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5 Companies to Play the Cloud-Computing Revolution

Sean Williams
August 13, 2012

You know the old saying about how an idea is the greatest thing since sliced bread? Well, cloud computing really is the best thing to happen to the tech sector since Al Gore invented the Internet.

OK, so that's a joke that'll never die, but according to estimates from Cisco Systems, global data-center IP traffic is expected to increase by a compound annual growth rate of 33% between now and 2015, with cloud workloads increasing to 57% of all data-center workloads by 2015 from just 21% in 2010. These figures are as real as its gets, and they demonstrate that the movement toward data sharing and storage is huge and rapidly transforming both large and small businesses.

With so much money being invested in virtualization, storage, and data transmission in the cloud, today I want to look at five different ways you can put your money to work in this segment for the long term.

The basic building blocks of life are air, water, and food; the basic building block of the software that runs the cloud is the hardware it's built around. That's where my long-term choice, Intel (Nasdaq: INTC  ) , comes into play.

Intel has made no secret that it's betting big on cloud computing to drive future growth, and it's aggressively infiltrating the cloud on multiple fronts. Intel is responsible for manufacturing some of the leading chips being used in Cisco's servers, while also supplying the hardware necessary to transmit big data throughout the cloud. Intel's unified networking products, built around 10-gigabyte adapters, allows for big data to be transmitted quickly, efficiently, and without the need for a spider web's-worth of wires being used. Intel isn't without its fair share of competitors, but it has the financing and partnerships to be the premier cloud hardware play.

As a sidebar to the hardware required to keep the cloud running, enterprises are going to need immense amounts of storage space. That means data-storage companies are going to be able to double-dip on the demand from both the PC end of the business, as well as on the server side.

The company I have in mind here is Seagate Technology (NYSE: STX  ) , which controlled 42% of the hard-disk drive market share globally in its most recent quarter. Seagate is using acquisitions and product innovation to drive its cloud growth. Its 2006 acquisition of EVault pushed it into enterprise data backup, while its purchase of French-based LaCie earlier this year expands its cloud storage presence and gives the company instant access to Apple, which carries LaCie's hard drives in its retail stores. The real draw of Seagate for me, over its rival Western Digital, is that its push into the cloud when supplemented with its key acquisitions should give it better pricing power than it has ever had. The demand on storage is so strong that I anticipate that pricing won't be a factor for years.

You can't run a data center without having it properly secured from hackers, viruses, and other malware, and that's where the freshly public Palo Alto Networks (Nasdaq: PANW  ) comes in.

Traditional and built-in security and firewall providers, such as Cisco and Juniper Networks, can protect against threats to older architecture and work well for individual users, but they don't work nearly as well for enterprise customers. They also require regular updates to protect against an ever-evolving sea of malware. Palo Alto, on the other hand, has designed its suite of products specifically for cloud-computing companies. Its cloud applications are predominantly self-managing and are able to integrate security for both old and new architecture websites (i.e. social-sharing platforms such as Facebook and Twitter). As next-generation firewalls become the norm over the next few years, I see Palo Alto's offerings becoming a big winner.

Before you can actually be a leading cloud-computing provider, you need a leading cloud virtualization company capable of delivering the solutions needed to optimize data-center efficiency. VMware (NYSE: VMW  ) is the company I'd peg to be the hands-down leader in cloud virtualization for years to come.

VMware's products, and its recent purchase of Nicira, allow enterprises to efficiently subdivide and program the operations of a network or operating system all at once, rather than taking on the task of programming them all individually. In easier-to-understand terms, VMware provides software-as-a-service management that allows enterprises to build their clouds -- it's the light on the horizon before the sun comes up. VMware's leading position in providing enterprises with the ability to adapt and control their cloud's development has allowed it to garner some very high-profile customers, including Verizon, Southwest Airlines, and