NEW YORK (TheStreet) -- The 7% fall of IBM's (IBM) stock following its earnings disappointment has shares of other big technology names, including SAP (SAP) , Hewlett-Packard (HPQ) and Oracle (ORCL) , lower, too.
The sector's problem is cloud technology. Cloud is changing how big business does its computing. The big players know this and that is why they've been spending money to get into that business. Either Big Tech opens their wallets and buys out cloud companies now or these companies will buy out Big Tech later.
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But as Big Tech looks for cloud companies to buy, there's a problem: There aren't many targets left.
Big cloud vendors including Facebook (FB) , Amazon.Com (AMZN) and Google (GOOGL) have long served consumers with off-the-shelf commodity hardware and data centers they build themselves. Businesses also use open source software supported by Red Hat (RHT) , VMware (VMW) and other companies to drive costs down further.
Red Hat has nearly doubled in value over the last five years, to $10.6 billion. VMware, which is 80% owned by cloud storage company EMC (EMC) , has given its shareholders just as good a ride.
Both these companies are considered "arms merchants" to the cloud. Think of their software as a cloud operating system. What delivers bottom-line results are applications, and this is where the big tech companies have been focusing their money until now.