Courtenay: Two Techs for the Price of One

NEW YORK (TheStreet) -- Do you feel as though you've missed out on the big stock market rally of 2013? Are you wondering if there's any stock left to buy that hasn't already soared? Would you like to own one with nice upside potential?

Well, you've come to the right place. I want to introduce you to a powerful technology company that owns an impressive majority interest in another technology enterprise. I'll introduce the company by letting you in on a secret: E=MC squared, an equation most of us take for granted or know little about.

When Albert Einstein came up with this equation it was mind-boggling stuff. Energy (E) equals mass (M) times the speed of light squared (C).

Imagine light traveling at approximately 186,000 miles per second and you begin to have a sense for how fast and powerful energy really is.

Now let me to tell you about a company whose name reflects that equation. EMC ( EMC) harnesses its energy, mass and speed to develop, deliver and support information technology infrastructure and virtual infrastructure technologies, solutions and services.

EMC used to be known mainly as a data storage tech company. Now it's also in the business of protecting data. As the company reported Monday, it has added to its array of products an update to its Data Protection Advisor. This is EMC's software product designed to provide real proof of data protection. It's about real-time visibility into global backup infrastructures, as the company says.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust -- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

How valuable and important is this? As company Senior Product Marketing Manager Tom Giuliano explained, "Any IT administrator or application owner who can't instantaneously verify that vital business data are not properly protected is leaving both themselves and their data exposed. It's that simple. It's a perilous and potentially very costly situation."

In other words, businesses can't afford to be without it!

To begin to understand the money-making power of EMC you'll want to visit its electrifying Web site and pay close attention to the page that discusses its products and "solutions." Like the famous Einstein equation, the list of products and solutions is mind-boggling. More important, it's what everyone who works on or works with the worldwide Web needs.

If that insight isn't enough to motivate an investor to consider owning EMC shares, let's add the fact that it owns a 78% stake in another technology superstar, VMware ( VMW), which rocketed over 8% higher on Wednesday after EMC announced at an analysts meeting in New York it plans to spin off a new company based on the collection of assets that are known as the "Pivotal Initiative."

What I understand at this point is that Pivotal will incorporate EMC's Greenplum and Pivotal Labs acquisitions, while VMware will contribute its Cloud Foundry, Cetas, Spring and Gemfire groups to the new company, which will headed by former VMware CEO Paul Maritz, who has been running the Pivotal effort within EMC.

The new "Pivotal Initiative" company is anticipated to have around $300 million in revenue this year and 1,250 employees. EMC will own 69% of the new company while VMW will own the other 31%. At the analysts meeting VMware reiterated its revenue outlook for this year and increased its operating margin forecast by one percentage point to 31%. As of the end of 2012 EMC had a trailing twelve-month operating margin of almost 19%. EMC's next earnings report will be on April 24th.

The new "Pivotal Initiative" is likely to help EMC's revenue and earnings per share in 2013. Let's look at a five-year chart and see for our selves how EMC's price correlates with these two important metrics. For earnings I've chosen the trailing 12-month Ebitda number.

EMC Chart EMC data by YCharts

After 2013, which will be a year of investing in internal growth, VMW expects its revenue to increase 15% to 20% in the following two years. The company has a new management team and, according to TheStreet's research department, "we believe that it the new management is purposely conservative and setting low expectations that will be exceeded. EMC owns 78% of VMware, which accounts for 21% of EMC's earnings."

It's an exciting time to own EMC shares, which have rallied on the good news that bubbled from the analysts meeting. EMC stock at $25 is still trading at a little over 12 times forward earnings and its price to earnings to growth (PEG) ratio (five-year expected) is barely at 1, also indicating that the stock is under priced.

At these levels, and with all the many ways EMC can power its earnings and revenue upward, it appears to be an auspicious time to get on board this technology "starship," which is accelerating to the speed of light squared, figuratively speaking. If you're a cautious type, consider doing your own due diligence and buy at price levels that make sense to you.

At the time of publication the author was long EMC.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Make smarter trading decisions and provide investment ideas that could help make you richer. Bryan Ashenberg does the dirty work so you don't have to!

More from Opinion

It's Just Not Smart For Investors to Ignore the Threat of a Trade War

It's Just Not Smart For Investors to Ignore the Threat of a Trade War

To Think a Trade War's Still Just a Threat Is the Dumbest Thing on Wall Street

To Think a Trade War's Still Just a Threat Is the Dumbest Thing on Wall Street

Flashback Friday in Politics: Trade Wars, Manafort, Immigration Dominate Minds

Flashback Friday in Politics: Trade Wars, Manafort, Immigration Dominate Minds

Microsoft and Sony's Rumored Game Console Plans Bode Well for AMD

Microsoft and Sony's Rumored Game Console Plans Bode Well for AMD

Apple Supplier Jabil Is Tumbling, But Its Sales Momentum Remains Strong

Apple Supplier Jabil Is Tumbling, But Its Sales Momentum Remains Strong