To strengthen its life sciences business, PerkinElmer (NYSE: PKI) is putting its head in the clouds — cloud computing, that is.
The 64-year-old Waltham, Mass.-based company recently acquired Geospiza, a provider of lab software and cloud-based genomic data services. PerkinElmer wants to provide more storage and analysis services via the cloud, as faster and less costly instruments let more labs sequence DNA.
Cloud computing is the next stage in the Internet’s development. It promises to provide the means through which everything — from computing power to computing infrastructure and applications, business processes to personal collaboration — can be delivered to customers as a service wherever and whenever needed.
The “cloud” in cloud computing is the set of hardware, networks, storage, services and interfaces that combine to deliver aspects of computing as a service.
As genome sequencers produce increasing volumes of data for labs to manage, companies like PerkinElmer are jumping on a market opportunity to provide services and technology for researchers to store and analyze data in the cloud. Major providers of sequencing platforms such as Illumina (NASDAQ: ILMN) and Life Technologies (NASDAQ: LIFE) have worked with companies like Geospiza to make certain its customers can tap the cloud to manage the large volumes of data now being produced by those platforms.
With the new technology provided by Illumina and Life Technologies, sequencing an entire human genome can now be done for $5,000 to $10,000 over several days, compared with millions of dollars and several months just a decade ago. Researchers also demand data redundancies to ensure they don’t miss a single gene, so an individual genome typically is sequenced 30 to 40 times, further adding to the data pile.
Ease of use is becoming essential as more researchers venture into DNA sequencing for the first time because drug development increasingly relies on DNA and protein analysis. Even better for PerkinElmer, drug developers seem to be getting more comfortable with storing and analyzing data in the cloud.
However, a recent storm could temper the enthusiasm over cloud computing. In late April, the cloud service offered by Amazon (NASDAQ: AMZN) was out for several days, taking some big websites down. That incident might lessen the cloud’s appeal to scientists already nervous about handing over their precious data.
Regardless of the Amazon blip, the large biotech companies understand much of their success is going to be tied to crunching huge amounts of data. “Genomic information is becoming increasingly important in understanding and treating disease,” one PerkinElmer executive has said.
So far, investors haven’t been as enthusiastic about cloud computing as PerkinElmer. Since the Geospiza acquisition was announced, the company’s shares have slid about a dollar, although the stock still is up about 30% from a year ago. The company did have a nice first quarter, with net income from continuing operations up 31.9% from a year earlier on a revenue gain of 14%.
The company also revised its adjusted earnings per share forecast for fiscal 2011, to a higher range of $1.62 to $1.67. The company trades a trailing P/E of just more than 8, well below its competitors.
Perhaps the recent acquisition of Geospiza will enable PerkinElmer to soar into the stratosphere.
Barry Cohen does not own any of the aforementioned stocks.
