Amazon.com, Inc. (AMZN), Red Hat Inc (RHT): A Cloud Investor Strategy for the NSA Scandal

The problem for investors is that, while cloud is important, it’s not yet financially potent. Assuming the Amazon estimates are right and it will bring in almost $4 billion from cloud this year, that would still be less than 4% of its total revenues, not a game changer.

Look at Red Hat Inc (NYSE:RHT)

It’s for this reason that those who think the NSA scandal will have an impact in the cloud business should look first at Red Hat Inc (NYSE:RHT).

Red Hat Inc (NYSE:RHT) stock has come under pressure since it became apparent companies were slowing their move to private clouds in favor of Amazon.Com. Over the last year the stock is off 13%, but almost all of that has come since mid-May.

Red Hat Inc (NYSE:RHT) grew revenues by $50 million year-over-year in March, a nice rate of 17%, and it regularly brings about 15% of revenues to the bottom line. The company is now holding its annual customer conference in Boston, where it’s expected to focus on OpenShift, a cloud platform built on OpenStack it first announced last year.

OpenShift offers customers access to all the tools Red Hat Inc (NYSE:RHT) originally built for its Red Hat Enterprise Linux product, a favorite among data center operators for many years now. It represents a smooth glide path from Linux hosting centers directly into cloud, with some backward-compatibility for applications. Red Hat Inc (NYSE:RHT) doesn’t do its own hosting, it’s a software company, so if there is a move toward private clouds it is well-positioned to take advantage of that, and it should start showing up in its results.

So if you believe that the NSA revelations will have an impact on the cloud computing market, you may want to take some money off the table at Amazon and put some of that to work at Red Hat. Red Hat makes its next quarterly earnings release on June 19, so you may want to test this theory by looking at those numbers and, if they’re favorable, see this as a trend with legs and get in then.

Dana Blankenhorn owns shares of International Business Machines (NYSE:IBM). The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com and International Business Machines.. Dana is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article A Cloud Investor Strategy for the NSA Scandal originally appeared on Fool.com is written by Dana Blankenhorn.

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