Get Your Head in the Cloud..Rackspace Hosting, Inc. (RAX), salesforce.com, inc. (CRM)

EMC has Brookside Capital, managed by Bain Capital, as its largest hedge fund shareholder, with a $204 million position in the stock comprising 4.6% of its 13F portfolio, but other hedgies are bearish on the stock (see which ones).
Red Hat provides open source software solutions to the enterprise, namely offering operating systems and virtualization options for mainframes and server applications. Red Hat saw sales lower than expected last quarter after several large deals failed to close, coupled with weakness in Europe.

After the earnings announcement Raymond James downgraded the company to market-outperform, citing the company’s below expectations guidance as setting the stage for potential future lowered guidance (next year).
For those looking to dapple in the virtualization market, VMWare and parent EMC both hold positions in two of the most demanded types of virtual storage preferences.

Source: Gartner
VMware has a dominant position in the server virtualization market from software-defined data centers, hybrid cloud and client management of mobile devices. The company estimates that these three market segments will grow at a compound annual growth rate of 20% for the next four years.

Yet, Red Hat, EMC and VMware are just pieces of the puzzle, proving virtualization solutions from the desktop to the data center. Their solutions enable organizations to aggregate multiple servers, storage infrastructure and networks together; however, for those looking to play the complete cloud industry, Oracle might be your best choice.

Don’t Be Fooled

The only variant view that I’d mention when comparing Rackspace and Oracle is that Rackspace is a purer play in the cloud space, whereas Oracle operates various segments. Everything else points in Oracle’s favor. Rackspace trades at 65 times earnings and Oracle only 15 times; meanwhile, Oracle also has an EBITDA margin that’s more than 1,500 basis points higher than Rackspace and a return on investment of 17%, compared to Rackspace’s 11%.

As far as cloud spending, it appears that emerging markets and Asia-Pacific will offer investors the best growth opportunities…

…so which company has the most exposure to these areas? Oracle derives around 50% of revenues from Europe, the Middle East and Africa, and Asia-Pacific, where only about 25% of Rackspace’s revenues are derived from outside the U.S.

If you want to play just part of the cloud market, EMC (and its subsidiary VMWare) offer solid growth prospects in the virtualization and storage markets; however, if you’re looking to play the fastest growing cloud segment Oracle is a solid bet.

The article Get Your Head in the Cloud originally appeared on Fool.com and is written by Marshall Hargrave.