I’m increasingly impressed by the applications and potential Cloud computing currently and will offer in the future. Today I came across an article that discussed ray-traced gaming on a tablet device run through a cloud computing environment. Though I’m sure the current application isn’t all that functional, you can see where the trend is leading to in the computing industry. Cloud computing is revolutionizing the idea of the CPU (central processing unit) and local data storage.
About 11-12 years ago a number of small firms launched back-up and remote file access services for free. This was a form of Cloud computing (a primitive form at that). When the dot-com bubble burst, they shortly were phased out of existence. Since then a financially viable Cloud computing environment is developing. One of the most important changes has been the speed at which we interact on the Internet.
The computer that I work at from home connects at 12mbs, which is the middle tier of my service provider’s option package. Ten years ago you would have been thrilled to be connected at 1mb. The change in what we see as a ‘normal’ connection speed is quite different today than it was a decade ago.
The speed at which a business or average person transfers data has huge implications in the world of Cloud computing. The faster the connection the greater the ability a provider has to harness off-site processing power. You can have all the processing power in the world, but if you are unable to send the information back to the user, then the user will not benefit.
If you believe that Internet connection speeds will continue their trend in becoming faster for businesses and consumers, then you should seriously consider investing in companies that support pieces of what’s come to be know as the Cloud computing framework.
One such company is CoreSite Realty Corporation (COR). COR owns, develops and operates data centers in major markets in the U.S. (LA, SF, DC, NYC, Chicago…). Think of COR as a virtual Cloud Realtor. Off-site storage and processing power are two vital components to Cloud computing. COR is a major player in this arena.
COR is an interesting play because, unlike most tech companies, it pays a dividend. The current yield is 3.1%. As a stock, it doesn’t have the longest track record, since it became public in the latter party of 2010. Over the past quarters revenue has growth. Net income is still slightly negative. If you’re investing in COR your investing hypothesis must be grounded in your conviction that Cloud computing will continue to boom and COR will leverage its current market position to prosper from the trend.
I’d look for further weakness in the market this summer to find an entry point for COR, if it’s a stock that would fit well in your portfolio.
Disclosure: No Position.