November Idea of the Month: Bringing the Cloud Down to Ground

By Travis Johnson, Stock Gumshoe, November 19, 2010

One of the ideas that I’ve been coming back to again and again is infrastructure — not necessarily just the kind of physical infrastructure that I talked about last month with Ferrovial, or things like power and highways and pipelines, but the basic kind of underlying businesses that keep other businesses operating.

And in the context of cloud computing, which is the “flavor of the year” in tech circles (or maybe the flavor of the decade), infrastructure could be any of the stuff that keeps enables internet traffic and remote storage and processing and keeps it fast and reliable enough that folks are willing to keep their data in the “cloud” (cloud computing, if you’re unaware, is basically just keeping your data and applications on remote servers instead of on your computer — one example would be using a web-based email system like gmail and never downloading your messages to your home computer, but that’s a very basic example of something that is moving into all aspects of business).

So if you’re looking at the cloud and wondering how to make money from the growth of internet traffic in general, there are several ways to look at that basic “infrastructure” question — there are the actual networks run by folks like the old phone and cable companies (AT&T (T), Comcast (CMCSA), etc), the companies like Akamai (AKAM), which I’ve recommended in the past, that make the internet faster and more reliable, there are the physical providers of material like routers (Cisco (CSCO)) or fiber optic cable (Corning (GLW)), and if you’re looking at the growing importance of the mobile internet there are the tower owners like American Tower (AMT — a big Motley Fool teaser target this year), but what I’ve been thinking about are the real basic power plants of the internet: the data centers, those often massive, high-security, power-intensive warehouses that actually hold the servers that run websites and make other internet services possible.

And there are some different ways to invest in data centers, including the companies that build them, or supply the servers or equipment — but with interest in real assets and in dividends both fairly high, I thought it might be most interesting to look at investing in the actual data centers as, essentially, rent-collecting real estate investments, which is possible through several publicly traded REITs that specialize in data centers. ...

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