Increasingly, both businesses and consumers are coming to rely on the power of the cloud. Not just cloud storage, but software accessed over the Internet.
Of course, that cloud-based software requires optimized servers. And when it comes to the businesses providing those servers, Microsoft Corporation (NASDAQ:MSFT), Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) stand out as the dominant players.
The trend towards cloud computing
In recent years, faster broadband speeds have made cloud computing possible. Applications can run on a distant server, and be accessed by the user with just an Internet browser.
This technology is embodied best in Google Inc (NASDAQ:GOOG)’s Chrome operating system. Chromebooks — laptops that run Google Inc (NASDAQ:GOOG)’s Chrome OS — are incapable of running local applications. Instead, the devices are more or less just Internet browsers, relying entirely on cloud-based software.
While most software is still local-only, the trend is clearly towards the cloud. Microsoft Corporation (NASDAQ:MSFT) has created a cloud version of its Office software, while Adobe Systems Incorporated (NASDAQ:ADBE) has stopped offering local-based Creative Suite in favor of the Creative Cloud.
In short, companies want to bring their software to the cloud. That provides a growth opportunity for the major cloud providers.
Microsoft’s Azure solution
Microsoft Corporation (NASDAQ:MSFT)’s public cloud product is called Azure. As a part of its business, it falls under its server and tools division. In Microsoft Corporation (NASDAQ:MSFT)’s last quarterly report, that division accounted for about a quarter of the company’s revenue and profit.
But it could soon be much more. Hedge fund ValueAct has bought up $2 billion worth of Microsoft stock largely on the promise of Azure. Specifically, ValueAct believes that Azure will make Microsoft Corporation (NASDAQ:MSFT) the biggest cloud-computing company in the world.
Using Azure, companies store their cloud software on Microsoft Corporation (NASDAQ:MSFT)’s servers. And according to Microsoft, half of the Fortune 500 uses Azure right now in some capacity.
Microsoft is even pushing Azure with its gaming division. Its upcoming console, the Xbox One, will incorporate Azure to offer limited cloud-based gaming.
Amazon Web Services
Along with selling physical and digital goods, Amazon.com, Inc. (NASDAQ:AMZN) is also a major seller of cloud services. In fact, Amazon.com, Inc. (NASDAQ:AMZN) Web Services (AWS) might be Azure’s biggest competitor. Microsoft and Amazon have been in a price war for months now, with each company progressively attempting to undercut or match the other.