Your portfolio in the clouds
At its simplest, cloud computing is computing via the Web rather than your local machine. The software, the processing power, it's all handled in a data center off the coast of Madagascar. Never mind the guy with the white cat and evil laugh. He's been there for years. Calls himself "Master of the Internets."
No word yet on whether anyone will file suit for trademark infringement. I doubt it, though. Fables are tough to beat in court. Just ask anyone who's watched the original Miracle on 34th Street.
So let's stick with reality. Here, the central truth of cloud computing is there are millions of servers delivering content to Web-connected users daily. Some of that data even originates in Madagascar.
More of it, though, originates here, at data centers operated by some of the biggest tech firms. Increasingly, they're storing, filtering, and delivering corporate data, enhancing or even replacing buy-and-install software from Oracle (Nasdaq: ORCL ) , SAP (NYSE: SAP ) , and Microsoft (Nasdaq: MSFT ) .
Roughly 13% of 2008 software sales were to cloud providers, the Associated Press reports. Meanwhile, analyst Frank Gens of IDC Research estimates that cloud services spending will rise 27% a year within major IT segments over the next four years.
How to compute in the cloud
I know what you're thinking. No one's really using cloud computing, right? Sure you are. Do you bank online? That's a crude form of cloud computing, especially if you use the Web to track transactions a la our free Mint.com personal finance service.
And what of the iTunes App Store? YouTube? These are services you're exposed to via the cloud. Clicking in your browser activates them, but the magic happens elsewhere. If Santa's gift to Apple is any indicator, a lot of you love the games you're finding via the cloud.
Millions also like Twitter, a Web-based micro-blogging service that's supported by an entire ecosystem of software that brings the cloud to your desktop. TweetDeck, built on top of Adobe's (Nasdaq: ADBE ) AIR platform, is a good example.
The convenience and low cost of cloud services makes them attractive to both consumers and IT managers now, in a time of recession. That's at least partly why writer Darryl Taft of trade magazine eWEEK has said that 2009 "is shaping up to be a big year for the cloud."
Let these cloud giants rain cash on you
If he's right, and I think he is, then which cloud computing stocks should you, the Foolish investor, buy? I have three ideas.
Let's start with Amazon.com (Nasdaq: AMZN ) , my choice for the best stock of 2009. Microsoft's Ray Ozzie says the firm is the current king of cloud computing. And it may continue that way for a while. James Hamilton, widely considered one of the architects of the data center strategy that birthed Windows Azure, has left to join ... Amazon's Web Services team.
Google's (Nasdaq: GOOG ) Apps suite won't soon replace Office, but it is winning converts, including drugmaker Genentech. What's easy to overlook is how Google is creating an entire ecosystem to support (i.e., the Chrome browser, Mashup Editor) and host (i.e., App Engine) software in the cloud. If anyone other than Microsoft is on course to create an operating system for the Web, it's the Big G.
Finally, the evangelist: salesforce.com (NYSE: CRM ) . CEO Marc Benioff has been declaring the end of software for years. Now, he's got proof. Third-quarter revenue rose 43%. Profits were up 55%. IT shops are adopting salesforce.com in greater numbers. Developers, meanwhile, have created 80,000 new services for the cloud using the company's Force.com platform that, as of earlier this month, was linked with Google's App Engine.
But those are my three ideas. What about yours? Would you buy any of these stocks? Would you short any of them? Insert your comments below, and be sure to tune in tomorrow for a look at three tech stocks you'll want to sell in 2009.