Satya Nadella's appointment as the new CEO of
) brings to a close a process that began last August. Since then,
the software giant has considered nearly a hundred names for this
position. Several notable outsiders were considered, including
Alan Mulally of
Ford Motor Co
) and President of
), Mark Hurd.
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The Search for a CEO
Nadella's elevation to CEO may have come as a surprise to some
outsiders. He is relatively low profile, though a company
veteran, having worked with both of the company's former CEOs,
Bill Gates and Steve Ballmer.
His contributions to the company are significant. Nadella has led
key initiatives at Microsoft over the years. He is largely
responsible for the success of Bing, the company's search engine,
forming crucial partnerships with the brands and advertisers.
However, it is in the cloud domain where he has made his most
significant contributions. It is Nadella who has helped shift the
focus from client services to cloud infrastructure and services.
The Azure cloud and Windows server and developer tools have made
great gains under his watch.
As executive vice-president of the cloud and enterprise group,
Nadella was leading what is expected to be a major growth segment
in the future. This includes the initiative to get Office onto
the cloud via Microsoft Office 365. After he began heading the
division in 2011, revenue from cloud services grew from to $16.6
billion to $20.3 billion in June 2013.
Nadella has ignored suggestions urging him to focus exclusively
on corporate and government customers and divest MSFT's consumer
businesses. He will continue with Steve Ballmer's efforts to
increase the company's presence in the cloud and mobile computing
At the same time, he is moving away from hardware to a software
centric approach. Nadella emphasised the need to concentrate
efforts on building cloud computing and related applications.
The elevation of Nadella and his successes with Microsoft's cloud
division illustrate how crucial the segment will be going
forward. Bessemer Venture Partners (BVP) launched a Cloud Index
in July last year which captures the fortunes of the top 30 cloud
computing companies. These companies were collectively valued at
$100 billion at the time. This was a clear indication, BVP said,
that leveraging the cloud to power software and data storage was
a theme that would come to dominate the tech domain.
Below we present three companies operating in the cloud computing
domain, each of which also have a good Zacks Rank.
Constant Contact, Inc.
Constant Contact, Inc
) provides engagement marketing tools available on demand. These
are customized for small companies, non-profit organizations and
associations. Among its prominent offerings are products which
can be used for social media and event marketing, email marketing
as well as survey tools.
Constant Contact, Inc. holds a Zacks Rank #2 (Buy) and has
expected earnings growth of 98.00%. The forward price-to-earnings
Ratios (P/E) for the current financial year (F1) is relatively
high at 53.70. However the price to sales ratio (P/S) is 2.9,
lower than the industry average of 5.4.
) offers demand software solutions aimed at the housing rental
sector. Among the company's products are property management
systems and seven groups of valued added services which are
software enabled. The company made important acquisitions last
year, such as Windsor Compliance, a compliance monitoring
Currently the company holds a Zacks Rank #2 (Buy) and has
expected earnings growth of 32.50%. It has a P/E (F1) of 39.53.
At 4.3, the company's P/S is lower than the industry average of
Rackspace Hosting, Inc.
Our third choice is
Rackspace Hosting, Inc.
). The company has a wide range of cloud computing products. This
includes public, private, dedicated and hybrid hosting. Operating
across 120 countries, the company has a presence in Zurich, Hong
Kong, Sydney and Amsterdam, aside from the U.S.
Besides a Zacks Rank #2 (Buy), RAX has expected earnings growth
of 19.60%. It has a relatively higher P/E (F1) of 50.48. However,
its P/S is 3.6, lower than the industry average of 5.4.
With major tech players increasingly focusing on the cloud, this
domain may offer significant growth in the future. Operating
exclusively in the cloud business, these companies may be best
placed to leverage those gains and would make good additions to