Bubble Watch – Part 3: Cloud Computing
A search for “cloud computing bubble” on Google returns an amazing 1,350,000 results, leaving our other contenders in the dust. The Google News search returns an increase to 83 results in 2010 from 31 in 2009. Cloud computing now may be more of a pervasive paradigm shift in IT infrastructure than a subsector like social gaming, and a multitude of companies are involved, or like to be thought of as being involved, in delivering a cloud computing solution. In that respect, cloud computing may be more about bubbly IT marketers rallying behind a common term to increase sales than a genuine business sector bubble.
In Gartner’s hype cycle of August 2010, Cloud Computing and Cloud/Web Platforms just surpassed the “peak of inflated expectations” and are slated for the deep dive into the “trough of disillusionment”. With an expected time to mainstream adoption of 2 to 5 years, such trough could of course be crossed relatively quickly.
Valuations for companies with some ties to anything cloud are still (or again) very substantial. VMWare is trading at a healthy 14 times revenue, Citrix is at 7 times revenue.
This leaves social gaming company valuations looking rather tame.
Gunther Hofmann is a Vice President of The Brenner Group and has done extensive work in valuations, M&A, venture capital, and corporate finance with significant international experience in small firms as well as global corporations. Gunther earned a Masters Degree in Electrical Engineering and Business Administration from Darmstadt University of Technology in Germany, and was a Visiting Scholar at UC Berkeley. He is a holder of the Chartered Financial Analyst designation, and a member of the National Association of Certified Valuation Analysts. Gunther is Chairman of the Software/IT Industry Group of the German American Business Association (GABA).
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