The tech sector is by far one of the most elusive, yet lucrative, sectors of all and or emerging growth companies it only gets harder. Not only is there overwhelming competition from aggressive big wigs but profit margins are also strained by high capital expenditures among other bottlenecks.
How do emerging growth companies in this sector secure longevity? While this may seemingly pass by as an uphill task, companies like NIC Inc. (NASDAQ: EGOV) have managed to play the right card in that regard. This internet service provider instead of trying to level the playing ground with larger competitors, it has opted to look for dedicated and deep pocketed customers. Customers that are sure to spend lump sums in a recurrent fashion; like the government.
NIC’s eServices, through its portal and software & Services segments, are particularly tailored to meet the government’s internet needs. Inking contracts with the government translates to a rosy top line, as demonstrated by the 14 percent year-over-year leap in quarterly portal revenues during the third quarter of 2012. In the same breadth, same-state portal revenues also edged up 8 percent during the quarter. From 2007 up until the 2012 3Q earnings release date, the company’s steadily growing bottom line has allowed it to comfortably return more than $133 million to shareholders in form of special cash dividends. This not only shows that NIC has been trending upward, but it also represents the company’s keen interest in creating shareholder value.
2012 fourth quarter earnings are expected to hit the public domain on February 7th. The general outlook is bullish and analysts are inclined to believe that performance will trend upward.
Market tailwinds will fuel company growth
While the government’s candid involvement with NIC is a key factor behind the company’s growth, broader market tailwinds will propel the company through the next decade. As of now, notable breakthroughs are being made with data, particularly so through the roll out of faster and more reliable networks like 4G. In fact, most carriers are currently wedged in an ongoing battle to secure bigger 4G footprints. Just like its bigger competitors, AT&T (NYSE: T) and Verizon (NYSE: VZ), Sprint (NYSE: S) also wants a piece of the action. Its bulging interest to secure the remaining 49 percent stake that it doesn’t already own in Clearwire (NASDAQ: CLWR) is indicative of its desire to expand its spectrum ownership and perhaps filter through the 4G market. Incidentally, DISH Network Corp (NASDAQ: DISH) has also shown interest in buying out the stake in Clearwire.
All these factors, coupled together, signal the market’s gravitation toward better internet. Considering that the government always needs to be a step ahead of the consumer market, it would be accurate to say that NIC’s technology outstrips many of the consumer-oriented companies. In addition, the future promise of work brightens the long-term picture and promises longevity. With growth steadily edging upward, and a 52 week price range of $9.95 -$16.83 (the stock is currently trading close to its high at around $16), it would be accurate to say that NIC has gained tremendous value of the past one year.