Friday, June 03, 2011

Why Clouds are Green: Cloud Computing Stocks

Cloud computing can go a long way to reducing carbon footprints and businesses are catching on. But the biggest advantage to companies is the cost savings. Corporations that utilize cloud computing don't need to periodically upgrade computers as often, and they don't need to own a lot of servers. The costs and issues relating to the disposal of old computers and servers is reduced dramatically. There is no need to deal with data security, as that is the job of the cloud computing firm. Companies don't have to have a technician to come out and install new software to each employees' station. There is also no need for lots of network administrators monitoring the company's servers.

So what is cloud computing? One way to look at it is having your programs and data stored remotely on a server far away, instead of on your own individual computer. As long as you have an Internet connection, you can have a low level computer and still take advantage of cloud computing. The clouds are simply the servers of companies that provide this service, and those servers can be located anywhere in the world. If you have Yahoo (YHOO) mail, Google (GOOG) gmail, or Microsoft's (MSFT) 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 or Microsoft servers. Many colleges and universities are turning over their student email services to Google, which saves them money on servers and saves on staffing for support.

The blog, Software Advice, recently published an article on what they refer to a cloud apps companies. The article, Q1 2011 Cloud Apps Financial Results Roundup, lists and describes the top ten pure play cloud app companies, showing where they stand in terms of revenue, operating income, customer count, average annual subscription value, and market cap.

With both green and financial benefits to cloud companies, investors are taking a closer look. There are over 25 stocks in the cloud field, according to the Cloud Computer Stock list at, which includes companies involved in server farms and outsourced storage systems.

The 800 pound gorilla in the room is (CRM), which is a provider of customer-relationship management services that has coined the phrase 'the end of software'. Salesforce has customers ranging from the very small to the very large, including the Corporate Express division of Staples (SPLS), Expedia (EXPE), Dow Jones Newswires subsidiary of News Corp. (NWS-A), and SunTrust Banks (STI). Salesforce trades at a very lofty 78 times forward earnings. Total first quarter revenues were $504 million, an increase of 34% year-over-year. Subscription and support revenues were $474 million, a rise of 35% on a year-over-year basis. By the way, the company's stock symbol stands for Customer Relationship Management.

VMware (VMW) is another major cloud and virtualization company. Its product VMware vSphere is a cloud computing data center platform. It sports a forward price to earnings ratio of 40. The company reported that latest earnings increased an incredible 60% in earnings on a 33% 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 a forward PE of 30. The latest quarterly earnings were up 55% on a revenue increase of 18%.

One of the companies covered by Software Advice is Concur Technologies (CNQR) provides employee spend management solutions including Concur Travel & Expense, Concur Expense, Concur Cliqbook Travel, and Concur Invoice, on-demand employee spend management solutions. The stock trades at 43 times forward earnings, and revenues for the latest quarter were up 16%.

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 You can also get info on the green aspects of cloud computing from my book The Green Light on Green Stocks: A Quick Guide to Green Investing and Making Money in Alternative Energy Stocks, in which I described cloud computing as a green industry and a way of providing money saving services to many corporations.

Disclosure: Author owns YHOO.


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