Investing in Cloud Computing

A friend forwarded me an sales email he received from The Motley Fool about why “cloud computing” was poised to disrupt to the market. I ranted a bit, but I think there are some things worth considering.

Shocking video reveals the “$160 billion tsunami” that could wipe out Microsoft -- and hand well-positioned investors untold millions...

But as you’re about to find out, that’s nothing compared to the gains we could see going forward. Which is why I thought you might be interested in an eye-opening video that reveals...

  • The dirty secret behind Microsoft’s mind-boggling growth -- and the 118-year-old technology that’s about to bring the computing giant to its knees.
  • Why even Bill Gates admits that “the next sea change is upon us” -- and why one of the world’s most widely-followed investors is convinced this massive shift will make in-the-know investors extremely wealthy.
  • Everything you need to claim your fair share of the profits -- including the full story behind a handful of little-known companies that are poised to rule the post-Microsoft world.

Click here to watch this video now{rel=”nofollow”}

My friend asked me a simple question: “Is this anything new?”

I skimmed the transcript that comes up when you try to leave the video page.

Crammed with 21 pages of detailed stock research, Gold and Beyond: 7 Surprise Plays to Inflation-Proof Your Portfolio is the latest in a long line of wildly popular and performance-packed research documents.

Yes, it is abusing a buzzword popular in 2008 to sell gold and PDFs. You should consider it slightly more trustworthy than the Nigerian prince who has a crate of money for you, in that yes, you really will get a PDF. (You’ll also get a never-ending amount of advertising along these lines because customer lists of people who buy get-rich-quick products are very valuable.)

Meanwhile, a few hundred miles south, on the banks of the Columbia River, a mysterious outfit known only as “Design LLC” quietly constructed two massive, windowless warehouses.

This mammoth undertaking was code-named “Project 2,” and the International Herald Tribune described the towering monolithic structures as “looming like an information-age nuclear plant.”

The story of Google building its data center near hydro power is a couple years old, all the nerds looked at the announcement and went “Hey, yeah, when you have a lot of servers that makes a lot sense. Clever.” Since 2005, power - largely for cooling - has been the key constraint on very large data centers run by Google and a few other very large tech companies run. This is definitely not news, and not related to cloud computing services.

They spooked the Microsoft founder into an early retirement. ... And that’s precisely why the two words “cloud computing” scare the hell out of Bill Gates.

You see, he realizes that thanks to the thousands of miles of fiber-optic cable laid during the late 1990s, the speed of computer networks has finally caught up to the speed of computer processors.

The invocation of Bill Gates is a big red flag that this is targeted to unsavvy investors. He hasn’t been involved in the day-to-day of Microsoft since 2006, not in R&D since 2008. While this plays on the fact that the public associates him with Microsoft and will for a few decades, he spends his time on philanthropy. The author thinks you’re an idiot.

But cloud computing isn’t going to be just a modern convenience -- it’s going to be an enormous industry.

You see, everyone from individuals to multinational corporations can now simply tap into the “cloud” to get all the things they used to have to supply and maintain themselves. This will save some companies millions and make others billions.

Cloud computing is when a developer rents computer time from other people’s data centers. You likely already use many services that use cloud computing but you don’t directly use it, it’s infrastructure. It’s really only annoying to Microsoft because these servers almost always run some variant of Linux or Unix rather than Windows, but that’s a missed opportunity rather than anything that’s going to actually take money out of Microsoft’s pockets by hurting their sales of desktop software. It is not “the next big thing”, though it is perhaps still the current big thing. It’s been in use for several years; I used it at the Post to process an 17,481 page PDF in a couple hours instead of two weeks.

That’s why I’m so eager to tell you all about the three companies that are leading the charge and look poised to rule the post-Microsoft world. ... It all starts with taking us up on this special offer and claiming your FREE report: The 3 Kings of Cloud Computing. I want you to have it right now, with my compliments.

And here’s one more thing I’d like you to accept with my compliments: an invitation to join our Rule Breakers community absolutely without any risk.

If you want to put your money behind cloud computing, buy Amazon. They sell what is by far the best cloud computing platform and will be for the next few years. Yes, the retailer. They built an incredibly smart backend to, then built good developer tools on top of it and started selling access in 2006. The company in second place is Rackspace, one of the biggest and best Internet hosting companies in the world, who bought a cloud computing company to expand their offerings. They have decent products, but Amazon is simply doing a better job.

Isn’t it too late to buy Google?

Not at all!

In fact, as I mentioned, one of America’s most trusted stock pickers is convinced that right now is the perfect time to get invested in the future of cloud computing -- and especially in Google.

It is a non-sequiter to suggest buying Google based on cloud computing. Google does sell a little bit in the form of Google App Engine, but even without looking at their FEC filings I’d guess it accounts for <1% of their revenues and they’re not heavily promoting it. Google is still an advertising company.

It is not a bad idea to consider buying Microsoft based on cloud computing, despite the screaming hype of this sales letter. Earlier this year Ballmer said they’re going “all in” on providing cloud computing services. Nobody knows quite what that will look like (and MS has a three-decade history of pre-announcing projects to try to scare away competitors), but they have enough developers using their services that they whatever they eventually produce is at least unlikely to flop.

But why should you trust him? ... Here are just a few more of the top dogs and first movers he’s uncovered recently:

  • Myriad Genetics -- Locked in 225% gains
  • Baidu -- Up 1,251%
  • Vertex Pharmaceuticals -- Up 259%
  • Green Mountain Coffee Roasters -- Up 260%
  • MercadoLibre -- Up 340%

I can even duplicate his prediction feat: on the NYSE, I recommend you buy every stock whose ticker symbol starts with a vowel. Come back in a year and I’ll point out the half-dozen that have skyrocketed.

In closing, always ask yourself why anyone would be stupid enough to sell this information. If he seriously thought that just buying a stock would get a three-digit return, he would be selling his house and kids and borrowing from loan sharks to buy before the market moves, and then building a large, Scrooge McDuck-style vault so he can swim around in his acres of money. Not selling PDFs by monthly subscription.