10 Tech Trends for 2010: #9 WAN (Wide Area Network) Optimization (BCSI, CTXS, FFIV)

WAN optimization built traction in 2009 a little sooner than I had expected. We saw the stock prices for all the primary players, Blue Coat Systems (BCSI), Citrix (CTXS) and F5 Systems (FFIV) perk up notably following their respective calendar Q2 forecasts that were provided in conjunction with calendar Q1 results. Year-to-date gains from these stocks, all of which were listed as good speculative buys in our special report, “Undervalued Tech Stocks for 2009,” ranged from a low of about 85% for Citrix to nearly 300% for BCSI.

Citrix was trading just under $23 when I pointed to it as a good speculative buy last December and was essentially flat with that when I reiterated the opinion at the end of March 2009. My simple thesis at the beginning of 2009 was that we would first see strengthening demand from consumers for such things as PCs, smartphones, flat screen TVs and in the infrastructure from wireless providers and then, during the second half, we would start to see improving demand from enterprise in the data center. Given the rise in the price of Citrix, it would appear that Wall Street now sees things similarly.

Similar to what we’ve seen at Citrix, F5 was trading below $23 last December when I pointed to it as a good speculative investment and had dipped only slightly when I reiterated the call in late March. Also similar to Citrix, it has since taken off now that Wall Street has realized we would see a resurgence in data center demand during the second half.

The short story here is F5 is a very well managed company and, due to this and the inherent value it delivers to its customers, has performed well in what has been a soft aggregate market. I expect this trend to continue.

In spite of a muted demand market, I think Blue Coat is also doing well – very well when viewed in the context of the IT sector as a whole. I think there is pent up demand for ADN products and that Blue Coat has the potential to grow its business more quickly than the consensus suggests we should expect.

In a new special report entitled 10 Tech Trends for 2010, NextInning.com highlights ten technology trends that investors will need to know about this year, as well gives opinions on several key tech stocks, including ones that are its favorites for the new year.

For access to the free report, examining each pick’s business activities, strengths, weaknesses, latest earnings report, and much more, visit NextInning.com.

Tags: BCSI, CTXS, FFIV