A Who's Who of the Cloud Computing World
Soroush is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Nothing beats being early in an upcoming trend. That applies not only to life in general, but to investing as well. Imagine yourself investing early in the semiconductor and personal computer boom. What would it be like if you were able to catch Intel, Microsoft, Apple, and Hewlett Packard before they were tech behemoths? The simple answer to that is you’d probably be filthy rich by now. Those companies have gained 8,583%, 42,571%, 19,787%, and 14,938% respectively since their IPOs.
The good news for us young investors is: The tech landscape is always evolving. New technologies are opening up new markets and new opportunities. One such technological evolution that is being developed (and used) by companies is cloud computing. International Data Corporation, a leading market research firm, expects that public cloud computing will be a $44 billion market by 2013. Currently, companies are pouring billions of dollars in the race for cloud computing dominance, so there is a fat profit opportunity for early investors in this emerging arena. For your reference and (further) research, here are seven publicly listed companies that pose to make a ton of profits from the cloud computing business.
VMWare, Inc. (NYSE: VMW) is a company that provides virtualization and virtualization-based cloud infrastructure solutions in the US and internationally. Currently, VMWare is trying to position itself as the linchpin to help enterprises get to public and private clouds. The company allows third parties to create virtual servers on its vSphere platform, which is now in its fifth version. Costs range from $495 to $30,000; this upper-end is a little pricey compared to most other players in the industry. One other fact that sets VMW apart from its competitors is its sheer reliance on the service for revenue – vSphere sales are estimated to account for around 90 percent of its annual totals. The good news is that these sales have been growing at more than a 26 percent clip per year since the recession.
Amazon.com, Inc. (NASDAQ: AMZN) created Amazon Web Services (AWS) in 2002 to sell its excess computing capacity. Fast-forward to today, and that small division has grown to become the dominant player in the public cloud computing business. AWS is being used as Amazon’s cloud where customers’ data, like ebooks, movies, songs, etc. are being stored and managed. Currently, AWS is estimated to be a $6 billion company that has a strong foothold in the cloud computing business. To learn more about how to value AMZN as an investment, continue reading here.
Google Inc. (NASDAQ: GOOG) is not going to be left behind in this market. Aside from offering cloud computing platforms, they are slowly but surely moving most of their services into the cloud. Google Docs, for example, is their real-time document collaboration tool that lets you store all your documents, presentations, spreadsheets, etc. online. They are slowly converting this tool into Google Drive, a cloud-based file storage and sharing suite (up to 5GB of data) that is pretty much like Dropbox. In a move to secure its dominant position in both the mobile and cloud market, Google just recently bought Quickoffice, a popular provider of mobile, cloud-supported office productivity tools similar to Microsoft Office.
Microsoft Corp. (NASDAQ: MSFT) is getting seriously involved in the cloud computing business. It has an open cloud platform service called Windows Azure, and the Microsoft System Center 2012 (for private cloud). It is also coming up with the Windows Server 2012, the server operating system that focuses on cloud computing. The company’s pricing strategy places it in direct competition with Amazon, charging around 12 cents per GB, down from the $0.14/GB it levied last year. It looks as though the company is going to continue to try and undercut AWS, which announced a similar ~10% price cut earlier this year.
Citrix Systems Inc. (NASDAQ: CTXS) recently bought a couple of cloud computing infrastructure and services companies. One of those is Cloud.com, a provider of open source infrastructure that is quite popular among cloud providers in the open cloud services arena. Among others, it also bought Sharefile, a provider of cloud-based data storage to complement Citrix’s foothold in the cloud computing business. Its Cloudstack 3 platform has been moderately successful, as tech companies like Zynga and Tata Communications are customers. Altogether, Citrix saw its revenues (17.6%) and earnings (28.1%) grow by double-digits last year.
Rackspace (NYSE: RAX) is the co-creator of the highly popular OpenStack open source cloud operating system. They currently provide traditionally managed hosting, public cloud Platform as a Service (PAAS), and hybrid cloud services that blend the two technologies together. The company is known for its superior customer service in comparison to its larger competitors. Last year, RAX grew its sales from $781 million to $1 billion, as cloud revenues currently make up a fifth of its overall top line. Going forward, analysts expect the company to finish 2012 with earnings of $0.79 a share, up more than 40 percent from one year earlier.
Aside from this scintillating six, Verizon, CenturyLink, and Salesforce.com (NYSE: CRM) are also positioning themselves to be competitors in the cloud computing arena, as each made notable acquisitions last year. Out of these up-and-comers, we particularly like Salesforce.com, as it may be on the cutting edge of the cloud’s next evolution. CEO Marc Benoiff calls it ‘Cloud2 computing’, which is all about social media, mobile computing, and real-time data aggregation. Last year, Benoiff oversaw the acquisition of Heroku, a popular cloud application platform that supports Ruby, Java, and a host of other programming languages. Keep these guys on your radar, as they look to be a step ahead of the cloud computing pack.
These companies are currently the top players in the (very promising) cloud computing industry. The idea is to keep them in mind and do your due diligence before investing in them. For more trading ideas in this uncertain market environment, visit WealthLift INSIDER today.
This article is written by Jason Ramos and edited by Jake Mann. They don't own shares in any of the companies mentioned above.