Internet Of Things To Unleash Massive Data Expansion

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The Internet is the pulse engine of today's economy, requiring gear at billions of junctions interconnected by millions of miles of fiber cable and wireless technology.

It's continuously under construction, growing larger and more complex, with trillions of data "packets" -- bursts of digital information -- delivered daily.

Diverse companies hustle to develop and re-invent the equipment and programs needed to manage this massive flow of data.

Among the players at the head of that pack areAkamai Technologies ( AKAM ),F5 Networks ( FFIV ),Aruba Networks ( ARUN ) andEquinix ( EQIX ).

Along with the other 26 companies tracked in IBD's Internet-Network Solutions group, they provide the equipment, software and data services able to route information, e-commerce, streaming video, graphics, wireless services and more to millions of website addresses worldwide.

The Internet is set to get much larger. Vast amounts of traffic are poised to come online with the evolution of smart technologies connecting autos, homes, aircraft and other sources to the Web.

The Internet Of Things

Google ( GOOG ) has been investing heavily in just such connections. It recently bought its way into the "smart home" market, acquiring Nest Labs for $3.2 billion. Nest Labs makes thermostats that learn from, and adjust to, user settings. It also makes high-tech smoke detectors. The acquisition provided Google entry into the market for Web-connected household appliances.

"Google will help us fully realize our vision of the conscious home," Nest CEO Tony Fadell wrote in a blog post when the deal was announced.

Google has long been investing in smart technologies, including its development of Internet-connected, self-driving cars and the eye-catching Google Glass. All three business groups fit into an emerging field called "the Internet of things," whichCisco Systems (CSCO) recently deemed a fast-growing, multibillion-dollar market.

The Internet of things defines a concept in which any device that can benefit from an Internet connection should get one. It includes parking spaces, vending machines, irrigation systems, electrical grids, surveillance systems and health care devices.

Machine-to-machine communications are central to the concept. M2M devices share data via Wi-Fi or Bluetooth through a cellular network or with a direct connection to the Internet.

The Internet of things and M2M are not new. Some estimates put the number of devices already attached to computer networks at 2 billion. Others place the number much higher.

"It's an old business and a new business," said Godfrey Chua, analyst at Infonetics Research. "But now the networks are more widely deployed, the cost of connecting devices is coming down and it's widely supported by governments and business."

It's among the reasons the amount of data traversing the Internet is growing at exponential rates.

Akamai, F5, Aruba and the others are seen taking advantage of the trend. Their products and services are used to fine-tune the speed, efficiency and security of the Internet.

Fighting An Army Of Ants

Akamai delivers content and applications across a globally distributed network of servers. It handles more than 2 trillion requests per day from more than a billion users. Companies use its services to deliver Internet content quickly, in addition to live and on-demand streaming video. Users of its technology include Apple, FedEx, Home Depot and IBM. Public-sector customers include the Federal Aviation Administration, the U.S. Department of Defense and Department of Labor.

In 2013, Akamai revenue rose 15% to $1.58 billion.

In December, Akamai acquired Prolexic Technologies for $370 million. Prolexic provides cloud-based security solutions for protecting data centers from distribute denial-of-service attacks, an area to which Akamai is giving increased emphasis.

In a DDoS attack, the target is intentionally bombarded with information requests that overwhelm servers and cause them to malfunction. While businesses deploy various security technologies to prevent hackers from accessing sensitive data, a DDoS attack is not as easily prevented. It's like fighting an army of ants.

"Traditional security solutions are ineffective against DDoS attacks," said Robert Blumofe, executive vice president of the Akamai Platform Division. With the addition of Prolexic, Akamai fortified its arsenal of solutions.

"Our customers want the same level of performance everywhere around the world," said Blumofe. "The reliability of packet flow is extremely important, and they come to us for that performance."

The New Home: Mobile

Cisco estimates that global Internet traffic will increase at a compound annual rate of 23% from 2013 through 2017. Much of that growth is expected to come from mobile data traffic, which rose 81% in 2013.

The ever-growing need to protect and speed the delivery of applications and data across the Internet has a lot to do with demand created by smartphones, tablets and other mobile devices. Among those playing an essential role in helping businesses deal with the increasing complexity managing this traffic is F5 Networks.

The goal of F5 Networks is to ensure the safe, fast and reliable delivery of Web applications and services across multiple data centers. F5 Networks is the biggest maker of application delivery controllers that optimize server workloads in corporate data centers and telecom networks. Its core technology is a highly scalable software platform called Traffic Management Operating System.

F5 designed its products and services to help companies manage the shift to virtualization and cloud computing, where software plays an increasingly important role in improving network efficiency at lower costs. Its products manage strategic points of control on Internet networks, inspecting, modifying and directing traffic for increased security and optimization.

Company revenue in 2013 rose 8% to $1.5 billion. Analysts expect a return to double-digit revenue growth for F5 this year as it moves deeper into the network security field.

The need for greater security is also strong in mobile, which is where Aruba Networks steps up to the plate.

400 Million New Smartphones

Aruba's core technology is Mobile Virtual Enterprise, which helps unify a company's mobile networks, including Wi-Fi systems. Its technology enables secure access to data, voice and video applications for enterprises, mobile professionals and remote workers, across wireless and wired networks.

The explosion of wireless use and the proliferation of smartphones are causing companies to radically change how they manage these devices.

The need for Aruba's technology stems partly from the growth of Wi-Fi networks and the bring-your-own-device trend that allows employees to carry whatever wireless device they prefer to use and still have full access, as they would to a wired network.

According to Cisco, the number of mobile devices and connections rose by 526 million units last year to 7 billion units worldwide. Smartphones accounted for 77% of that growth, a staggering 406 million additions.

For its fiscal year ended July 31, 2013, Aruba reported revenue of $600 million, up 16% from the same period a year ago. For the six-month period ended Jan. 31, revenue rose 13% to $337.3 million.

Another key player in the network infrastructure field, on the data management side, is Equinix. It builds and leases data centers to a swath of business segments, including Internet service providers, software-as-a-service providers, financial companies, content providers and companies deploying cloud computing systems.

"Cloud computing is creating massive disruption in the IT supply chain and will continue to do so at an accelerated pace, creating opportunities across all of our verticals," said Stephen Smith, Equinix president and CEO, in a conference call with analysts last month when the company reported Q4 results. Equinix has about 4,500 customers.

Demand for its service is also fueled by bandwidth-intensive services such as video, social media, mobile data and gaming. Customers include Amazon, AT&T, Microsoft, LinkedIn and Salesforce.com.

In 2013, Equinix reported revenue of $2.15 billion, up 14%.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: AKAM , FFIV , ARUN , EQIX , GOOG

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