Big Data is a business driver. Big Data refers to sets of data they can't be managed with traditional database tools. Data rates are doubling every 18 months and a 300-fold increase in data volume is predicted in this decade.
Most businesses aren't ready to manage this flood of data, much less do anything interesting with it. Big Data is a top three priority at Walmart (WMT). They're using Big Data tools to sift through social network posts and anticipate spikes in demand.
Big Data will impact every industry, as well as education and government. In fact, the Federal government just announced a new research initiative, with a budget of $200 million.
For AT&T (T) the pace of growth in data transmission is hurting margins. AT&T has limited pricing power or ability to raise the rates consumers pay. In addition, AT&T also has limited ability to stop subsidizing smartphones and other upgrades. The wireless carrier needs customers to upgrade to more efficient networks as data consumption overloads older networks. Data rate plans have been modified in an attempt to slow consumption, nonetheless growth in data usage is doubling every 18 months.
AT&T needs people to upgrade phones to newer networks while at the same time they are creating a "smartphone bubble". In other words, subsidized smartphone sales are creating an over-supply of smartphones. Eventually, the smartphone bubble will burst and Apple (AAPL), Samsung, HTC, Research in Motion (RIMM) will see slowing smartphone sales growth. Notwithstanding, Big Data should boost sales at Oracle (ORCL) and SAP AG (SAP).
We prefer Oracle to SAP because of its cloud capabilities. Given that we are seeing an explosion in data transmission, storage, processing and interpretation, Oracle stands to benefit as one of the leading providers of database solutions. Oracle will have some work to do to meet demand with non-traditional databases tools. However, Oracle should be able to meet the challenge given its history, market share, and strategic position.
We expect Big Data to generate revenue for Oracle and as a by-product cash flow for investors. The long-term prospects are intriguing as Oracle could be well positioned for the next decade or two.
Notwithstanding, AT&T faces a challenging environment as pricing power is limited and the firm continually tries to meet growing demand for it services. Said differently, AT&T faces a challenging operating environment and is going to have to change the way it operates. Some combination of less subsidies on new smartphones and higher rate plan prices should impact consumers wallets in the years to come.