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This Tech Player Looking Good


Unless you're Apple, the tech sector hasn't been drawing a lot of attention -- or money -- from investors. But this stock is worth your time and money, says Rob DeFrancesco of Tech Stock Prospector.

One of the most interesting things about following the tech sector is that the competitive dynamics are constantly shifting within the various segments based on what the different players are doing. Companies are continuously introducing new products, forming new partnerships, or making strategic acquisitions.

The end goal is always to boost top-line growth and take market share. For major announcements that would seem to alter the competitive landscape, stock prices tend to react quickly. Never mind that in many instances the immediate reactions can be "false" or overdone.

Market-share movements always take time (unless it's a major M&A event), especially when we're talking about a new product or a technology-based acquisition. Competitors don't give ground immediately or so easily. This creates opportunities for investors who are well informed about the transformational changes.

I have covered Citrix Systems (CTXS)-a provider of desktop virtualization, data center, and collaboration solutions-for years. With a market cap of nearly $14 billion, Citrix is a significant player in the enterprise and a major beneficiary of three important tech trends: Desktop virtualization, data center build-out, and the massive shift to the cloud.

Competing against leader F5 Networks (FFIV) in the application delivery controller (or ADC) market, Citrix has been doing quite well cross-selling its NetScaler product into its enterprise customer base.

In the second quarter, Citrix's data center and cloud unit saw revenue growth of 20%, with NetScaler included in 500 of the company's desktop virtualization deals, up from 400 deals in Q1. At the high end, NetScaler SDX sales to service providers and larger enterprises rose 20%.

But Citrix shares fell as much as 12% during the first week of August, dipping to a low of $68.17, after investors became concerned about some recent M&A in the networking sector. First off, VMware (VMW) announced in late July that it would pay $1.05 billion for privately held Nicira, an upstart provider of software-defined networking (or SDN) technology.

In networking virtualization, software from Nicira sits on top of datacenter servers and acts as an intelligent layer that manages and controls networking gear. This is somewhat troubling news for the hardware vendors, because Nicira's technology moves the intelligence out of the boxes, meaning cheaper commodity gear can be used instead. While SDN is still in its early stages, the networking hardware vendors are already paying attention because this technology is quite disruptive.

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No positions in stocks mentioned.
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