Cloud computing major CA Inc. (CA) is expanding its cloud services with the introduction of CA Service Catalog that combined with CA Virtual Automation and CA Oblicore Guarantee will help the independent functioning of physical, virtual and cloud services in a cost effective way.
The new service Catalog 12.6 is expected to add efficiency to the process of private and hybrid cloud provisioning, service automation, user self-service and financial management, while increasing the security of the IT system. This single-window support may be expected to enhance customer experience.
This new product is expected to create a connection between current IT operations and also address the challenges faced by companies in the process of moving existing services to a private cloud, thus facilitating the process of transformation towards a dynamic and virtualized environment.
CA Inc.’s emerging opportunity in the virtualization/cloud computing space is significant and could help accelerate growth over the next 2-3 years. Particularly, 2011 is likely to be the turning point, establishing CA as a beneficiary of virtualization/cloud computing.
Cloud computing enjoys strong demand and is being increasingly adopted by businesses. However, managing the way it is used will be very important. As per a study conducted by Market Research Media, the U.S. government’s spending on cloud computing is entering a phase of explosive growth. The research firm expects the market to grow at a CAGR of 40.0% from 2010 to 2015, crossing $7.0 billion in 2015.
Revenue generation from cloud computing services continues to be a key area for CA with significant business potential. Moreover the company is also adopting a diversification strategy to minimize its business risk. CA is also exploring the potential in service assurance, identity & access management, and making prudent moves to strengthen its mainframe business. The company is also restructuring its business to tighten its grip across segments.
CA is rolling out new products and services at regular intervals that are offering better features to customers and contributing higher margins to the company.
Moreover, it is witnessing a steady pickup in order renewal rates, which have now touched. 90%. This is a good sign, as the company’s ability to retain old customers coupled with the improvement in new bookings growth should enable CA to grow in line with or at a faster rate than the pickup in demand.
We believe that with the revival in the macroeconomic scenario, CA’s growth trajectory should continue. On the other hand, we are a bit concerned about the intense competition in the software & cloud computing space from big players, such as International Business Machines (IBM) and Hewlett-Packard Company (HPQ).
Currently, CA has a Zacks #3 Rank, implying a short-term Hold rating.
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