But for many investors, the cloud can seem like an opaque business filled with confusing jargon. The business of cloud servicesAmazon, Google, Microsoft, and IBM are all focused on growing their "cloud as a service" revenue, which comes from services provided to customers over the Internet.
PaaS solutions -- for example, Google App Engine, IBM's Bluemix, Amazon Web Services, and Microsoft's Azure -- provide developers with a framework for creating software applications.
IaaS platforms, such as Google's Compute Engine, offer "self-service" models for remotely accessing and managing data center infrastructures. Follow the moneyAmazon, Google, Microsoft, and IBM all have different reasons for pursuing growth in cloud services. Cloud revenue only accounts for single-digit percentages of annual revenue at all four companies, but the units are all posting double or triple-digit annual sales growth.
Microsoft's total cloud revenue rose 106% year over year last quarter, with an annual run rate of $6.3 billion.
Hybrid cloud solutionsWhile the spotlight usually shines on cloud as a service solutions, investors shouldn't overlook the growth of "hybrid cloud" solutions. This approach is attractive to older and larger businesses that aren't ready to send all their data to the cloud. To tap into that market, Microsoft teamed up with IBM and Accenture to offer hybrid cloud solutions for large businesses, which partially connects them to public cloud services such as Bluemix and Azure. Leo is a Tech and Consumer Goods Specialist who has covered the crossroads of Wall Street and Silicon Valley since 2012. Atos, the European IT services giant based in France that is the amalgam of a dozen companies that have been brought together over the past several decades, is getting into the systems business through the acquisition of French IT supplier and services supplier Bull. Bull has a long and complex history, like Atos, and is well regarded for the engineering of its systems, particularly in recent years in the supercomputing space. On a call with analysts and journalists to go over the proposed acquisition on Monday, which was a the Memorial Day holiday in the United States, Charles Dehelly, senior executive vice president of global operations at Atos, spent a lot of time talking about the synergies between Bull's systems and Atos' software and services expertise and how this would be leveraged in the big data and cloud markets, which are growing faster than other parts of the IT sector where the two companies play right now. Bull currently has a 16 percent share of the €900 million market for HPC systems in Europe, according to Dehelly. These are recurring themes here at EnterpriseTech: leveraging advanced technologies for competitive advantage in the enterprise and providing a finished stack that performs a set of tasks. The way the pieces come together, Bull will be supplying the high performance infrastructure and software for optimizing the systems and dataflows, while Atos has the system integration and data analysis skills.
The combined HPC and big data businesses at Atos and Bull accounted for €200 million in sales in 2013, and the plan is to scale up the traditional as well as enterprise HPC business. The cybersecurity angle is something that the Atos-Bull combination will play up, and so is cloud computing and what Atos is calling IT consolidation.
That leaves cloud services, something that both companies have been trying to build up in the past three years, according to Breton.
Amazon Web Services is predominantly involved in selling public cloud capacity, and is estimated to have more than €1 billion in such sales in Western Europe, according to statistics that Atos gathered up from IDC, TBR, and Synergy Research Group in the chart above.
Atos says that it has a few ways of pushing up sales and lowering costs with the Bull acquisition.
By eliminating some back office and real estate costs and scaling up purchasing power, Atos thinks it can cut about €80 million in costs over the next two years through the combined companies.
Given the indigenous nature of high performance computing and the localized IT needs of governments and some large enterprises, it will be interesting to see if any of the other large IT services companies that do not already have their own systems businesses will be tempted to replicate a similar pairing.


