Over the past few years, the “cloud” has been a fast-growing technology — it essentially allows people to access software applications via the Internet. Often, this is more convenient and cheaper than traditional approaches.
However, if you ask most people to describe the cloud, they probably wouldn’t know it is actually a technology. This is going to change — because of Apple’s (Nasdaq:AAPL) Steve Jobs. His cool new offering, which is called the iCloud, is a hub that allows people to store all forms of media, which can be accessed from any device or platform. According to Jobs, this will be a transformation for millions of people. “We are going to demote the PC to just be a device,” he said.
And it will likely boost the fortunes of top-notch cloud companies as well. Hey, if Jobs says the cloud is the real thing, it must be true.
So which companies should investors have on their radar screen? Here’s a look:
Rackspace Hosting (NYSE:RAX): The company provides hosting services for companies and organizations of all sizes. There are more than 130,000 customers.
Rackspace is in a fiercely competitive business with operators like Amazon.com (Nasdaq:AMZN). Yet it has a strong infrastructure and a solid customer-support system.
An interesting strategy for Rackspace is to provide its core software technology for free. Known as OpenStack, it is getting adoption from major players like Dell (Nasdaq:DELL) and Citrix (Nasdaq:CTXS). Basically, if OpenStack gets traction, it could lead to even more hosting business.
VMware (NYSE:VMW): The company is the leader is virtualization, which helps to greatly improve the performance of servers and applications. This is critical for data centers, which are at the core of the cloud.
Despite its large size, VMware is growing like a scrappy startup. In the latest quarter, revenue surged 33% to $844 million. Operating cash flow was $477 million, up 35%. In all, there is $3.7 billion in the bank.
Thus, VMware is in an ideal position for deal-making. To this end, the company has been snapping up cloud application companies like SlideRocket and Socialcast (which is a Facebook for the enterprise).
Fortinet (NASDAQ:FTNT): While the cloud has many advantages, there are still some risks. One of the most important is security. What if there is a breach? As seen in the case of Sony’s (NYSE:SNE) PlayStation, the consequences can be devastating.
Thus, the cloud should mean more business for top-notch security providers. And one of the best is Fortinet, which has a suite of offerings that includes things like intrusion protection, Web filtering and firewall protection.
In the latest quarter, revenue spiked 34% to $93.3 million, with $36.5 million in free cash flow. The company also saw a strong 48% increase in product revenues to $40.2 million.
Tom Taulli’s latest book is “All About Short Selling” and he has an upcoming book called “All About Commodities.” You can find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
