General Electric (NYSE:GE) has announced the availability of its Proficy Monitoring and Analysis suite. The product is the first integrated solution for a big data management and an analytics service. In this article, I want to show how a rise in the analytics services and the big data market will help General Electric to increase its Home and Business Solution division revenues by 2% with the new product. This factor will improve the price multiples of General Electric.
Why will the company accomplish this feat? Many organizations are searching for the means to transform the way they can provide a quality service to their customers. Consequently, they have increased their spending on their big data and their analytic services deployments. According to the International Data Corporation, the big data sector will create a $23.8 billion market by 2016. Additionally, the firm predicted the new market for the analytics services sector will grow to $70.8 billion by 2016. General Electric will benefit from this trend with its new product. This will increase the revenues of the company's Business and Home Solution division.
The General Electric sales growth is inevitable. Its Home and Business Solution division has boosted the company's growth through its many successful solutions in the analytics sector. In the first quarter, the net income of the division rose to $79 million from $57 million in the previous year. In the fourth quarter, the division reported a revenue of $2.1 billion, an increase of 2% on a year-on-year basis.
General Electric And The Home and Business Division
General Electric has instituted several initiatives to boost the revenues of its Home and Business Solution division. Recently, the company joined the PTC Partner Advantage program to integrate its Proficy software applications with PTC's technology solutions. General Electric released the PROFINET industrial networking platforms to ensure a connectivity to its controllers. The company also introduced the Reflective Memory Analyzer to move a large quantity of a company's data with a low latency. General Electric also acquired SmartSignal to provide an analytics solution for its numerous customers.
The newly available solution will enable the customers of General Electric to process their data for an actionable insight toward an effective decision making. The product allows the storage of a large data in a cluster and facilitates an advanced analytics procedure to improve a process performance. "GE manages 5 TB of new time-series data per day," said Brian Courtney, the General Manager of the GE's Data Intelligence Software group. "Our experience in big data and analytics that maximize equipment and process mitigate the risk for other companies."
General Electric developed the product to improve the price multiples of the Home and Business Solution division. Fortunately, the big data and the analytics services sector is a growth area. This is important to General Electric, as it strives to be a little ahead of its rivals.
When we take a look at the Home and Business solution revenues, we see that it shows a growth on a year-on-year basis. It is clear that General Electric has been improved by the division. So it can be said that the division is making a progress.
With a price to sales ratio of 1.64, General Electric is trading competitively. This is impressive given that it has a gross margin of 50.54%. The new product will increase the company's revenues and improve the earnings per share . It will enable its investors to continue to benefit from the robust earnings that establishes a benchmark for a good performance.
With a price to earnings of 17.15, compared to 17.46 for Citigroup (NYSE:C), 15.33 for Siemens (SI), and 17.30 for 3M (NYSE:MMM),and a gross margin of 50.54%, compared with 28.10 for Siemens, 48.1% for 3M, and none for Citigroup, General Electric does appear to be operating at a competitive level. Siemens, 3M, and Citigroup have the similar line of products with General Electric and are its rivals. But with the new product, General Electric will remain competitive.
There is a risk in buying the General Electric share. The company has a large debt load. It could be controllable in a strong economy but prove to be a burden in a rough economic climate. Based on the growth prospect in the big data and the analytics services sector, we can say the new product will increase the revenues of the Home and Business solution division. Looking at the General Electric price multiples, we say the investors should HOLD the stock for the long term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.