How to Profit From the Microsoft Fiasco

By now, you've probably heard that Microsoft's (Nasdaq: MSFT  ) aptly named Danger subsidiary didn't properly back-up server-stored data for users of T-Mobile Sidekick phones. The outage raises questions about the reliability of cloud-computing environments, as did earlier outages of Google's (Nasdaq: GOOG  ) Gmail service.

Can we get past this? Outages happen. They will continue to happen. As reliable as it is, the Internet is neither efficient nor 100% reliable. If it were, Web content delivery services wouldn't exist.

As investors, we need to recognize this outage as profit opportunity. The Danger data drain was more than a miscue; it illustrates a vulnerability in the cloud computing value chain, a hole that can only be filled with new and better data management and backup tools.

Backup?
Right, backup. If we're honest with ourselves, we'll admit that we like cloud computing. We like that it's cheap, and we like that we don't have to manage much of what's under the hood. This is why salesforce.com (NYSE: CRM  ) continues to be a massive-growth winner.

Therein lies the opportunity. See, if we aren't about to abandon cloud computing, running from the data center like a screaming teenager fleeing some horror-movie killer, then we're left with only one choice: Fix what remains by making cloud computing more reliable. Data management and backup software can copy, replicate, and store information where it can never be lost.

Have you checked the vault?
The technology is in demand. Ask EMC (NYSE: EMC  ) and NetApp (Nasdaq: NTAP  ) , which got into a bidding war over backup specialist Data Domain over the summer. EMC prevailed after agreeing to pay $2.1 billion for the company.

Thanks to acquisition, attrition, and the Darwinian cycle of innovation that defines the tech industry, few public data-management pure plays remain. VMware (NYSE: VMW  ) is close, but its virtualization technology offers efficiency more than protection -- though data protection and preservation is part of its pitch.

If not VMware, whom? CommVault (Nasdaq: CVLT  ) could be the best remaining opportunity, even if our 140,000-strong Motley Fool CAPS community has mixed feelings about the stock:

Metric

CommVault

Recent price

$21.36

CAPS stars (out of 5)

***

Total ratings

224

Percent bulls

94.6%

Percent bears

5.4%

% above 52-week low

193.8%

Sources: CAPS, Yahoo! Finance.
Data current as of Oct. 14.

They're right to be skeptical. CommVault has just about tripled from its 52-week low, and consequently may be priced for unsustainable growth. There's just one problem: Evidence points to accelerating growth in cloud computing, and Danger's miscue could create commensurate demand for data management and backup technology.

But that's also just my take. What would you do? Would you buy CommVault at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.

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Microsoft is an Inside Value pick. Google, salesforce.com, and VMware are Rule Breakers recommendations. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy would like whipped cream with a double-shot of espresso, please.


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  • Report this Comment On October 15, 2009, at 2:24 AM, Decibel45 wrote:

    I think it's completely misguided to tie CommVault to cloud computing, unless I've really missed something on their website.

    The reason I say this is that people who are utilizing cloud computing such is Amazon's EC2 or S3 are unlikely to have a data center or the hardware necessary to utilize CommVault's offerings. If they had that kind of hardware and connectivity, they most likely wouldn't need EC2 or S3.

    I'm also not sure how much of a market there is for backing up cloud data, at least at the enterprise level. While losing phone data is a problem for whoever lost data, it's ultimately just a small blip on the radar. What *will* make a huge difference is if EC2/S3 or something similar eats a whole bunch of people's data, because there are actually businesses that are banking their future on the capability of those services. A data loss there wouldn't be killing a few people's data, it would be killing a few companies.

    Now *that* might end up killing the cloud.

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