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Two Weeks, Two Companies, Two Results: The Tale of SalesForce and Cisco

Cloud computing growth perceptions match stock price swings

The stock price of Cisco, a darling of the stock market for a long time, fell 16% and contributed to a 73 point drop in the Dow index on November 11, 2010. SalesForce, on the other hand, shot into the upper atmosphere, up by 18%. Interestingly, Cisco market cap fell by $24 billion, more than the total market cap of SalesForce.

While stock swings are not as common, what made these two companies change their market value so rapidly? Investors usually peer into the future and buy or sell stocks based on the projections. Cloud computing is being recognized by investors as an engine of growth and rewarding certain companies like SalesForce.

Cisco, the sixth largest technology company by market value(1), has some products that are challenged by solutions delivered free or virtually free. One example is the consumer facing umi telepresence compared to Skype or Gtalk. Also, the next iPad is rumored to have a camera built in and there is a plethora of smartphones planned or that have with video chat capability. In this example, Cisco is going after a video conferencing market already crowded with cheap solutions. I expect for Cisco to make some good cloud start-up acquisitions to enhance their server product line capabilities in the cloud market.

SalesForce is focused on the fast growing cloud computing business with software, platform and (probably soon to come) infrastructure capabilities. In adding capabilities, SalesForce copies Facebook like functionality into their product through Chatter. The SalesForce platform used to be considered proprietary but they have reduced that concern through partnership with VMWare by offering VMForce. SalesForce needs to look out for Yammer (vs Chatter) and EngineYard (vs VMForce). Although SalesForce market cap and cash available is a fraction of leading technology companies like Microsoft, Oracle, IBM, HP and Cisco, they can grow rapidly by adding more capabilities and drawing partners.

Time will tell how existing technology companies will enhance their cloud presence with strong offerings and keep up with the rapidly growing cloud revenue stream.  The bigger question is: how will investors react?

More Stories By Larry Carvalho

Larry Carvalho runs Robust Cloud LLC, an advisory services company helping various ecosystem players develop a strategy to take advantage of cloud computing. As the 2010-12 Instructor of Cloud Expo's popular Cloud Computing Bootcamp, he has already led the bootcamp in New York, Silicon Valley, and Prague, receiving strong positive feedback from attendees about the value gained at these events. Carvalho has facilitated all-day sessions at customer locations to set a clear roadmap and gain consensus among attendees on strategy and product direction. He has participated in multiple discussion panels focused on cloud computing trends at information technology events, and he has delivered all-day cloud computing training to customers in conjunction with CloudCamps. To date, his role has taken him to clients in three continents.

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