By Steve McDonald
The cloud computing phenomenon has been described by The Wall Street Journal as “the single biggest creation of wealth in the history of business.”
Read that again.
Not the biggest in the history of the tech industry, but the biggest in the history of all business. According to analysts, this investment opportunity will dwarf the internet and tech boom of the 90s. And it’s time to start now while the smart money is jockeying to help bring a number of companies to the forefront in the coming years. Finding the right investment will be the challenge, but I have a few companies to keep an eye on over 2011 and beyond…
The Cloud – Eliminating the Desktop PC
Just so we are all on the same page about this shift in the tech industry and how big it is, the cloud could literally eliminate the need for personal computers. The cloud and its applications will most likely make handheld smartphones the computers for the vast majority of the world.
Mike Abramsky, the Managing Director of Capital Markets at RBC, said this week that right now billions of people worldwide don’t have computers but they do have smartphones… And they all use cloud applications. The market for the cloud is so big that no one has tried to put a number on the total potential.
Abramsky also said that the cloud, specifically the iCloud, has effectively cut the cord with the PC, and that puts Apple (Nasdaq: AAPL) in a position to access this gigantic market of phone owners worldwide.
Apple, according to Abramsky, could move higher from its current price of about $335 on this news alone. It may take a little time to realize the revenue from the iCloud, and there may be some weakness near term, but the revenue is coming, and it will be amazing.
Finding the “Next Apple” in A Sea of Wannabes
Right now it would be easy to say buy Apple on the iCloud news, or Microsoft (MSFT), or any of the other big players who will have a share of the cloud, but the big high-percentage gains will be in the smaller companies. No one has emerged yet as the next Apple. There will be several to come, but finding them in the sea of wannabes will not be easy, and could be costly as the stragglers fall off the train.
One way to deal with this type of situation is to track a basket of the players that have been getting attention from the bigger banking houses. I’m not recommending any of these, not yet. This is a way to get familiar with the industry, its direction and who’s making the news.
You need to watch these for all the usual signs a company is pulling away from the pack: earnings, guidance, talking heads are focusing on them, rumors of takeovers, the CEO and CFOs are on Squawk Box on CNBC, The Wall Street Journal and Barron’s featuring them, and so on. So keep your eyes open.
And here are the companies I’m watching:
- Akamai (Nasdaq: AKAM)
- Aruba Networks (Nasdaq: ARUN)
- Dupont Fabros Technologies (NYSE: DFT)
- Vmware (NYSE: VMW)
- F5 Networks (Nasdaq: FFIV)
- Open Text Corporation (Nasdaq: OTEX)
- Rackspace Housing (NYSE: RAX)
- Riverbed Technologies (Nasdaq: RVBD)
The Future of the Cloud Computing Industry
This is hardly a complete list of cloud players or players who support applications within the cloud computing industry. But it also should act as a starting point to help you build an understanding about the cloud and how it’s developing. That will be essential if you’re to have any hope of participating in this explosion.
And the one key reason I’m paying attention to them is that these companies were attendees at a recent private cloud conference hosted by Goldman Sachs. The event was so private, that it was closed to members of the press, and the events schedule was confiscated from journalists who tried to figure out who was in attendance.
If you recall the late 1990s, Goldman Sachs was one of the leaders in directing the tech boom. If Goldman is getting to know the companies, that means you want to get to know them, too.
The cloud is still in its early stages of development and you need to be a part of it. It truly is a paradigm shift in how the world thinks about information and business. Get started now!
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