code and iron

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Alphabet, the holding company parent of Google, just announced earnings and they were amazing. Microsoft, too, announced earnings with which they were quite happy following some tumultuous, leggy years.  I’m no economist so the difference between revenue, net income and post-tax profit are a bit beyond me but I will make one observation, software is back and cloud computing is the haps, to quote Dave Robicheaux’s pal Cletus.

Of course, we still have to make stuff we can sit on (furniture), wear, eat and communicate with (telecoms), but it seems the business of hosting and information access is as profitable as ever. The margins associated with software and cloud computing are killer. The margins on content aren’t bad but a distant second. Companies like Google and Microsoft are closer to “pure play” software and hosting companies than most. Salesforce.com too. Companies like Verizon, on the border of a deal with Yahoo! (content), and Netflix, smitten by Hollywood, are drifting away from their core – software and hosting.

For investors, code and iron are looking more and more attractive.

Peace.

 

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