Friday, December 13, 2013

Get Your Head Out of the Clouds and Look at Cloud Stocks

If you saw the 60 Minutes report on Amazon (AMZN) recently, you may have seen the delivery drones. But the more important aspect of the episode was the extensive cloud computing operations, and the point that the company provides cloud services for numerous companies and organizations including the U.S. Government. Even Netflix (NFLX), which is a semi-competitor, uses Amazon cloud services. 

Who is Getting into Cloud Computing?

Other companies are getting into clouds in a strong way, such as Adobe (ADBE). The company reported a 22% subscriber increase in its Adobe Creative Cloud operations, before the market opened this morning. The stock is up over 11% as I write this, based on that news.

What is Cloud Computing?

So what the heck is cloud computing in simple terms? Cloud computing means having  data stored remotely on servers in a different location, instead of on your computer. The servers of companies that provide this service represent the 'clouds', and those servers can be located anyplace, the next office, the next building, or the next state. And the servers don't have to be owned by your company, they can be 'rented' from companies such as Amazon.

Yahoo (YHOO) mail, Google (GOOG) gmail, and Microsoft's (MSFT) hotmail are examples of cloud computing for email in a small way. The email servers are not in your office or home,  they are located on Yahoo or Google or Microsoft servers. Many corporations, organizations, and universities are utilizing the email services of Google, which saves the expense of servers and saves on staffing costs.

Financial and Green Benefits of Cloud Computing

For corporations, cloud benefits are substantial. Cloud computing can reduce waste and carbon footprints along with providing significant cost savings. Companies that utilize cloud computing don't need to keep buying more servers. Costs relating to the disposal of old computers and servers is cut back significantly, since older computers can usually still take advantage of the cloud. Data security is the job of the cloud computing firm. Businesses can eliminate the techs that have to come out and install new software to each employees' station, and not have to hire network administrators monitoring the company's servers, since they have been replaced by the cloud.

Because of the financial and environmental benefits (I wrote about the green benefits of cloud computing in my book The Green Light on Green Stocks several years ago), investors are taking a closer look at cloud computing companies. According to, there are over two dozen stocks in the cloud field, based on the free Cloud Computer Stock List, which includes companies involved in server farms, computer virtualization, and outsourced storage systems.

Major Players in the Cloud Computing Arena

The one of the largest corporations that falls into the cloud computer arena is (CRM), which is a provider of customer-relationship management services. The company's stock symbol stands for Customer Relationship Management. Salesforce's customers have included Staples (SPLS), Expedia (EXPE), News Corp. (NWS-A), and SunTrust Banks (STI). Salesforce trades at 102 times forward earnings. Although currently generating negative earnings, quarterly revenues jumped 36.5% for the latest quarter  year-over-year. 

Citrix Systems, Inc. (CTXS) provides on-demand applications and online services, including GoToMeeting, GoToWebinar, GoToTraining, GoToAssist, and GoToMyPC. This company has a trailing price to earnings ratio of 35, and a forward PE or 17. The latest quarterly earnings were down slightly, dropping 1.9%, however, revenues rose 11.1%. The company is debt free and has $3.73 in cash per share.

VMware (VMW) is another major cloud and virtualization company. Its product VMware vSphere is a cloud computing data center platform. It sports a trailing price to earnings ratio of 42, and a forward PE of 22. The company reported blowout quarterly,  with profits rising an astounding 66.2% on an remarkable 13.7% boost in revenues. Although VMware has $450 million in total debt, it holds $5.84 billion in cash, amounting to 13.56 in cash per share.

More Cloud Stocks

To access the free database of numerous companies involved in cloud computing in some way, that can be downloaded, sorted, and updated, go to A couple of them even pay dividends.

Disclosure: Author owns AOL and YHOO.


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