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We all knew cloud computing was a fast-growing market. But based on new data from IDC, cloud revenues in 2014 will exceed already sky-high expectations, jumping to more than $100 billion in spending next year. That's a 25% increase from this year and opens a huge door of opportunity for investors.
Of course, not all IT companies are ready to take advantage of the shift to cloud computing. But for a couple of late adopters and one underdog, 2014 could prove to be a pleasant year in the cloud.
Cloud infrastructure, services -- particularly platform-as-a-service (PaaS) -- and related software, will lead the jump in cloud revenues next year, according to IDC. And both IBM (NYSE: IBM ) and German-based SAP (NYSE: SAP ) are positioned to take full advantage of all things cloud.
Early cloud players like Salesforce.com and Amazon.com will certainly benefit from next year's $100 billion cloud-based spending, since both got onboard early. But the fact that IBM and SAP are later arrivals to cloud technologies, combined with their all-out commitment to making it a driving force for growth, will actually work in the favor of investors. Why? Because IBM and SAP are just scratching the surface when it comes to the cloud.
The day before announcing Q3 earnings, SAP was trading at $73.75 a share: It's now more than $84 a share, with little sign of slowing. The reason for the nice jump in share price wasn't just a solid quarter -- SAP certainly did that -- it was how it accomplished it. While still a relatively small piece of SAP's overall revenue pie, its significant jump in cloud-related revenue to an annual run-rate of more than $1 billion was impressive, to say the least.
IBM's cloud efforts are even further along than SAP's, increasing to more than $1 billion in revenues last quarter for the first time ever. Investors were hung up on the decline in IBM's hardware sales, however, and its stock price has yet to return to its pre-earnings-announcement levels. And that's ideal for value investing Fools in search of long-term appreciation.
Much of the talk surrounding Intel (NASDAQ: INTC ) is how long it will be before it's able to make a serious dent in the exploding mobile market. New-ish CEO Brian Krzanich has Intel running full steam in the mobile direction, and that's as it should be. But another tidbit from IDC's recent news regarding cloud revenues in 2014 could prove very interesting for Intel fans.
Keeping up with all the software-as-a-service (SaaS) and PaaS needs of the cloud will require more data centers. According to IDC, there will be a dramatic increase to meet demand, and that fits right into Intel's data-center wheelhouse. While some bemoan its lack of growth in mobile, as well as the steady decline in PC sales, Intel has continued to strengthen its data center business.
Last quarter, Intel's Data Center Group generated $2.9 billion in revenues, a 12.2% improvement over Q3 of 2012, and up 6.2% from its second-quarter results. Yes, Intel's future prospects are more reliant on its mobile efforts, but as the market for cloud-related services continues to climb, Intel is quietly positioning itself to reap some of the benefits.
Final Foolish thoughts
Cloud technologies are going mainstream even sooner than many of us expected, and there are no shortage of potential benefactors -- but some are positioned better than others. SAP's commitment to growing its cloud revenues is beginning to pay off, as evidenced by its $1 billion annual run rate in cloud revenues.
IBM will certainly carve out a big piece of the cloud's $100 billion pie and, coupled with its ridiculously low forward-price-earnings ratio of just over 10, it may be the best opportunity of the bunch. And don't forget about cloud underdog Intel, either. The talk is all about mobile, but Intel also has its head in the cloud.
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