All of the big technology research firms—Gartner, Forrester, 451 Research, IDC, Yankee Group—are making cyber-wide headlines for their “Top Trends for 2014” predictions. I’m a firm believer that key trends in this most explosive, disruptive sector will dictate many of the winners and losers in the stock market as well.
The following on-the-cusp companies provide solutions that can make or break the way the government spots criminals, how individuals keep identities private and companies keep data secure, or where and how we all store zettabytes of data. You most certainly have heard about a couple of them; others may require a few taps into a search engine.
They all, however, offer potentially huge rewards for investors in 2014 and beyond.
Here are six high-stakes tech stocks and the gale-force trends driving them:
What it Does: While Amazon’s (AMZN) success as an online retailer is unprecedented, its Amazon Web Services (AWS) business may be the driver for the future decade. AWS recently beat IBM as winner of a $600 million contract with the CIA to manage its private cloud. AWS contributed $844 million to Amazon’s bottom line in second quarter 2013.
Market Cap: $176 billion
The Big Trend: The global market for cloud infrastructure services is projected to reach $63.5 billion by 2018, driven by widespread adoption of cloud computing by enterprises worldwide against a backdrop of increased pressure to reduce IT costs.
Performance: Year-over-year revenue jumped 24% to just shy of $17.1 billion in third quarter.
Stock YTD: +55%
What it Does: The San Diego-based ImageWare Systems (IWSY)company is in the business of facial recognition technology. It was recently awarded a $2.2 million contract by its largest customer, the U.S. Department of Veteran Affairs, to expand its personal identity verification (PIV) capabilities across federal, state and local lines.
Market Cap: $143 million
Trend: The U.S. government has invested a lot of money in this technology and from the looks of it must continue to do so, which is why facial recognition technology is expected to become a $6.5 billion industry by 2018.
Performance: Total revenues in the third quarter of 2013 increased 167% to $2.5 million from $938,000 in the third quarter of 2012.
Stock YTD: +111%
What it Does: Western Digital (WDC) develops, manufactures, and sells hard disk drives (HDD) and other computer storage devices. Western Digital forecasts revenue from Big Data and cloud to grow at an annual rate of 34% through 2020.
Market Cap: $12.7 billion
The Big Trend: IDC’s Digital Universe projects that people will create three times more content in 2015 as in 2012 (from 2.8 ZB to 8.6 ZB).
Performance: Full-year 2013 revenues of $15.4 billion were 23% above the prior year’s results.
Stock YTD: +81%
What it Does: CA Technologies (CA) provides Data Center Infrastructure Management (DCIM) software for IT. Under the leadership of CEO Michael Gregoire, the company has consistently cut costs and expanded its cloud offerings.
Market Cap: $14.8 billion
The Big Trend: Fewer than 10% of mid- to large-sized data centers utilize it, and 451 Research says DCIM supplier revenue will reach $1.8 billion by 2016, representing a 44% compound annual growth rate.
Performance: Revenue was flat for the second quarter F2014, although it’s worth noting that net income for the first fiscal quarter ended June 30 rose 42% to $335 million.
Stock YTD: +44%
What it Does: Lifelock (LOCK) provides identity-theft protection services in a subscription platform. For $25 per month, LifeLock will remove your name from junk-mail lists, monitor the Web for fraudulent use of your name, Social Security number and other personal information, and alert you about potential breaches.
Market Cap: $1.5 billion
The Big Trend: The same technologies that make banking, shopping and working so convenient also make identity theft easier. The Javelin Strategy & Research’s 2012 Identity Theft Report says that 12.6 million people were violated at a cost of $21 million. At a projected growth rate of 4% per year, losses will become even more staggering.
Performance: Third-quarter revenue grew 33% to $95.7 million year-over-year.
Stock YTD: +103%
What it Does: FireEye (FEYE) provides malware protection systems (MPS) to enterprises and governments. FireEye just released a report that said it had gained visibility into 23 different servers used to command and coordinate attacks by Chinese entities on foreign ministries in five European countries. The attacks date back to 2010.
Market Cap: $4.5 billion
The Big Trend: Cyber criminals launched 1.5 billion web attacks in 2012, infiltrating 6.5 million unique domains. Malicious codes corrupted servers in the Internet zones of 202 countries, just 20 of which accounted for 96.1% of all of those detected by IT security vendor Kapersky Labs.
Stock YTD: +2.5% (IPO launched on Sept. 20, 2013)