Cloud computing maybe another dot.com bubble

After quite a tear, companies that put the term "cloud computing" in their official description have started to come under the same scrutiny as those that added dot.com to their names during the great technology bubble of the late 1990s. The cloud burst on this space after an earnings warning by smaller player Equinix earlier this month.

A less volatile and cheaper way to play the space may be EMC Corp., according to various analysts and investors. EMC was of the few companies, especially in the tech space, to rise today after reporting profit margins that blew by street estimates and raising its revenue and earnings forecast for the current quarter.

"EMC represents one of the cheapest and cleanest ways to gain exposure to cloud infrastructure," said Brian Marshall, a Gleacher & Co analyst, who has a forward price-earnings ratio of 15 on the shares.

EMC is the well-known leader in the data storage space, the back office of cloud computing and the more commoditized part of the business deserving of a lower valuation. What you may not know is that it still owns 80 percent of its former unit VMware, the middle man of the cloud space between the desktop and the data center that makes sure a company’s servers are running at their highest capacity.

Two interesting finds by analysts: 1. Marshall points out that VMware owns 100 percent of the virtualization market for the Fortune 100. 2. FBR analyst Daniel Ives points out that unlike most spin-offs, EMC is actually now buying back more shares of the company it spun out to investors in 2007. EMC used almost $1 billion of its $10.5 billion cash hoard last quarter to buy back VMware shares notes Ives.

"What makes EMC more attractive than pure cloud plays however, is the stability of their storage business, which shows no signs of slowing down," said Simon Baker, CEO of Baker Avenue Asset Management. "Valuation is also attractive vs. its peer group with our estimate of fair value in the mid-twenties."

For the best market insight, catch ‘Fast Money’ each night at 5pm ET and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC. 

Ref: http://www.cnbc.com/id/39741062

John Melloy is the Executive Producer of Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team

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