This is a true story. A man walks into a Target store and asks
to see the manager. The manager asks if he can help and the man
produces an advertisement that his daughter had received in the
mail at their home. It was for diapers, wet wipes, strollers and
other baby gear.
"My daughter is only 16," the man said. "Why are you sending this
The manager apologized profusely and offered a vague explanation.
The man nodded and left. A few days later, the manager, who was
bothered by the entire situation, called the man to once
"Well, it appears that I complained too soon," the man said.
"Evidently there are some things going on in my house that I
wasn't fully aware of. My daughter is due in May. So I guess my
only question is, how you knew before I did?"
The manager again offered a vague explanation, but the truth is
that retailers like Target have complicated algorithms that
carefully analyze massive amounts of purchasing data. They can
discern buying patterns and draw highly specific marketing
In this case, the man's daughter had bought a number of items in
one transaction that expectant mothers tend to buy. Armed with
this data and other customer information, the retailer can send
out highly targeted marketing material -- material designed, in
this case, to create a strongbond with a potentially lucrative
Today, retailers are very careful with this sort of customer
information. They still analyze the data, and they still make
these sorts of conclusions, but theywill include other offers to
mask the intention of the targeted campaign -- acoupon for dog
food, say, or patio furniture and other seasonal items.
The truth is, retailers like
J.C. Penny (
and others use "Big Data" to know exactly the kind of ads to get
in front of you. But what they don't want is consumers to know
just how much they know about them. Just think how much I could
tell about you by examining what you bought at the grocery store.
If you think that loyalty card is there to give you a discount,
think again. This is how supermarket mailings are eerily matched
to the same stuff you typically buy.
As an investor, all you need to know is this:
Information is the most important and valuablecommodity
on Earth, and it always has been.
The only difference is that now an entirely new industry is
arising that promises to change the way we eat, play and live.
And perhaps most importantly for investors, how we do business.
Today, the ability to use massive amounts of data and strain it
into something resembling intelligence -- even for something as
mundane as what you buy at the grocery store -- is a large,
growing and dynamic industry.
Essentially, it is the job of a Big Data to store large amounts
of information, enable its easy analysis and aid in the
presentation of the data's results.
In 2010, Big Data was a $3.2 billion industry. But research firm
IDC expects it to grow more than 428% to $16.9 billion by 2015.
That's a scorching 40% per-year growth rate.
So, what is the best way for investors tocapitalize on this
EMC Corp. (
is the 800-poundgorilla of Big Data, with $50 billion ofmarket
capitalization and annualrevenues in excess of $20 billion. It's
There's just one problem. With the company as large as it is
today, the company's growth prospects have diminished somewhat,
though they ought to mirror the industry's growth going forward.
Anotheroption is a much smaller company,
Emulex Corp. (
. This company has a market capitalization of $529 million --
about a hundredth of EMC's. The share price during the past 52
weeks has been volatile, with a low of $5.72 and a high of $8.67.
Its recent price of $5.84puts it near the bottom of its range for
Even with thestock 's recent losses, the company's fundamentals
are favorable. Revenues last year came in just above a
half-billion dollars, a record, which represents a 9.9%compound
annual growth rate during the previous three years. Thebalance
sheet shows a modest amount ofcash , nolong-term debt , and
roughly static shareholderequity for the past several years.
Action to Take -->
Big Data has scope -- it touches every sector of theeconomy . I
expect companies like EMC and Emulex to be at the forefront of
this technology, pushing the outer bounds of what we thought was
possible with data -- and delivering substantial profits for
investors in the process.
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