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Intel's Cloudera Investment Won't Solve Its Cloud Quandary

Stocks in this article: HPQ IBM VMW GOOG AMZN FB MSFT

Cloud is an architecture, not a product the way a mainframe is a product or a PC is a product. You can't take a cloud and ship it to someone on a truck, then plug it in. Intel x86 chips are used in cloud data centers, but such centers are built with cheap commodity chips, not the high-end server chips on which fat margins are built.

Turning cloud into a high-profit product requires more than a big box and a cloud operating system. It requires a box that is cost-competitive with do-it-yourself solutions like Google (GOOG), (AMZN) and Facebook (FB) use. And it requires an integrated software stack -- an infrastructure, platform and applications -- that justifies a premium price.

Hadoop could be part of that solution, and Intel's gain in Tuesday's trading reflected optimism that it would.

By integrating a big data solution and a full cloud stack, by supporting that software as part of the larger buy, Intel may be able to put a cloud in a box and ship it profitably, with back-end support revenue attached.

To some this appears a bit desperate, but these are desperate times for big tech companies. Amazon dominates in cloud infrastructure, Google has the largest clouds, Facebook is growing fast, Microsoft (MSFT) is a software company, and none has the slightest need for the high end of what big tech is selling.

Intel's Cloudera investment may start to change that, or it could just turn out to be a profitable investment, as its 2007 buy of part of VMware was a profitable investment. But it's just the start of a solution, not the solution itself. In the race to the clouds, big tech remains far behind.

That's the real message of this story.

At the time of publication the author owned shares of AMZN and GOOG.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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