Three Big Tech Income Opportunities

Implied volatility in the innovation sector has been trending up, and we believe that the following companies remain undervalued, providing a potential possibility for selling bullish exposure:

Wide range of enterprise IT solutions

Oracle(ORCL)Oracle sells a wide range of enterprise IT solutions, including databases, middleware, applications, and hardware. Software license and product support--the most profitable segment of the company's operations--accounts for about 67% of total revenue.

An active acquisition program is a fundamental component of the company's overall strategy. Oracle has spent more than $38 billion on acquisitions since fiscal 2005. Oracle's market share leadership in database and middleware products combined with an arsenal of integrated hardware and software solutions position the company to increase its share of medium and large enterprise clients' IT spending. Oracle's engineered systems strategy will drive market share gains in enterprise data centers at the expense of hardware-only rivals just as HP(HPQ). Public cloud computing threatens the company's businesses, however we believe the hybrid deployment model made possible by Oracle's Fusion applications strategy is sound and will enable the firm to retain the vast majority of its clients in the transition to cloud solutions.

Near-term financial results are likely to be volatile as the company rightsizes the hardware business acquired from Sun and builds out the Fusion applications portfolio, nevertheless the company is then positioned for the medium to long term.

Although growth is slowing in its core search market, we however expect annual growth in search revenue to exceed 15% while the then five years, supported by the firm's successful foray into mobile advertising. Additionally, we expect initiatives in display advertising and YouTube to represent multibillion-dollar revenue opportunities.

Apple(AAPL)Apple designs consumer electronic devices, including PCs, tablets, phones, and portable music players. Its iTunes online store is the largest music distributor in the world; it sells and rents TV shows and movies and sells applications for the iPhone and iPad. In early 2011, Apple launched the Mac app store, an online store that sells first- and third-party applications for Mac desktop and notebook computers.

Apple's short-term momentum looks unstoppable. Triple-digit growth rates will slow, nevertheless as we look five years down the road, some of the most important drivers of valuation include estimating how big the addressable market for smartphones will grow and how much share Apple can carve off. Once share is secured, we believe users become tethered to the Apple ecosystem that will drive their purchasing decisions for years to come. Apple is peaking at the perfect time, riding Steve Jobs' legacy of unequalled insight, execution, and design skills to the front of the current product cycle. The iPhone is the cornerstone of Apple's consumer strategy, with few opportunities larger than the global handset market. Now it is positioned to ride a wave of smartphone growth that could see the market top a billion annual unit shipments by 2015.