June 21, 2010 No Comments-
Over the post two years, IT budgets have been shrinking while network security and other IT initiatives have become more vital. In these types of environments, consumers seek solutions offering the best value. When it comes to IT, especially in the network security space, the best value product is often that which best protects.
Drilling down into quarterly, 10k, and annual reports often reveals results and strategic directions for specific products and lines. What does this have do with IT? A look at vendor results, particularly revenue increases over the past few quarters, will reflect which products consumers consider the best value.
I don’t recommend this method in a bullish economy. In good times, budgets allow markets to consume poor products that add little to no incremental value to IT initiatives. Remember, if you do use this method, some current profits have increased due to cost cuts. Revenue measures, such as revenues from sales, will best reflect which vendors are actually increasing total sales. With vendors decreasing prices in the face of falling demand, increased revenue is a great sign.
If you do use Wallstreet as a product information source in bullish economies, I’d suggest looking at valuation measures such as earnings yields, or price to earnings(P/E). Valuation measures take into account results, but for technology stocks especially, they also add valuation premiums which consider product lines quality and management’s ability to keep those products on the leading innovative edge. Valuation premiums are often influenced by analysts research who consider all the same information you would use in purchasing decisions, like word of mouth, and third party performance tests and reviews.
In a previous post I discussed how to evaluate network based security products. If you don’t mind scanning through financial information, Wallstreet information is a great source of secondary research. Remember, no matter who is buying the most popular products, you must first consider which products best fit into your IT environment.
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