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3 Top 'Cloud' Stocks to Own in 2012

Editor's note: As part of our partnership with Nightly Business Report, TheStreet's James Rogers will appear on NBR Monday (check local listings) to look at the top cloud-computing stocks for 2012.

NEW YORK (TheStreet) -- With cloud computing becoming a mainstream enterprise technology, investors should pay attention to EMC (EMC), Salesforce.com (CRM) and Rackspace (RAX) in 2012.

No longer perceived as a niche corner of the tech sector, a growing number of businesses are harnessing the power of cloud services. Rackspace, for example, counts Kraft Foods (KFT), Under Armor (UA), and Vodafone (VOD), among its customers, while Salesforce.com provides services for HP (HPQ) and Time Warner Cable (TWC).

There are different types of cloud technology available for enterprises, from "public" clouds, where customers access services like storage and server power from third-party companies, to "private" clouds, which are run at customers' own sites. Private clouds could be used, for example, to provide company-wide marketing or HR services across multiple locations.

Tech research firm IDC estimates that revenue from public IT cloud services alone exceeded $21.5 billion in 2010 and will reach $72.9 billion in 2015, growing four times faster than the IT market as a whole.

Word on the Street

The good news is that there are many ways for investors to ride the cloud wave, from companies providing core hardware and software, such as EMC, to actual cloud service providers like Rackspace. Salesforce.com, which reported impressive fourth-quarter results last week, is the trailblazer in what's known as Software as a Service, or SaaS, providing a host of specialized services from its data centers.

"While the software as a service trend has been growing rapidly since 2005, it is now exploding as major enterprises are accelerating their adoption of cloud computing," said Pat Walravens, an analyst at JMP Securities, in a note released last week. "Our sense is that Salesforce.com and other SaaS companies are increasingly taking market share from traditional enterprise software vendors like Oracle (ORCL) and SAP (SAP)."

As cloud deployments become increasingly common in corporate America, these are the cloud stocks that investors should keep an eye on in 2012.

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