By Jeremy White
Cloud computing appears to be the best way to go for technology companies looking to keep ahead of the pack. However, it seems that everyone has the same idea about how to compete in cloud computing, meaning that the competition is stiff. Today, I will focus on the cloud activities of Microsoft Corporation (NASDAQ:MSFT), Google Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Oracle Corporation (NYSE:ORCL) in order to determine what effect a focus on cloud computing may have on the stock of these companies.
First, I will look at Google and Microsoft. These two companies are competing frantically in the arena of cloud computing, but the problem is that they are both offering more or less the exact same set of services. Microsoft recently made a cloud server offering that is more widely applicable to a larger clientele base by introducing infrastructure-grade virtual machines available on Windows Azure. This is an important move, especially as competition is getting stronger. In addition, when people think of cloud computing, this is the area that tends to come to mind first. Consequently, this should mean that Microsoft is perceived as a stronger player in the arena at present. I think that we can expect to see an increase in Microsoft's share prices over the next few weeks, and I think that this increase will be influenced in large part to the announcement that it is making an IaaS available.
Google Compute Engine will, it seems, be a direct competitor to Amazon's web services. This probably won't help Amazon out, as the company has already experienced a drop in its trailing net income from a standard level of 3% to just 1.1% - a significant drop indeed. However, despite concerns about competitors and despite the fact that Amazon has been down for the better part of a week now, the company still stands around $218 per share. It has a market capital of $103.41 billion - an amount that should keep the company going and assist it in weathering any storms that may arise.
Netflix is down almost 12% in 2012 (nothing compared to the 71% downfall since July 2011, though). June saw a record number of viewers for its services, and it has been up about 30% since the beginning of that month. It should stay up for a while on the back of that announcement.
Google has had a rough year so far, down over 11% from where it began. The company seems further away from that $650 trading price everyday. It did have a great start to July, though those gains are tapering off a bit. Microsoft, on the other hand, is up over 12% this year in 2012 as it reclaims its place among other technology giants. It still has a larger market cap than Google, and the rest of 2012 should really be interesting in terms of what Microsoft comes up to reestablish its name.
Amazon and Netflix are also in the cloud computing game. Netflix is the biggest user of Amazon's cloud service. Recently it released an open source console, called Asgard, which is specifically designed to handle the company's Amazon deployments. This is because Amazon's own console is simply insufficient to deal with the large quantity of work that Netflix has to do using the Amazon cloud service. To me, this seems like a good move on the part of Netflix in order to ensure that it can provide the most efficient service possible. Amazon, then, may be one of the losers in the cloud computing arena in that it clearly cannot handle the workload required by Netflix. On top of that, Amazon is facing competition from another front in the form of Google.
Oracle may soon become "the largest seller of cloud business software applications." This is definitely the way to go as cloud computing is the future. The sooner companies such as Oracle become firmly established in the cloud computing market, the greater the chances that they will be one of the leaders of tomorrow. The opportunities for the company at this point are endless. Since June 6th, when Oracle rolled out its cloud applications, the company's share prices have increased by almost 9%, and I believe that there may be a correlation in this increase and the company's clear financial and potential sales success in the cloud computing market so far.
Things look good for Oracle right now, and I recommend it most out of these cloud competitors. It began 2012 on a low note, but things have changed and it could ride its cloud technology up to, well, the clouds. Netflix has some good growth potential (especially because we know how high that stock can go). Microsoft should continue its stellar 2012 and Amazon and Google will remain expensive buys that should continue to reward their investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.