Broadcom’s (AVGO - Free Report) latest Portfolio License Agreement (“PLA”) solution was recently selected by Barclays in a bid to accelerate its digital transformation initiatives.
Notably, Broadcom introduced the new PLA solution with an aim to provide enterprise customers with streamlined IT software management, renewal, compliance and security processes.
The PLA solution adopts an innovative, simplified and cost-effective Everything-as-a-Service (“XAAS”) approach over the Software-as-a-Service (SaaS) licensing model. This enables the enterprise customers to leverage end-to-end software development solutions and increased flexibility facilitating faster time to market.
Per the terms of the multi-year PLA, Barclays attempts to bolster “significant savings” by reducing costs and complexities involved in IT processes.
We believe Broadcom’s latest PLA offering’s innovative features position it well to witness incremental adoption from notable enterprises, going ahead.
Notably, shares of Broadcom have returned 17% in the past year outperforming the industry’s rally of 13.2%.
XaaS Approach: A Key Catalyst
The growing clout of XaaS among enterprises undergoing digital transformation enhances the prospects of Broadcom’s latest PLA.
To quote president and CEO of Broadcom, Hock Tan, “I’m excited about the potential for our PLA to shake up the software status quo and enable customers to be more nimble and efficient with the solutions they use.”
It is to be noted that software is ubiquitous and has become the focal point of technological innovation. With the XAAS software architecture, enterprises are enabled to deploy agile innovative practices, consequently enabling them to accelerateproduct development cycles.
Per Deloitte Insights 2018 report, eight out of 10 companies surveyed are of the view that XaaS provides accelerated access to the new innovative capabilities and technologies. Further, seven out of 10 companies surveyed believe that XaaS adoption enabled them to reduce costs.
In the era of dynamic innovation with increasing demand of flexible options and easy-to-adopt solutions, we believe XaaS-based approach in Broadcom’s latest PLA offering holds promise.
Focus on Enterprise Software to Aid Top Line & Expand TAM
In digital transformation era, enterprises are increasingly focusing on rapid migration to cloud and DevOps technologies with an aim to achieve scalability and improve agility to enhance IT processes.
In fact, per IDC data, spending on digital transformation is projected to grow to $1.97 trillion in 2022 at a CAGR of 16.7% from 2017-2022.
We believe Broadcom’s initiatives to innovate and enhance infrastructure software and expand mission critical technology solutions portfolio with new approach and capabilities bode well.
The company’s efforts are expected to drive adoption of its software offerings which in turn will favor the top line.
Furthermore, we believe the company is well positioned to benefit from synergies of CA buyout. In fact, CA’s strength in enterprise software offerings and substantial customer base is anticipated to enable Broadcom explore the infrastructure software market and expand its TAM.
Zacks Rank & Key Picks
Broadcom carries a Zacks Rank #3 (Hold).
Benefitfocus, Inc. (BNFT - Free Report) , MeetMe, Inc. (MEET - Free Report) and EPAM Systems, Inc. (EPAM - Free Report) are a few stocks worth considering in the broader technology sector. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Benefitfocus, MeetMe and EPAM Systems is currently pegged at 25%, 20% and 19.6%, respectively.
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