The Cloud Computing Sector includes companies in the Software-as-a-Service (think Salesforce.com, Workday, or Xactly) segment right on through the Datacenter Infrastructure Services (Equinix, Savvix, or Interxion) are; it includes Information Services businesses and even some aspects of New Media and Social Networking. With 15 – 20 yr growth drivers supporting it, the share shift from installed software to Cloud based applications, at a dramatically lower cost per user, is one of the most exciting investment themes available at the current time. Characterized by recurring revenue models, high incremental margins from new customer additions, and rapid growth, these businesses can be capital intensive though, managed properly, are terrific long term cash flow machines. Admittedly, the current valuation environment is “robust” but the predictability of these businesses and their margin structures have awarded them rich valuations by the capital markets community.

UEI is interested in the Managed Hosting/Data Infrastructure Services sector and will evaluate select Software-as-a-Service (aka Cloud Applications) companies as well. Great P&L managers with terrific go-to-market (read: selling) skills are the hallmark of success in these businesses and are the key criteria for investment selection by UEI in this sector. Most of the target market segments are large enough to grow sizable companies, it’s the strength of management teams (and their ability to avoid Kool-Aid drinking in favor of crisp business model management and focused customer targeting) that are essential for the win.