Sunday, November 21, 2010

Do Investors Have Their Heads in the Clouds?

A year ago when I wrote my book The Green Light on Green Stocks: A Quick Guide to Green Investing and Making Money in Alternative Energy Stocks, I started touting cloud computing as a green industry, not to mention a way of providing money saving services to many corporations. Cloud computing as a growing industry is finally being recognized. Look at (CRM), which is up 633% since it started trading in 2004. Last week, Isilon (ISLN) shares jumped 28.5% in one day, after EMC announced it would take over the company at $33.85 a share.

So what is cloud computing? It is having your programs and data stored remotely, 'in the clouds,' instead of on individual computers. As long as you have Internet connection, you can have a fairly dumb computer ans still utilize cloud computing. So where are these so-called clouds? They are basically, in very simple terms, the servers of companies that provide this service, and those servers can be located anywhere.

Do you have Yahoo (YHOO) mail, Google (GOOG) gmail, or hotmail? Then you are using cloud computing in a small way. You don't have the email servers in your office or home, you use the Yahoo or Google servers. As a matter of fact, many public universities are turning over their student email services to Google, giving students a type of gmail account. It saves them money on servers and saves on staffing for support.

These same benefits apply to the private sector, especially when you extend it to data storage and computer software. You don't need a technician to come out an install new software to each employees' station. You don't need a bunch of network administrators monitoring the company's servers. You don't need to periodically upgrade computers. You don't need to own a bunch of servers. You cut down on the costs and issues relating to the disposal of old computers and servers. You don't need to deal with data security, as that is the job of the cloud computing company. The benefits of clouds are extensive, and there are over 25 stocks in the cloud industry to choose from, according to the Cloud Computer Stock list at, including companies involved in server farms and outsourced storage systems. is a provider of customer-relationship management services that has promoted 'the end of software'. Salesforce has customers of all sizes, including Corporate Express division of Staples (SPLS), Daiwa Securities (DSECY.PK), Expedia (EXPE), Dow Jones Newswires subsidiary of News Corp. (NWS-A), SunTrust Banks (STI), and Kaiser Permanente. Salesforce trades at a lofty 76 times forward earnings, debt in the amount of $476 million, with over $742 million in cash. The company just reported a quarterly sales increase of 30% year over year, with a one cent drop in earnings per share.

VMware (VMW) is another major cloud and virtualization player. Its product VMware vSphere is a cloud computing data center platform. It sports a forward PE ratio of 45. The company has $450 million in debt with $2.9 billion in cash. The company reported that latest earnings increased an incredible 121.4% in earnings on a 45.8% increase in revenues.

Citrix Systems, Inc. (CTXS) provides on demand applications and online services, including GoToMeeting, GoToWebinar, GoToTraining, GoToAssist, and GoToMyPC. This debt free company has $902 million in cash and carries a forward PE of 29. The latest quarterly earnings were up 64.3% on a revenue increase of 17.8%.

To access a free Excel spreadsheet database of numerous companies involved in cloud computing in some way, that can be downloaded, sorted, and updated, go to

Disclosure: Author owns YHOO.


No comments: