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Technology Stocks : Cloud, edge and decentralized computing
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To: Glenn Petersen who wrote (589)2/28/2011 1:47:59 PM
From: Doren  Read Replies (1) of 1685
 
Questions:

(spend 6 months a an IT recruiter so I have some insight)

It seems to me that profit margins on cloud companies without a distinct proprietary advantage are going to be razor thin.

Just off the top of my head Rackspace has a P/E of 103 according to Yahoo. Pretty steep for basically an app storage provider. Servers are servers. Generic.

So I'm thinking why would companies migrate to a service provider with their Data and apps. Well so they can concentrate on business. But their in house guys are probably not completely inefficient, particularly large experienced corporations probably have pretty good talent. Therefore the advantage of moving apps and data off their own servers is:

Less headache (but that means loss of control)
Less money (but only slightly)

If I were a CEO/CIO/CFO team I'd be very skeptical of giving over control of my data etc for what would amount to very little savings.

I can see how a company like salesforce gets new companies addicted. Once signed it would be difficult to develop your own systems and hair raising at the minimum to migrate to a different provider.

What am I missing?

I'm thinking that maybe there is a pretty good short among these companies if there is a bubble coming.

And of course there are some companies that are misunderstood (like Apple was misunderstood 10 years ago). Which companies are companies that investors don't "get." Certainly not salesforce.
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