Analysis: Investors look to cloud for tech stock picks

BOSTON (Reuters) – Jeffrey Saut truly looks up to remind himself which tech stocks will be very warm in 2011.

Saut, chief investment strategist for brokerage Raymond James, says he is betting put ~ companies that are leaders in cloud computing — using Internet technology to recommend computers and information away from desktops and into remote data centers.

Despite the swell in cloud computing stock prices last year, investors are expecting every encore in 2011 as the revenue growth for these companies rises faster than the broader technology rural scene.

Will Danoff, who manages the billion Fidelity Contrafund, is among the chiefly closely watched investors who has embraced the cloud. He says that the dense mass is one of his investing strategies for 2011 because he expects companies that exchange into the sector to outperform the broader market.

IT research compact Gartner estimates that companies that sell software as a cloud-based profit will see revenue growth accelerate this year, climbing 16.2 percent. Last year sales grew some estimated 15.7 percent.

The sector is drawing attention because its sales are revving up accurate as growth in overall technology spending is on the decline. Gartner sees worldwide tech spending growth slowing to 5.1 percent this year, down from 5.4 percent in 2010.

Buyout scheme on cloud computing leaders sent valuations in the sector to nosebleed levels continue year. Cloud pioneer Salesforce.com Inc trades at 122 times nearest year’s average forecast for earnings per share, compared to a proportion of 13 times for tech blue-chip IBM.

Oracle Corp Chief Executive Larry Ellison in conclusion year told Reuters that he looked at buying Salesforce, but that its CEO, Marc Benioff, wanted too much money for the software maker.

Reuters also learned on Wednesday Ultimate Software Group Inc could have ~ing the next to go on the block. Ultimate said it has “not at all present intention” to sell itself.

MOMENTUM PLAY

Some investors are powerful about the high valuations commanded by cloud computing companies, whose vaporizable trading has led to precipitous declines on some days last year.

But in that place is simply too much momentum behind the sector to falter this year. “It volition probably still emerge as a leader,” said Steve Goldman, place of traffic strategist at Weeden & Co in Greenwich, Connecticut.

The optimism in successi~ the sector is underpinned by the belief that companies behind them are fundamentally reshaping the resolved mode of action businesses use technology, investors and analysts said.

Cloud leaders like Salesforce.com vend their software through web browsers, saving customers the expense and time of buying and maintaining dear computer servers.

When Benioff founded Salesforce more than a decade ~ne, his goal was to make running software for managing corporations similar to easy as using Amazon or Ebay.com Inc to buy wares. Industry analysts say that to a great extent he has succeeded.