Cloud Stocks Fall 6% For Week Ending January 21
After climbing sharply during the first two weeks of 2011, cloud stocks fell 6.13 percent for the week ending January 21, according to the Talkin’ Cloud Stock Index. All 20 cloud computing companies in our stock index saw their shares fall during the week. Three companies — Constant Contact (CTCT), Rackspace Hosting (RAX) and Salesforce.com (CRM) — saw their shares drop more than 9 percent during the week.
There is some talk about a cloud computing bubble… but it’s also important to keep the bigger picture in mind: The Talkin’ Cloud Stock Index is up ever-so-slightly (0.82%) so far this year, and the index climbed roughly 50 percent in 2010.
Still, the week ending January 21 was a particularly rough one for cloud stocks. The week’s biggest losers included:
Constant Contact: Shares fell 10.56 percent on the week. The SaaS-centric email marketing company will announce Q4 2010 results on February 3. Despite the one-week stock drop, keep in mind that Constant Contact shares have climbed from $17.20 in August 2010 to a $27.61 close on January 21. Shares had hit an all-time high of about $32.09 in late December 2010.
Rackspace Hosting: Shares fell 9.88 percent for the week. SeekingAlpha blamed portions of the Rackspace decline on a less-than-stellar earnings report from F5 Networks. Frankly, I don’t see the connection. F5 Networks specializes in application acceleration. A portion of the company’s revenues comes from private and public cloud deployments. In stark contast, Rackspace is all cloud and all hosting all the time.
Salesforce.com: Shares fell 9.72 for the week. Barron’s takes a close look at the stock and the company, noting that shares are still up 92 percent over the past year. Also, Barron’s notes that Salesforce insiders spent 2010 selling shares, stating:
“THE USE OF OPTION-ADJUSTED EARNINGS is particularly eye-catching because of the number of shares sold by management. CEO Benioff unloaded roughly 10,000 shares every day the stock market was open for business last year. On every trading day last month alone, he raised $1.4 million from stock sales. Co-founder Parker Harris sold 467 shares a day, producing a tidy $65,000 daily. Those sales stopped at the end of the year without explanation.”
So, back to the central theme of this blog: Was this simply a one-week drop for cloud stocks, or has the bubble arrived? For VARs and MSPs I don’t think the answer to that question really matters.
The reason: Whether stocks rise or fall, the cloud computing market will continue to grow. A growing number of small businesses will never buy another on-premise server, I believe. And there are multiple signs that cloud channel programs are catching on.