of Big Data service providers. Cisco Systems works closely with software companies like open-source software provider Apache Hadoop to collect and store data for clients.
As businesses migrate from on-site servers to Cloud networking solutions, Cisco has had to make a few changes, as well. As spending has slowed, big tech companies like Cisco have realized that it must evolve or perish. Today, Cisco is shifting its focus to wireless networking and software services.
In its most recent earnings report, Cisco reported a 5% increase in sales. But switching and routing make up more than half of the company's revenue and those two sectors are currently declining. The company has no choice but to focus on areas that are growing.
Cisco's CEO has also pointed out that Big Data only works when channeled through a company's network. He added that increasingly sophisticated computing must be built into the networking devices consumers use each day.
Juniper unveils network analytics suite
Another provider of networking equipment, Juniper Networks, has begun the shift toward Big Data solutions. The company recently unveiled the Junos Network Analytics Suite, utilizing Guavus technology. Guavus specializes in studying network traffic patterns to better understand both network and customer behavior.
The company reported a 3% increase in its most recent earnings report, but warned that the rest of the year might not be so fruitful. Juniper's CEO warned of "headwinds" in certain areas of the company, citing weak spending from Federal government and financial clients.
The move to Big Data could help Juniper minimize some of these losses, providing services to those same clients that could help improve the company's outlook for the rest of the year. Since the Junos suite is designed to help customers harness data to direct future business decisions, Juniper's new solution could give its clients the ability to bring in more revenue, thereby increasing spending on its network solutions.
Foolish final thoughts
As the buzzwords "Big Data" continue to circulate, investors are looking for ways to get in on the front end of this new trend. While Cisco and Juniper are forging partnerships to successfully initiate the shift, Gigamon specializes in intelligent Traffic Visibility Solutions, making it the best bet for investors who want to put their money behind a Big Data provider.
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Stephanie Faris has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!