SGI also brought in new leadership when it tapped Jorge Titinger to be CEO in early 2012, and has similarly been focused on bringing its shared-memory system and clustering technologies, originally aimed mostly at supercomputing centers, into the enterprise datacenter. SGI and Cray, of course, are focused on partnering with software and services companies to provide exactly the same kind of integrated stacks for analytics, simulation, and other workloads directly to customers as Atos and Bull are talking about once the acquisition is done. Completa con tu email tanto para suscribirte a nuestra newsletter, como para agregar o quitar otras suscripciones. In this article, I'll cut through that jargon and highlight key areas on which investors should focus. Examples include productivity suites such as Office 365 and Google Apps, customer relationship management platforms including Microsoft's Dynamics CRM, cloud storage solutions like Google Drive, and video conferencing solutions such as Microsoft's Skype. They also allow information-technology administrators to remotely manage operating systems, servers, networking, and other computing infrastructure. This allows customers to tap computing services, like storage and processing power, from "virtual data centers." Bluemix, AWS, and Azure are notably both PaaS and IaaS platforms, since they straddle both with scalable all-in-one solutions. Amazon can diversify its top line away from e-commerce and use the cloud to support its digital media ecosystem.
Last quarter, revenue at Amazon Web Services' cloud unit rose 49% year over year to $1.57 billion, with an annual run rate of $6 billion. The company's cloud business is larger than Amazon's, but most of that revenue comes from SaaS offerings such as Office 365 and Dynamics CRM. Hybrid cloud solutions help businesses manage some of their resources locally (the "private cloud") while depending on external cloud services (the "public cloud") for others. Research firm Gartner estimates that nearly half of all large enterprises will install hybrid cloud solutions by the end of 2017. Last year, Amazon started integrating AWS with AT&T and Verizon's private clouds to create hybrid solutions for large businesses. Please use newer version of your browser or visit Internet Explorer 6 countdown page for more information.
Thierry Breton, who is chief executive officer at Atos, a former CEO at Bull in the 1990s, and a former minister of finance for the French government, is attempting to create an IT giant that can span Europe as well as dominate its home market. That is about a 30 percent premium over Bull's average share price in the three months prior to the announcement of the deal.
Bull can build and support petascale systems and has also reached down lower with a new line of smaller machines.
Atos reckons this business is growing at double digit rates and while much smaller than other parts of the company, it is important and, significantly, able to generate profits with a solution sale.
Each company has over 1,000 engineers dedicated to IT security in one form or the other, and the combination of the two cybersecurity units generated €290 million in sales in 2013. The Worldline online payment service from Atos kicked in another €1.1 billion in revenues, and big data and security (which Atos will collapse into one practice because you can't have one without the other) generated €490 million. Bull's cloud services business generated €112 million last year and Atos brought in €280 million, for $392 million.
Like IBM's own Power Systems business, the Escala AIX server business from Bull, which includes rebadged Power-based servers from Big Blue with, has been declining over the past several years. Crescendo Industries and Pothar Investments, which together own 24.2 percent of Bull's outstanding shares, have approved the acquisition of Bull by Atos. This deal for Bull is attractive to Atos for a number of different reasons, but its portfolio of 1,900 patents is important and so is the fact that Atos has pretty balanced sales across the major countries in Europe and across various industry sectors.


With a market capitalization of $1.14 billion as this story goes to press, Cray has been able to grow sales and net income for the past several years even if you exclude the $140 million it got in 2012 when it sold the "Gemini" and "Aries" interconnect businesses to Intel.
SGI had $767.2 million in revenues in 2013, and has reduced its losses significantly as it deals with a cutback in Federal government spending in certain areas of its business.
Amazon Web Services competes directly against Azure, which is a much smaller business for Microsoft. For example, a company can keep recent customer data on the private cloud, but upload archived data to the public cloud. In January, Google announced a deal with enterprise cloud company VMware to launch a new hybrid cloud platform. The combined company will not just be a managed services and outsourcing giant, but will leverage the deep infrastructure and system software skills of Bull to create a unified stack from the hardware out to application software to help companies design products and process massive amounts of data. The fact that the price is about half of a year of Bull's revenues shows just how tough it is in the IT infrastructure and services market these days.
This cloud is also growing in the double digits, Breton said, and when you take infrastructure and platform cloud services and roll in software, encryption, identification, and access management services, cloud revenues are around €450 million. The Bull cloud business plus the Canopy cloud business from Atos together came close to €400 million last year, and while it was mostly for private cloud construction, it is still cloud business and it makes the combined Atos-Bull the number two cloud player in Europe, just jumping ahead of Microsoft and IBM.
Atos says it can mitigate that decline by shifting the procurement of systems for its Atos services clients and for its Canopy cloud from IBM to Bull. The combined companies generated 22 percent of sales in 2013 in France, 19 percent in Germany, 17 percent in the United Kingdom and Ireland, and 15 percent in the Benelux and Nordic regions. Cray has stabilized even as government funding from the Defense Advanced Research Projects Agency for HPC systems was cut back, leaving the US Department of Energy to champion the development of large-scale clusters.
Part of SGI's recovery has been to shift away from the commodity cloud servers and storage space, where it is very tough to make money (unlike in days gone by), and towards the big data and analytics spaces, where the need for shared memory systems is only now becoming apparent to enterprises that are habituated to only deploying clusters.
But the synergies might make sense, particularly given the deep experience that these two companies have, if the right deal came along.
Microsoft can expand beyond Windows, while IBM can find a way to grow its revenue, which has fallen for 12 consecutive quarters.
Deutsche Bank estimates Azure only generates between $500 million and $700 million in annual revenue. It wants to leverage that to chase the data analytics opportunity, and equally importantly, make its own systems to sell to customers and to use in its clouds. The company's percent of sales in France were enhanced a bit, but not in a way that makes Atos lopsided.
Cray weathered the Great Recession under the stewardship of CEO Peter Ungaro and pushed out into storage and repositioned its machines to take on enterprise-class analytics jobs.
With a market capitalization of $314.1 million and a core business – including traditional HPC, big data systems, storage, and services but excluding legacy cloud and low-margin deals from prior periods – that is growing sequentially at a decent clip, SGI might be an attractive acquisition as well. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.



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