(IT) CA to Support StratITsphere Cloud

Information technology (IT) and management software developer, CA Inc. (CA) recently revealed that its cloud computing, energy management and service assurance solutions will support StratITsphere’s new package of cloud-based services (Nimbus) and other offerings.

Nimbus was developed on CA AppLogic cloud platform and will be delivered on the same, including virtual private data centers (VPDC) with full failover and disaster recovery capabilities.

This should help StratITsphere’s Fortune 1000 customers who would be able to access dynamically provisioned and secure cloud services, providing an agile and highly efficient platform with a lower capital investment than traditional computing solutions.

The company will be using CA ecoSoftware to enable customers in its co-location facility, which will in turn help lower their electricity costs and make the entire facility more energy efficient. CA’s solutions will enable SratITsphere to see energy consumption patterns at the device and system levels, thereby providing them the opportunity of making necessary adjustments that could improve power usage effectiveness (PUE) and make the billing process more efficient.

The company is slowly tapping the huge opportunity available in the cloud computing space. CA Inc.’s emerging opportunity in the virtualization/cloud computing space is significant and could help accelerate growth over the next 2-3 years. CA believes that 2011 will be crucial as the company seeks to establish itself as a beneficiary of virtualization/cloud computing.

The company’s recent acquisition of the cloud computing company Oblicore Inc. is also an indication of its focus on the cloud computing business. Cloud computing is witnessing strong demand and is being increasingly adopted by not just the small and medium businesses, but also large players.

Moreover, CA Inc.’s record management business is poised for growth. The company’s Records Manager, part of its comprehensive Information Governance solution, automates the record-keeping processes to help users gain faster access to information, save resources and facilitate compliance with regulatory, legal and business requirements. Gartner estimates that the worldwide records management market will see a five-year compound annual growth rate (CAGR) of 12% between 2009 and 2014.

CA Inc. posted modest fourth quarter results, with EPS in line with the Zacks Consensus Estimate, although revenues missed. However, the demand trend noticed in the quarter was encouraging. Keeping in mind the quarter’s revenue backlog, we find the fiscal 2012 guidance a bit conservative. We think that CA Inc.’s endeavor to return shareholder value with share buybacks and dividend increases could boost investor sentiment.

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). This apart, its high debt balance and European exposure remain headwinds going forward.

Currently, CA Inc. has a Zacks #3 Rank, implying a short-term Hold rating.

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