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Chris Lau, KAPITALL Contributor: Mainframe computing from around the 1970’s was replaced by client-server computing architecture in the 1980’s and 90’s. By the time the Internet proliferated, the world found a need to centralize the storage of data again. Cloud computing supports the delivery of services over a network. Some of the jargon of abbreviations include: Saas (software as a service), middleware, and more recently, SDN (software-defined networking). [More Analysis by Chris Lau:
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Consumers may be more familiar with cloud service offerings. This includes Google Drive, offered by
Google (GOOG), SkyDrive by
Microsoft (MSFT), Box.com, and DropBox.
Some of the other big players investors might want to start with are grouped below.
Read descriptions for all companies mentioned]
1. Cisco Systems, Inc. (
CSCO): The networking giant grew through acquisitions. The company is turning its focus on SDN. UBS
argued that innovation in hardware will happen through SDN. Performance, latency, and resiliency are elements that will improve.
Cloud computing supported
virtualization initiatives, since hardware and storage became very inexpensive. A leader in this field:
2. VMware, Inc. (
VMW): Valued with a POP (price of profit) of 34 at the time of writing, shares dipped sharply below $100 after issuing a profit warning at the beginning of 2013.
In the software services industry:3. Amazon.com Inc. (
AMZN): The book retailer, which now sells practically everything for consumers, also sells AWS (Amazon Web Services). This allows companies ranging from all sizes (small to large) to rent hosted computing and storage. The company is extending its reach by bundling content through Amazon Prime, and reaching more users by selling tablet device hardware almost at-cost.
4. Salesforce.com (
CRM): The high price of shares of Salesforce.com is supported by quarterly results that pleased investors. Last quarter (Q4), the company won many large deals. Deals between 7- and 8-figures rose by 50% compared to last year. The company plans to acquire companies aggressively. This will add to the already 3 million apps developed on Heroku and on the
5. Oracle Corporation (
ORCL): benefits from the growth in cloud demand, although the most recent quarter was disappointing. Oracle experienced a drop in hardware product sales, which dropped 23% from last year. The company is
introducing SPARC M5 and T5 servers, which the company claims is 10x faster than older models.
6. International Business Machines Corp. (IBM): Big Blue benefits from selling consulting services for cloud solutions. IBM also makes Power 780 servers that compete with those offered by Oracle.Additional Note:
Investors should compare a high flier like salesforce.com and amazon.com to Google and Microsoft. It is quite clear that the market favors Salesforce.com over Microsoft and Google. The latter two companies have sales that dwarf that of Salesforce.com: