Small Caps | Nov 12 2014
– Data collection growing exponentially
– Cloud adoption still in its infancy
– Security breaches ever more rampant
By Greg Peel
Big Data, it would seem, is just getting bigger. Even the Australian government is now embracing Big Data, despite apparently only one member of cabinet having a clue what Big Data actually is. Suffice to say Big Data refers to the overwhelming avalanche of data now being collected through increasingly intrusive channels, including rapidly growing social media platforms. This data is met by ever more powerful, and faster, computing capacity that can crunch numbers within a realistic timeframe, providing valuable information for commercial and non-commercial activities alike, including sovereign security.
Coincident with the rise in Big Data has been the evolution and rapid adoption of cloud computing, even on sunny days. Not only is data now bigger, more powerful and more valuable, it lives somewhere in “the cloud”, being the internet ether, rather than safely tucked away in some terrestrial super computer.
And as sure as night follows day, more valuable data stored in more ethereal filing cabinets is a red rag to the bull of cyber criminals. As data collection and storage has grown in importance, so have the incidences of information theft and business disruption. Episodes of corporate and government “hacking” have grown exponentially. The technology evolution has moved so fast that legacy internet security providers such as Oracle and SAP have been struggling to keep up. They are now being challenged by more nimble, smaller companies who have moved swiftly to tailor their bespoke products.
The information technology security market is currently estimated to be worth US$68bn globally. In Australia, the cloud computing industry is expected to grow at a pace of 19-25%, reaching an estimated $2.7bn by 2017. Further estimates suggest global growth in cloud computing from a value of $47bn in 2013 to $107bn by 2017.
Just when you thought the twenty-first century technology revolution must surely be reaching a pinnacle, it’s as if mankind has just now invented the wheel. Or at least the second wheel.
It is of no surprise the shift towards cloud-based solutions has spawned a wave of new investment in internet security. Australian company Covata ((CVT)) provides a data-centric solution to security through its proprietary platform technology, based on securing data at the data level from the point of origin to provide outward-facing security. We might consider Covata’s cyber soldiers as bodyguards to the data, who move as a detail with that data wherever it may go, such as into a cloud.
Moelis & Co IT analyst Kyle Twomey believes Covata offers a compelling solution at the right time and across an industry with favourable thematics. The structural shift towards cloud-based solutions is in its infancy, with significant growth expected into the future.
Industry thematics support the adoption of Covata’s data-centric platform technology, says Twomey, and the company offers a leveraged business model targeting OEM (original equipment manufacturer) and distribution partnerships and an application-based solution. Partnering with leading organisations that can off scale and distribution will amplify growth potential and limit overhead costs.
Covata is now at the point of commercialisation. It has validated technology and a marketable product and has signed a distribution partnership agreement with NSC Global. Covata has made impressive inroads for a company fresh to commercialisation, suggests Twomey, and boasts an impressive board of directors with a depth of experience across the industry.
“With pent up news flow, a favourable thematic and a leveraged business model, in our view, the risk reward is to the upside.”
Moelis has initiated coverage of Covata with a Buy rating and 27c twelve-month price target. The stock last traded at 20c.
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