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Company Business Summary(Standard&Poor's)
This company is a global provider of intelligent software that allows enterprises to analyze and monitor raw data stored across their enterprise. Our fundamental outlook for the Application Software sub-industry is neutral. We note that results for 2006 largely met our expectations, and we think the outlook for 2007 is healthy. We continue to expect future appreciation to be determined largely by year-end enterprise IT budgets. While we do not expect software to be the sole beneficiary of any corporate investment cycle, we still think that productivity enhancements offered by, and the ongoing reduction in overall risks associated with, investments in software will make it an attractive investment area. Standard & Poor's expects corporate spending on enterprise software as a whole to grow at a mid- to high single-digit rate in 2007, consistent with trends seen in 2006.We expect growth in some areas to be above-average. We expect companies in the Customer Relationship Management and Business Intelligence software segments to do well as IT budgets remain healthy in these areas, and we believe recent consolidation has created some pent-up demand. We expect large purchasers of software to continue to exercise great discipline in their software buying decisions and maintain a keen focus on return on investment and total cost of ownership. In this buyers market, we think software vendors face intense competition and ongoing pricing pressure. Vendor rationalization, which refers to a buyer's decision to purchase more from fewer vendors, is common, further increasing the market power of purchasers. Despite this, we believe that enterprises will continue to look to software as a way to increase the productivity of their work forces. Over the longer term, we believe that the rapidly evolving Internet and e-commerce are creating strong demand for software applications that take advantage of these platforms. Many vendors are integrating Web features into their products, and exploring new ways to deliver more value to their customers by assuming more of the risk associated with a typical investment in software. As the enterprise software market matures, we also see an increased focus by vendors on small and midsized businesses to drive future growth. Year to date through June 22, the Application Software sub-industry index rose 8.7%, above the 6.5% gain for the S&P 1500.We believe that this advance began as a favorable response to year-end results for 2006, although we think that ongoing share buybacks and industry consolidation have had a positive impact on performance. In view of recent gains, and as we move through what has typically been a seasonally slower period for the group, we expect more modest gains relative to the index.