This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Cloud Computing Looking Ominous for 2014


NEW YORK (TheStreet) -- The key technology trend of the last few years has been the barbell effect. The two edges of the market have grown, and the center has narrowed.

The computing "middle class" of PCs and servers are being rendered obsolete, on the one hand by cheap mobile devices like phones and tablets, on the other by scaled cloud environments.

Companies that lived in that market center -- like Hewlett-Packard (HPQ), Microsoft (MSFT), Oracle (ORCL) and IBM (IBM) -- have been hard-pressed to scramble out of the way of device and cloud giants like Apple (AAPL), Google (GOOG) and Amazon (AMZN).

I've written about IBM's problem recently. And the problem is not going away; if anything, it's getting worse. While 2013 was a year of struggle for Big Blue, 2014 will be its annus horribilis. The company that emerges from the struggle will be far, far different from the one that went into it.

But none of this is a secret. Technology investment is about the next trend.

And the next trend is consolidation within the cloud.

We are already starting to see it. Companies like RightScale, created to arbitrage and manage competing cloud services, are laying off workers because there just aren't that many good choices. Rackspace (RAX), the OpenStack hosting company valued at $76.31 per share at the start of 2013, has sunk to $37.21 as of the market close on Jan. 28.

If there are fewer viable cloud companies, then there are fewer viable merchants to the cloud. Software companies like CA (CA) and even Red Hat (RHT) should have a hard time. Seagate (STX) and Western Digital (WDC), which supply hard drives, are starting to roll over to the downside.

Big gains are getting harder to find in tech as more companies avoid the public markets altogether. DeepMind won repeated rounds of venture funding and was bought this week by Google for $400 million. The same thing happened last year with Tumblr, bought from private investors by Yahoo! (YHOO) for $1.1 billion.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs