The ever-evolving technology sector has been seeing a number of new trends over the past couple of years. Of these, the notable ones include cloud computing, Big Data, Bring Your Own Device (BYOD), Internet of Things, flash storage, social networking and 3D printing.
These trends have brought about a massive change in the IT sector. Last year, we saw mainstream adoption of cloud computing by enterprises, something that will likely continue over the next few years. The exponential growth in the amount of data, complexity of data formats and the need to scale resources at regular intervals compelled several companies to turn to cloud computing vendors.
There is also an ongoing revolution in the way people use devices and communicate with each other, which is leading to the proliferation of mobile devices by consumers. The convenience and accessibility enabled by mobile is also driving employers across many sectors to move toward BYOD. However, the nature of work differs by organization and broader adoption of BYOD across enterprises can only be possible when using cloud resources.
Before getting into the growth prospects in the segment, it might therefore be helpful to understand what exactly cloud computing represents. So here goes-
Cloud computing consists of the entire gamut of computing intelligence required to carry out day-to-day operations by companies and professionals. This basically means that other than the hardware, which could be of any shape or form, all the supporting technology involved in creating, storing, retrieving, transporting, protecting, sorting, processing, analyzing and presenting information from multiple sources and formats, which when available from a shared (private) or public pool, could be referred to as cloud computing.
Cloud service providers therefore help organizations to store data and applications remotely in this pool, which can then be accessed from anywhere and at anytime via the Internet. Therefore, users have access to their files and settings to different devices wherever and on whatever device they may be using.
Given its scope and advantages (cost, scaling, convenience, etc) it’s not surprising that the demand for cloud computing software and applications is on the rise. Cloud vendors usually offer the infrastructure or other technology as a service, which further reduces costs for adopters.
According to Centaur Partners, the Software-as-a-Service (SaaS) and cloud-based business applications are likely to grow from $13.5 billion in 2013 to $32.8 billion in 2016, reflecting a compounded annual growth rate (CAGR) of 19.5%. Moreover, Computerworld forecasts that 42% of IT decision makers are planning to increase spending on cloud computing in 2015.
As mainstream adoption gathers steam, infrastructure has to be built out rapidly and it would therefore be more advantageous for the leading vendors to collaborate or even merge in the race to capture a larger share of the pie. Particularly since a number of niche players are entering the space with specialized capabilities.
The recent rumor about Salesforce.com Inc. (CRM - Free Report) being approached by a potential buyer has therefore spurred a lot of interest.
Bloomberg was the first to report that Salesforce, a technology company known for its on-demand CRM (customer relationship management) applications, is reportedly working with financial advisors regarding an acquisition offer from a potential buyer. This usually precedes a sale of the company. The possible acquirer was however not mentioned in the report.
No matter who ends up being the buyer, Salesforce shares gained nearly 11.6% in yesterday’s trade on the possibility of a merger. At the close of yesterday’s trade, Salesforce had a market value of approximately $47.1 billion and so the deal is likely to be worth a lot.
The cloud computing industry space has several promising stocks to choose from. Here are some stocks which could be interesting long-term investment options for those interested in the space.
Box, Inc. (BOX - Free Report)
Box is a provider of a cloud-based product platform. The company's platform offers content management and collaboration, storing, sharing and managing files. It serves advertising, construction, consumer packaged goods, education, energy, financial services and insurance, government, healthcare and life sciences, high tech, legal, manufacturing, media and entertainment as well as retail industry.
The company currently carries a Zacks Rank #2 (Buy) and has a long-term earnings per share (EPS) growth rate of 30% which is more than double the industry average growth rate of 14.4%.
Zendesk, Inc. (ZEN - Free Report)
Zendesk is a software development company. It provides a software-as-a-service, or SaaS, customer service platform. The Company offers applications that allow clients to manage incoming support requests from end customers from any Internet connected computer. It provides customer service through its platform in approximately 40 languages to customers in various industries, such as business technology, telecommunications, education/non-profit, consumer technology, media/entertainment, and retail/ecommerce.
The company currently carries a Zacks Rank #1 (Strong Buy) and has a long-term EPS growth rate of 35.3% which is more than double the industry average growth rate of 14.4%.
Juniper Networks, Inc. (JNPR - Free Report)
Juniper is a leading provider of networking solutions and communication devices. The company is set to capitalize on the growing demand for data center virtualization and cloud computing. The company reported encouraging first-quarter 2015 results last week and provided an optimistic outlook for the second quarter, primarily due to rising cloud services related demand.
Juniper sports a Zacks Rank #1 (Strong Buy) with an expected long-term earnings growth of 10.6%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 21.3.