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Intel, AMD & Akamai Could Gain from Cloud Insecurity

We knew the cloud was vulnerable and that security would be a concern. A recent Reuters article highlights that the latest high profile break-ins of Google's (NADAQ:GOOG) Gmail service and Sony's Playstation could threaten to slow the take off of the cloud computing industry - often considered the computer industry's next big thing. For companies positioning for growth in cloud services like Intel (NASDAQ:INTC), AMD ( AMD ) and Akamai ( AKAM ) - what's at risk ? Or said another way - what's to gain?

Below we look at how these 3 companies could take advantage of the growing insecurity of the companies using the web.

Intel Has Opportunity with McAfee

Now that Intel has McAfee in the bag, it plans to leverage its technology in order to enhance security at the chip level. The company believes that the best way to tackle security threats is by tackling it at the semi-conductor level.

These recent high-profile attacks demonstrate a severe need for better security systems for cloud services. If Intel can do this well with McAfee, it would bode well for the rest of its chip business. We estimate that McAfee constitutes less than 3% to Intel's stock but indirect benefits can come from higher demand due to the success of embedded security solutions.

Our price estimate for Intel stands at $27.50 , implying 25% upside to the market price.

Can AMD Chips Shine in the Cloud?

AMD is working on chip level security as well, and it maintains that its server processors will work better in a cloud computing environment. The company claims that virtualized systems run at high CPU utilization and that AMD's servers will outperform Intel's HyperThreading system.

If that is so, there could be downside from a potential slowdown in cloud computing growth that would imply fewer opportunities for AMD to gain server market share , an area where it has lost significant ground over the last few years. However, if AMD can increase the security of its chips in a meaningful way, demand could pick up since cloud providers are taking security issue more seriously in the wake of the recent events.

Our price estimate for AMD stands at $9.48, implying 25% upside to the market price.

Akamai Can be a Premium Security Provider

Such security breaches could make companies hesitant to move to cloud services altogether, thereby affecting Akamai's web security services. On the other hand, they also create an extremely strong incentive for major cloud providers to invest more earnestly in security, which benefits Akamai.

As one of the leaders in offering value-added services to its customers including security, Akamai can charge higher prices if it comes up with high-quality solutions to help customers. This could help sustain growth in its revenue per customer metric despite ongoing price pressures for content delivery.

Our price estimate for Akamai stands at $35, implying 15% upside.

See our complete analysis for | Intel| AMD | Akamai |

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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