This Technology Will Profit From the Panic

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Bear markets bite. Tech stocks bite back.

Frequently, anyway. The dot-com bubble was a disaster for most tech stocks. Cisco (Nasdaq: CSCO  ) , Microsoft (Nasdaq: MSFT  ) , and many others have yet to recover to their 2000 highs. And yet the forward march of innovation creates winners in good markets and bad. How to find them? Follow the money.

Where the money is headed
Researcher IDC says about $42 billion will be spent on cloud computing services by 2012, up roughly threefold from today's levels.

Impressive, yes? Sure, but before we get too excited, it's important to know how IDC defines "cloud computing services." It's not infrastructure but rather the services that businesses and consumers adopt; software they pull from the cloud, such as Google's (Nasdaq: GOOG  ) Apps suite.

Trouble is, we don't yet know what these services will be, or what they'll look like. What we have instead are emerging platforms, and it's a good bet that most services will be built upon them. Google's App Engine, for example. Microsoft's Amazon's (Nasdaq: AMZN  ) Web Services. EMC's (NYSE: EMC  ) storage on demand.'s (NYSE: CRM  ) toolset.

These suites, and the developers who adopt them, will create the services that IDC foresees: services built for small businesses and emerging-market firms -- think China, India, and Brazil -- looking to seize massive growth, but which lack adequate time and capital to create their own systems for accounting, inventory management, and the like. Cloud services, IDC asserts, will remove the barriers. I agree.

The revolution is upon you, Mr. Market. I suggest moving out of the way.

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Fool contributor Tim Beyers had positions in Google's shares and 2010 LEAPs at the time of publication. Google is a Rule Breakers recommendation. Amazon is a Stock Advisor selection. Microsoft is an Inside Value pick. Get access to all of Tim's Foolish writings here. The Motley Fool's disclosure policy has a loud bark and a powerful bite.

Read/Post Comments (2) | Recommend This Article (4)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 25, 2008, at 4:10 PM, titopuntes wrote:

    Tim failed to explain exactly how this technology is supposed to profit from the panic

  • Report this Comment On December 03, 2008, at 5:57 PM, TMFMileHigh wrote:

    Hello titopuntes. I think the second to last graf explains it pretty well. The cloud provides low-cost infrastructure for start-ups and others, and thus is more likely to continue seeing growth in lean times.

    Foolish best, Tim (TMFMileHigh)

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