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You Can Bank on These Electronics and Software Companies

Sunday - 6/30/2013, 3:42am  ET

These electronics products manufacturers' core business units operate in cyclical end markets. Specifically, spending by financial institutions and banks, as well as the broader call centers and office sector, typically increases when the economic picture brightens. Capital spending by banks is a key determinant of two of the following companies' prospects. All of these three operate core units that are tied to the business spending environment, while they may also operate units in faster-expanding end markets.

Here are brief overviews of three companies, focusing on their largest business units.

Plantronics - Office and contact center revenue growing

Plantronics , a maker of lightweight headsets primarily for the office and call-center market, experienced improved sales in its core division for the fiscal year ended March 31, and this trend has probably continued into the June quarter. Plantronics has kept its product lines fresh, offering the most updated technologies for convenient office communications.

On that note, Plantronics is adhering to a unified communications (UC) strategy, composing its newest offerings with what it calls "contextual intelligence", the capability to communicate with the most effective and convenient mode of communication. The goal is to reduce costs and improve collaboration. For instance, Premiere Global Services is integrating Plantronics' Voyager Legend UC headset into its video conferencing/virtual meeting solution.

Speaking of Premiere, the company is a pioneer in the field of virtual (non face-to-face) meeting experiences, combining real-time video, voice, web streaming, and file-sharing technologies. It is a growing company, with share earnings targeted to increase 10% to 15% this year, on a single-digit revenue gain. I like Premiere's strategy for this year focused on expanding distribution (it already reached 25 countries) and upgrading its iMeet and GlobalMeet online and conference-calling solution products. Along with property and equipment, the company is utilizing cash to repurchase shares, likely supporting share earnings accretion.

Premiere shares have gained Wall Street's favor this year. It falls in the same category as Polycom, a company I discussed in a recent blog. Companies looking to cut travel expenses and boost productivity compose its customer base. I like the shares of the small-cap Premiere as a near-term above-average performer.

As for Plantronics, the stock, too, ought to outperform the S&P 500 market average over the next 6-to-12 months.

NCR - ATM business trending positively

Previously, I had blogged about NCR's  expansion into new end markets with its self-service technologies (see blog). However, NCR's bottom line could well also benefit from ongoing heightened demand for its core financial institution business (ATMs). It sees a sales increase in that division this year of 2% to 4% from that, its largest, segment. This indicates that banks have loosened their capital spending budgets further, and that its deposit-enabled product launches are being received well.

Combined with likely better-than-20% growth in sales to the hospitality (hotels etc.) market, and a favorable impact from the acquisition of retail self-checkout systems software company Retalix, NCR is in store for a decent year. In fact, share earnings are apt to rise about 10% in 2013. I reiterate, also, that NCR is a good long-term holding, based on an enhanced presence in untapped industries, restaurants and cinemas for starters.

Final notes

Plantronics has a mobile-products unit that should help to support profit gains behind sales of Bluetooth products for use with phones. The company invests around 10% of sales in R&D, a factor that should help it over the long run. Premiere is somewhat more of a risk than the other two stocks mentioned here, due partly to it being a small-cap, more single-focused company. NCR is seeing a resurgence in traditional product lines, but is also relying on new avenues of growth for the long term.

This article was originally published as You Can Bank on These Electronics and Software Companieson

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