The technology team at Jefferies is totally on board with this new hardware design and infrastructure. In a new research report, the Jefferies analysts say that based on their conversations with industry contacts, they believe that the momentum of Open Compute is undeniable, particularly among cloud providers and large enterprises that seek to deploy equipment at “hyperscale.”
Since OCP is a nonprofit initiative founded by Facebook designed to open-source data center hardware and design, it potentially lowers the cost of data center infrastructure. Jefferies analysts believe it may hasten adoption of data center technologies and drive incremental volume for various vendors. The firm points out specific stocks that may benefit from this new data center technology and initiative.
ARM Holdings PLC (NASDAQ: ARMH) has been pretty much a byword for earnings growth over the past decade, with its chip designs being used in just about every imaginable kind of portable computing device — the power behind iPhones and iPads is clearly something to be reckoned with. The stock has traded flat over the past year and may be ready to run. Investors are paid a small 0.4% dividend. Jefferies has a $55 dollar adjusted target. The Thomson/First Call estimate is posted at $53.86. ARM closed Tuesday at $46.33.
Broadcom Corp. (NASDAQ: BRCM) is a former high-flyer trying to fight its way back to prominence. The stock of this provider of semiconductor solutions to wireless and wired communications has seen a surge over the past four weeks and may be on portfolio managers’ radar. A key reason for this move has been the positive trend in the earnings estimate revisions picture. For Broadcom’s full-year estimate, nine estimates have gone higher in the past 30 days, compared to no downward revisions. This has helped the consensus estimate to trend higher, going from $1.78 a share a month ago to its current level at $1.84. Investors are paid a 1.6% dividend. The Jefferies price target is $37. The consensus estimate is pegged at $32.34. Broadcom closed Tuesday at $30.79.
Cavium Inc. (NASDAQ: CAVM) has done poorly over the past six months as the market focuses on its large amount of business with Cisco Systems. Cisco accounted for almost 20% of Cavium’s revenue in the recently reported fourth quarter. Cisco is going through some difficult times, which seems to be overshadowing Cavium’s solid growth. The company has made good progress in an effort to capture as much of this market as possible. Its new 28-nanometer products are finding traction in enterprise, data center and service provider segments. The Jefferies price target is $45, and the consensus target is $41.22. Cavium closed Tuesday at $38.19.
Facebook Inc. (NASDAQ: FB) is prominent in the Jefferies report as it actually started the OCP organization. Investors may recall that Facebook blew out earnings for the third quarter in a row and was up more than 15% after the gigantic earnings home run. The company is also one of the top Mobile Internet theme stocks for 2014. The company has totally revamped its mobile advertising arm, and the efforts are paying off big time. Every metric from the most users to margin expansion to soaring ad revenues has Wall Street still buzzing about the stock. The Jefferies price target for the social media giant is $80. The consensus target is $70.01. Facebook closed Tuesday at $64.85.
Intel Corp. (NASDAQ: INTC) stands to be a large winner in the OCP arena. Last September, Intel and Corning announced that they had successfully transmitted 100G of data with the Intel Silicon Photonics module and Corning’s MXC connect and ClearCurve fiber. Contacts from Intel/Corning indicated that this demonstration was performed essentially under perfect conditions, and that given the inherent variability of the manufacturing process, 300m is the reach that they believe can be achieved reliably in production. Intel pays shareholders a very solid 3.7% dividend. The Jefferies price target is $32, and the consensus figure is $25.24. Intel closed Tuesday at $24.47.
Microsoft Corp. (NASDAQ: MSFT) has finally settled the CEO issue by appointing Satya Nadella to be only the third chief executive in the history of the software giant. Nadella recently served as the executive vice-president of Microsoft’s cloud computing offerings since July 2013. Although cloud computing remains one of the smaller parts of Microsoft’s current business, the cloud computing enterprise group more than doubled customers in the latest quarter. Cloud computing is a huge part of the OCP initiative. Microsoft investors are paid a nice 3.1% dividend. The Jefferies price target is $42, and the consensus target is $38.40. Microsoft closed Tuesday at $37.17.
VMware Inc. (NYSE: VMW) has been on fire and is a leader in cloud storage software. Its cloud computing service is a new offering for its customers. The company’s vCloud Hybrid Service has n0t been designed or marketed as a standalone public cloud as of yet. Many analysts believe that on a pricing basis it is one of the more expensive offerings. The ability to tie software solutions in with public cloud service may be a huge winner in the future. The Jefferies price target is $114. The consensus price target is $105.78. VMware closed Tuesday at $93.06. Investors can also indirectly own VMware by buying the stock of storage giant EMC Corp. The company owns more than 43 million shares of the VMware stock. EMC closed Tuesday at $24.98.
The Jefferies analysts believe that OCP is increasing the return on investment and reducing frictions to deployment of data center infrastructure. This is critical as the demands for data storage, video and audio streaming and a host of other services we now take for granted are exploding. Data center construction and implementation may become much smoother in the future.
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