SuccessFactors, Inc. (SFSF)
The cloud is one of those buzzwords that’s being thrown around and has generated a lot of excitement in the investment community. The cloud is actually not a new concept. Microsoft has for years been tirelessly trying to convert its user base into cloud users. Let’s discuss what the cloud is.
When you go into Best Buy or Walmart and buy a software program that’s the old school way of doing business (at least that’s what companies like Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), and others, hope will be the case in the future). With cloud computing, you don’t buy a software program, you don’t get a CD or DVD, and you don’t install any programs on your computer.
Instead, you access these programs via online services where those programs are run and stored in The Cloud. That means your files and documents don’t exist on your hard drive, they exist, again, in The Cloud. That could have some benefits. For example, if your hard drive fails (very unlikely), or your laptop gets stolen (possible), all of your files are still available on The Cloud. Likewise, you can access your programs and files on any computer without the hassle of installing and moving files.
There’s a reason why Microsoft would be ecstatic at converting everyone over to The Cloud. Instead, of paying once for your Microsoft Office products, you get to pay Microsoft on an ongoing basis, a lifetime subscription. Just like a car lease, this can make sense for CERTAIN people or companies. There are numerous risks and downsides to cloud services. Since our focus is on stocks and investments, we will not go into the details here.
Again, Microsoft (MSFT) has had cloud services for a while. Amazon (AMZN), has also offered cloud computing and services for some time. It recently made some buzz with it’s introduction of a new service allowing people to upload their digital music collection and listen to it on any web connected PC, Mac, or Android device. The music industry was not happy because Amazon is not licensing the music rights. Amazon countered that you don’t need a license to store YOUR files on an external hard drive, which in basically what users are doing.
In summary, The Cloud offers new revenue sources for companies like Apple (APPL), Microsoft (MSFT), Amazon (AMZN), and other smaller niche players like SuccessFactors, Inc. (SFSF), and SalesForce (CRM). Since not all of the kinks have been worked out, don’t expect The Cloud to replace the normal way of doing business any time soon.