One of the best reasons to invest in the technology sector is the evolutionary nature of tech companies. The truly successful ones don’t rest on their laurels after introducing an important product. They’re constantly looking for something else to spur sales and profits.
A recent addition to the tech lexicon has the kind of game-changing potential that tech investors crave: cloud computing. We previously discussed cloud computing and since then this new technology gained more steam.
Cloud computing tries to make life easier for businesses and consumers. The premise is the use of remote servers to allow users to access their favorite and most-used computer applications from anywhere. Old-timers may notice a resemblance to the mainframe time-share systems of yesteryear. In many respects, it appears that the computer services delivery model has come full circle: from centralized to desktop and now back to centralized.
Cloud computing helps businesses save money on tech expenditures. A 2009 study showed that companies using cloud computing were able to reduce their IT budgets by 18% and cut their data center energy costs by 16%. In this economy the ability to trim costs is crucial, especially for the biggest companies.
Last week tech giants Hewlett-Packard (HPQ) and Microsoft (MSFT) announced a $250 million cloud computing agreement. That news was followed by an announcement that International Business Machines (IBM) and Japan-based Panasonic entered into the largest cloud computing pact to date. Soon 300,000 Panasonic employees, partners and suppliers will be using IBM’s LotusOne cloud computing technology.
Internet search giant Google (GOOG) already has a significant footprint in the cloud computing arena, and Intel (INTC), the largest semiconductor maker in the world, has declared its intent to seek profits from the cloud. Throw in VMWare’s (VMW) recent acquisition of Zimbra from Yahoo (YHOO), a clear cloud computing play. Obviously many of tech’s biggest names see tremendous value in the future of cloud computing.
Even though cloud computing is relatively new, industry participants are already eying the next frontier: mobile cloud computing. Analysts estimate the mobile cloud computing market could feature 240 million business customers and be worth as much as $5.2 billion by 2015. With smartphones expected to outsell personal computers with the next year or two, it’s no surprise that cloud computing vendors are focusing on the mobile market. Cloud computing should generate impressive returns for investors in the coming years, even though there isn’t a cloud computing ETF yet.
Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.
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