This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Which Company Will Define the Cloud Decade?

NEW YORK ( TheStreet) -- In the history of computing, an innovation has defined each decade and its technology leadership.
  • The 1950s were about mainframes and IBM(IBM).
  • The 1960s were about minicomputers and companies such as Digital Equipment Corp.
  • The 1970s were about the microchip and companies such as Intel(INTC).
  • The 1980s were about local networks and companies such as Novell(NOVL).
  • The 1990s were about the Internet and, to a large extent, Microsoft(MSFT).
  • The 2000s were about gadgets and, of course, Apple(AAPL).

We're now into the third year of the 2010s, and it's clear that the computing theme of our time is cloud computing. The question is: Where will the leadership lie? Who will be the prime beneficiary?

Some of the biggest price-to-earnings ratios in the land are to be found at cloud technology outfits VMWare (VMW - Get Report), Rackspace (RAX) and Red Hat (RHT).

The idea is that the software that people choose to run their clouds -- the "cloud stack" -- will grow these companies, as every enterprise works to replace client-server computing with more cost-efficient clouds.

Maybe. But a key to cloud development is the favoring of open-source software, where the software's benefits benefits flow mainly to users, not vendors.

VMWare could be the cloud's Apple or its Microsoft, because its vSphere infrastructure is largely proprietary. Or, if the money is to be found in cloud-hosting and open-source, Rackspace could win the prize. If open-source itself is the key, maybe Red Hat will triumph.

As you can probably tell, I'm skeptical about those possibilities. Not that the companies are bad investments. They just may not define cloud when the history of our time is written.

Another way of looking at this is in terms of services. Software as a Service is the result of using clouds, delivering enormous bang for the customer's buck. That's what (CRM)is claiming. That's really what (AMZN) is about, with the retailing giant used to generate demands for digital files and cloud infrastructure. I own a little Amazon, but when you put its earnings next to its price, it's nearly fully valued.

The excitement about Facebook is really about cloud. Facebook is, at its heart, a cloud application. It could not have scaled as quickly as it did without cloud architecture. It's a wonderful demonstration of the power cloud technology has.

But I think it's more likely that the people hyping Facebook to you right now are selling stock. The "social computing" boom feels to me like the dot-com bubble, and in many ways it has popped, with the shares of many social computing outfits trading at less than their offering prices. My view is: Let the private investors take that hit. Wait until there is some "there" there with Facebook. Let's see some operating numbers.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GOOG $693.01 0.00%
VMW $56.91 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
TSLA $240.76 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs