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Google Inc (GOOG), Cisco Systems, Inc. (CSCO): Cloud & IT, Where To Invest May Surprise You

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Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Cloud investing carries big risk. The median of 40 ISE index members sells for 25 times projected earnings for its current fiscal year, nearly double the S&P 500 index median.

Even so, it is not going away, and investors should research and make it a part of their investment strategy. Industry experts are projecting a huge increase this year in enterprise spending as companies look to migrate their networks further into the cloud.

Investors can buy into the index via an exchange-traded fund or an exchange-traded note. IDC, a tech research firm, estimates that revenue from public cloud services exceeded $30.5 billion in 2012, and will grow to a staggering $72.9 billion in 2015. This growth is approximately four times faster than the IT market as a whole.

Google Inc (NASDAQ:GOOG)

From search to cloud

In the past decade, Google Inc (NASDAQ:GOOG) has diversified from strictly search engines and ads into cloud computing services, mobile operating systems, and hardware. What’s more, Google Inc (NASDAQ:GOOG) ‘s various business areas are up against mostly anyone’s. Every story about cars that drive themselves, or Google Glasses that offer on-the-go augmented reality, reinforce the image of a company breaking new ground.

Google Inc (NASDAQ:GOOG) is the choice over other tech companies simply because of its anticipation of consumer trends and meeting the needs. Google Inc (NASDAQ:GOOG) Drive is the method it has chosen to offer consumers the ability to access their files anywhere. Consumers can use the drive with any existing Gmail username and it offers 5 GB of storage for free.

Google Drive recently implemented an impressive “Save to Drive” option, which allows users to instantly save files with a convenient, one-click button. Google Drive eliminates users resulting to the right-click save format and introduces a shortcut that permits quicker cloud uploads. Web developers can easily apply Google Drive on their own websites with two lines of HTML.

In the last month, Google Inc (NASDAQ:GOOG) has risen just under 1% and currently sits around $830. Based on its other financials, investors should definitely have Google Inc (NASDAQ:GOOG) in their portfolio.

Cisco Systems, Inc. (NASDAQ:CSCO)

Cisco Systems, Inc. (NASDAQ:CSCO) is best known for producing the software, switches, and routers that run corporate and communications data networks. But thanks to heavy spending on research and development, as well as certain acquisitions, Cisco Systems, Inc. (NASDAQ:CSCO) is well-positioned for industry leadership in mobile computing, cloud computing, video-delivery services, network security, web conferencing, and network storage.

Cisco Systems, Inc. (NASDAQ:CSCO) has put tremendous effort into ‘playing nice with others’. Cross technology compatibility is a key consideration when IT managers worry about the interoperability of various technology components in their corporate ecosystem.

The company has set an ambitious target of doubling the revenue it derives from software in the next five years. This, in turn, should lead to a rising take rate for its expanding suite of service offerings.

Taking a page out of the IBM playbook, the company is focusing on long-term service contracts for its software as well as cloud computing solutions. I see this leading to much smoother revenue and profit streams in the future. The company itself aims to boost service revenue from a current 21% of the sales mix to more than 25% within three years.

Cisco Systems, Inc. (NASDAQ:CSCO) partnered with McMaster University to create a cloud computing solution envisioned to aid in sharing medical research among university facilities. Cisco Systems, Inc. (NASDAQ:CSCO) serves as a liaison to manage research accessibility as technology progressively transforms research communication. The partnership attempts to adjust medical data management.

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