Microsoft Corporation (MSFT), Netflix, Inc. (NFLX) & Google Inc (GOOG): Who Is Ready for the Next Phase of the Cloud?

On the surface, the choice between Netflix, Inc. (NASDAQ:NFLX) and Microsoft Corporation (NASDAQ:MSFT) sounds like a horses-for-courses debate, with Netflix the choice for capital gains and Microsoft the choice for yield. But the two cloud strategies are radically different, and this could prove important down the road.

Google does it right

Google Inc (NASDAQ:GOOG) has long pursued a strategy more like that of Netflix. The company has many data centers scattered around the globe, and makes copies of itself – or its primary resources – available for delivery to Internet points of presence and to corporate offices around the world.

Because it has redundancy – more redundancy for the most often-used files – Google doesn’t suffer long outages like Netflix, Inc. (NASDAQ:NFLX), which went down four different times last year due to its reliance on a single Amazon.com, Inc. (NASDAQ:AMZN)data center in Virginia. But, as previously noted, this is a problem Netflix is addressing, and in the right way.

Google Inc (NASDAQ:GOOG) is building ahead of the market. It is not yet offering its own full capabilities to the cloud computing market. Redundancy is not a main feature of the Google Compute Engine – instead, resources are held in a single center as close to the customer as possible. But the next evolution in this market will demand redundancy, Google Inc (NASDAQ:GOOG) is ready for it, and Netflix, Inc. (NASDAQ:NFLX) is getting ready for it.

Small wonder then that despite its relatively low public cloud market share vis-a-vis Amazon.com, Inc. (NASDAQ:AMZN), Google continues to power ahead. Its market cap began exceeding that of Microsoft Corporation (NASDAQ:MSFT) earlier this year, and now stands at $287 billion – Apple’s market cap is less than $100 billion away. Despite this Google Inc (NASDAQ:GOOG) manages to grow its top line at 30% year over year, and has expanded its bottom line despite acquiring Motorola last year.

Google Inc (NASDAQ:GOOG) is doing all this with one virtual hand tied behind its back. Once it unleashes its full cloud capabilities on the public cloud market, you’re going to see some major impacts. This is a stock that needs to stay in your portfolio no matter how frothy it gets, and at a Price/Earnings (PE) multiple of 26 it’s pretty frothy.

Dana Blankenhorn owns shares of Google. The Motley Fool recommends Google and Netflix. The Motley Fool owns shares of Google Inc (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Netflix, Inc. (NASDAQ:NFLX).

The article Who Is Ready for the Next Phase of the Cloud? originally appeared on Fool.com.

Dana is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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