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Tech in Transition: The Winners

By: Nicole Urken | 03/19/14 - 11:01 AM EDT

NEW YORK (TheStreet) -Take a look at Microsoft's (MSFT) stock over the last year-- up a solid 40%. Or Hewelett Packard (HPQ) up almost as much. Yet when we look at EPS growth, it is minimal ... and both companies are still largely reliant on PCs. So what gives?

As Mark Moerdler from Sanford Bernstein has pointed out, investors are looking through short term disruption if  they believe in the transition. Moerdler has been pointing to the increased cloud focus at Microsoft for some time now, with the new CEO an affirmation of that focus.

It seems, in some ways, that it took news that Satya Nadella's will be making his first major public appearance--with rumors about Office for iPad--to shift sentiment on the cloud transition at Microsoft. 

Microsoft's move to Cloud & subs revenue is accelerating-- and even at current rate it could be the largest commercial cloud company.

We are seeing this shift to cloud being celebrated in companies like Adobe (ADBE), which reported solid progress last night. They added 405,000 Creative Cloud subscribers-- bringing creative subscription revenue (1.84mm subscribers) higher than perpetual licensing revenue.

The "race to cloud" continues--Oracle (ORCL) for example is in catch-up mode, having been late to the cloud. But investors are seeing some underlying improvement in corporate spend - a positive sign.

The bottom line: Expect names like Microsoft, Hewlett and Adobe to continue to rise as they are in transition mode, even if there are bumps along the way.

As an aside: The first cloud IPO for the week, Paylocity (PCTY), is off to a strong start as expected.

--Written by Nicole Urken in New York.

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