Option Millionaires

[jimmybob]

http://blogs.barrons.com/techtraderdaily/2016/04/29/cloud-is-an-instrument-of-destruction-says-needham/

Cloud computing is an “instrument of destruction,” writes analyst Richard Kugele of Needham & Co. today, reflecting on Amazon.com’s (AMZN) 64% growth in AWS revenue, reported yesterday with Amazon’s Q1 report.

“AWS posted another exceptional quarter last night of $2.6B, up 64% y/y,” writes Kugele.

He’s truck by the the scale of AWS, and cautions trouble for traditional IT in the starkest terms:

We have seen start-up companies display revenue growth in this range before, but few can maintain the pace AWS has and virtually none have done it at this scale. In the current IT spending malaise, having such a rapidly growing, increasingly capable alternative to traditional solutions creates a black hole from which the weak and infirm companies may not be able to escape.

Kugele’s writes that IT infrastructure is increasingly “divided into three camps”:

1) component suppliers (that can supply elements of ¦ solutions that the hyperscale can use to build their empires); 2) next-generation solutions, built for the cloud era that are being embraced by players 4-10 of the CSP world and are eating the lunch of traditional enterprise storage and server; and 3) the legacy aristocrats of the old IT hardware guard that are caught between trying to partner with the instruments of their own destruction, developing their own poor facsimiles, or hoping to maintain enough cash flow to hopefully buy one of the winners.

His recommendation: Buy the “component” makers that are on the right side of cloud:

Today, perhaps the best way to benefit from the increasing popularity of the cloud is through the core component technologies being adopted by hyper scale (processors, HDD and SSDs) or through next gen, cloud-enabled storage/solutions in hybrid, AFAs (such as Nimble [Storage (NMBL)], Pure Storage (PSTG)) or hyperconverged.

“For the rest, buyer beware,” concludes Kugele.