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Vinay Singh
Vinay Singh
Articles (229) 

Invest in These Companies to Profit From the Cloud

June 21, 2014 | About:

With competition in the smartphone arena heating up even more, there have been some interesting movements among competitors both large and small that could cause some pressure for investors' bottom lines.

What happened to Intel?

One company that is encountering a fair amount of potential negative financials due largely to the slowing growth of PC use is Intel (NASDAQ:INTC). This company essentially built its reputation - and its revenue model - on a once-current outlook that interconnected computer systems would be everlasting. While Intel was unquestioningly the winner in the desktop semiconductor niche back in the day, its offerings are simply not as in demand as they were a decade ago.

One way that Intel could stop its fall from grace is to adopt new product strategies. As sensible as that sounds, however, the company has been extremely slow in doing so - resulting in missed opportunities in the mobile device area to the likes of Samsung, Qualcomm, and Apple (NASDAQ:AAPL).

Presently, these competitors each possess a particular edge over Intel in the marketplace. Intel also missed out on the in-house development of processors to Apple, which seems to be making the competitively-paced environment even more heated. Likewise, according to AT&T, the area of cloud computing appears to be "where it's at" going forward.

Even though information is becoming more and more centralized and may be accessed via the Internet by basically any device that is wireless, the Cloud may not be able to completely replace desktop computers. This could mean that there's still a ray of hope for Intel.

Are some tech companies' heads in the clouds?

Today's cloud-based computing has actually been a boon to some computer companies such as IBM (NYSE:IBM). In fact, thanks to IBM's cloud division, the company's yearly revenue rose by 68% between 2011 and 2012.

Even so, IBM is still seeing some downward moving financials in its technology and systems divisions due in large part to many companies renting their data centers instead of purchasing them. This has led to a decline in IBM's hardware sales by 15% since one year prior.

This decline will probably continue with the emergence of cloud computing. Given much faster Internet speeds, it is anticipated that the adoption of "the Cloud" will only increase over time. This will harm IBM's hardware business, especially if Big Blue is not able to adapt itself to the altering landscape in the technology world.

Apple's cloud storage and computer service iCloud also offers users the ability to store data such as music and other iOS applications so they can download it later to any iOS-based device or PC running OS X. It currently has more than 300 million users. The service offers users automatic wireless backup of iOS devices to iCloud as well instead of doing it manually. Though each Apple ID account can use 5 GB of free storage, additional storage of up to 50 GB can be purchased as well.

iCloud is a crucial piece to Apple's future success in the cloud arena. Since the idea of data stored locally is gradually losing steam, iCloud could very well be the default place where apps store files in the future. With the move to cloud computing growing exponentially, iCloud is the most significant thing that's happening on iOS at the moment.

Are computers on the way out?

When considering just how useful cloud computing can be, there are some who feel that the PC will not be seen as useful at all in terms of storage and processing in the future. One key factor in this rationalization is the fact that consumers are able to access music and other apps online that work on Apple's products or that use Windows and Android operating systems.

In this vein, standardization is key. Standardization will likely result in more and more devices becoming more apt to handle whatever users need - regardless of whether this will be viewed as replacing one's PC or laptop.

As for IBM, there is a bright spot in that the company will likely see additional growth in the company's cloud division, especially as product standardization moves forward. It is anticipated that overall competition will heat up among the makers of cloud server hardware, however.

Should computers even be improved?

While most tech giants realize where the market is headed in terms of cloud-based computing, there are those that still grapple with the decision of whether or not to improve on their more "traditional" computer systems.

Really, though, the majority of consumers who might purchase such upgrades are not part of higher-income households - meaning that although there may be a market for such hardware upgrades, the revenue that is generated is not likely to be worth the companies' efforts.

Replacing the PC with mobile devices

Even with the vast array of tasks that can be performed using a mobile device, it is not likely that most people are going to completely ditch their desktop or laptop in lieu of solely using a tablet or smartphone. Even though companies like Apple want the market to believe that people can do just about anything imaginable with an iPhone, the truth is that while smartphones are quite good for some tasks they are equally bad for others.

For example, anyone who regularly produces content-laden documents or spreadsheets would not likely be doing so via their Blackberry or Galaxy tab. It just wouldn't make much sense - nor would it be very convenient for the user.

Likewise, it is highly unlikely that mobile devices - regardless of their flexibility and convenience - will replace the business uses of full-fledged computer systems such as those used in hospitals and accounting firms.

To bring the point home, imagine for a moment the likelihood of large corporate spreadsheets being produced on one's smartphone and I think you will get the overall picture. With this in mind, even though the PC market has essentially stagnated it doesn't mean that it is history. Not by a long shot.

Cloud computing plays nice with others

Just like with most other industries, even when one product stagnates and another emerges there is still often room for both. If things go right, new ideas and technologies may even be able to enhance or build upon the old ones.

At the present time, because cloud computing is still relatively new it may be viewed as being the "next big thing." And while this is true in large part, the fact is that such a new idea could drive additional sales of both smartphones and desktops. Tomorrow's "new" technology revolution could very well be linked to today's PC or desktop, but only time will truly be able to tell.

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