Wall Street Transcript Interview with Mark Moerdler, Ph.D., Senior Research Analyst at Sanford C. Bernstein & Co.: M&A Expected to Continue in Application Software

Wall Street Transcript

67 WALL STREET, New York - November 30, 2012 - The Wall Street Transcript has just published its Business and Application Software Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Application Software Consolidation Activity - Cloud Computing and SaaS Trends - Health Care Transition to ICD-10 - Outsourcing and Offshoring Trends

Companies include: VMware, Inc. (VMW), Microsoft Corporation (MSFT), SAP AG (SAP), Hewlett-Packard Company (HPQ), Dell Inc. (DELL), CA, Inc. (CA), Salesforce.com (CRM), Adobe Systems Inc. (ADBE), Apple Inc. (AAPL), Citrix Systems, Inc. (CTXS) and many more.

In the following excerpt from the Business and Application Software Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Which two names from your group would you recommend as best bets at the moment?

Dr. Moerdler: We have an "outperform" on Microsoft. We believe Windows 8 is a credible operating system for tablets, and they're going to gain market share there and that there's more to the story relating to the cloud and other parts of the business.

We have an "outperform" rating on Adobe (ADBE). We believe that that many on the Street have just stopped watching. On the other hand, the company has made a transition to raise the percentage of their revenue that is recurring in nature, that they moved into areas such as CRM/digital marketing by their acquisition of Omniture, which is a fast-growing part of their business, and it is a very sticky business. They've taken the core creative product, Creative Suite, and offered it both as a license version and a subscription version, and it's got upside from mobile devices app development, as people need tools to develop for not just simply Apple (AAPL), but multiple versions of Android and Windows. So we see upside and opportunity in that stock as the transition occurs and as the Street recognizes what's happening within the company.

We have an "outperform" rating on Citrix (CTXS), driven again by mobile and that we see there's an opportunity here for Citrix to grow their desktop virtualization business. As consumers buy more and more mobile devices, they come to work with them, they want access to the corporate apps from it and one of the best ways to deliver it is desktop virtualization, application virtualization, which is core to Citrix's business.

There is also the fact that we had a little over 50% of desktops have moved to Windows 7, corporate has to moved over to Windows 7 by sometime in 2014, and we believe that the next tranche of the rollout of Windows 7 is going to be devices where they're older, they're in branch offices, they're in other places, and therefore, desktop virtualization has a better value proposition, which will help the revenue of Citrix.

The last "outperform" we have is SAP. The opportunity for SAP is threefold because the core business is reasonably protected. It's got a very large recurring revenue stream to it, and in addition, they've moved into the area and they developed organically a technology in memory database called HANA, which we believe will generate significant revenue in the business intelligence space. They have also moved into the cloud by acquisition and some of their own development to be able to offer what's now becoming a suite of cloud-based ERP solutions. So that could drive significant revenue growth in the future.

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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