VMware, Inc. (VMW), Red Hat, Inc. (RHT): With the Cloud Market Set to Flirt With 20% Growth in 2013, How Can You Play It?

Equally as important, Citrix added about 4,000 new XenDesktop customers in this period. Shares have responded well year-to-date, jumping by more than 10%; this has benefited hedge fund bulls like John Zaro and George Soros (check out Soros’s top picks here), who are both long CTXS. Yes, an increasing shift to tablets may prove to be a challenge for the company, but the stock’s appreciative potential looks intact over the short-to-intermediate term.

VMware, Inc. (NYSE:VMW)’s annual revenue, meanwhile, grew 22% to $4.61 billion in the fourth quarter of 2012, and net income for this period was $206 million, largely flat compared to the $200 million posted one year earlier. Full-year revenues derived from the US grew 22% from FY2011 to $2.23 billion, and international revenues expanded by an identical growth rate.

VMware, Inc. (NYSE:VMW) expects revenues to grow by 15% in 2014, and as much as 20% in the subsequent 24 months. The cloud and virtualization giant has made a number of acquisitions in recent years, which have added about 6,700 employees, but it expects to lay off about 900—or 7%—of its workforce in the face of headwinds in the first half of this year. The stock is down about 18% since the late-January layoff announcement, and five hedge fund managers sold off their stakes entirely last quarter (see what this group of hedge funds was buying).

For its quarter ending December 31, 2012, Rackspace Hosting, Inc. (NYSE:RAX) generated net revenue of $353 million—a 25% year over year.  Net income of $30 million grew by 19%, and adjusted free cash flow came in at a company-record $119 million compared to -$8 million in 2011. The company, which is powered by Openstack—an open source method for creating “clouds”—is an intriguing company to watch in this space, much like Red Hat, Inc. (NYSE:RHT).

Red Hat is set to announce its Q4 earnings next Wednesday, and while revenue is expected to rise in the high teens, the company’s outlook remains unclear amid concerns that Linux may be slowing.  Red Hat, Inc. (NYSE:RHT)’s OpenShift uses Amazon’s AWS, which allows Linux users to house their apps on Amazon.

Even as debates over security, flexibility and cost persist, enterprises’ collective comfort level regarding their deployment into the cloud environment looks bullish. Ardent investors should watch the companies we’ve discussed above.

Disclosure: none