I am admittedly a fan of the Fitbit – the little device that you wear that tracks your daily activity.   When Fitbit the company went public last year, I was somewhat tempted to buy in, but I have an aversion to IPO’s as unless you are insider you usually overpay for IPO stocks.

So roughly a year later, I am looking at Fitbit stock, and its appears to me to be at a valuation that is pretty darn reasonable.  It’s a $14 dollar stock, earned $.75 a share in 2015, and has huge revenue growth numbers:

Analysts have an earnings target of $1.17 for 2016, and $1.41 for 2017.

So you have to ask yourself – why is it so cheap selling at 12 times 2016 earnings?  I think the market thinks the Fitbit is potentially a fad with lots of competitors out there.  Also, the theory is the smartwatches and phones will replace the need for a separate tracking device.  Valid points, but I am going to take the other site of that bet.   The other day I posed this question to some co-workers who where wearing a Fitbit.  The comments were the phone is not a valid tracking device (if they are at home they don’t have their phone with them, or if the phone is in their purse it doesn’t track).  The battery life of a smartwatch is an issue – the watch is another device you have to charge daily – where the Fitbit goes for weeks before charging.  Fitbit  has a nice website where you can see how you are doing compared to your goals and your friends – so it does have a little network effect if it can continually be the market leader (If all your friends have a fitbit, you will want to be in their ecosystem).

I will be continually arguing with myself about whether the Fitbit will continually thrive, and watch for clues to which thesis will win.  I figure at this valuation I have some wiggle room – if new competitors come out or revenue starts to fall, I can probably get out before there is too big of loss.  But for now, I think Fitbit deserves a shot.

I have been watching with interest the battle for Enterprise Market share of cloud computing.  Many large and small companies are transitioning their on existing on premise IT infrastructure to use publicly managed services such as Amazon’s AWS or Microsoft’s Azure platform.

The cost savings (and headaches) can be huge – no  servers to buy and replace, network architecture is simplified, and IT staffing can be reduced.

As mentioned above, Amazon and Microsoft are the two big players in this space, and while I knew Amazon had the bigger market share, I was curious how the two compare.

This article provided me some of the numbers I was looking for. Here is a brief summary:

Cloud Revenue

Anecdotally, there is much more buzz amongst the people I talk to about Amazon’s AWS than Azure  – and I live in the heart of Microsoft country.  I have not talked to anybody that is using Azure, which surprises me a bit.  I know future Microsoft products are going to increase their integration of Azure into the product- for instance the database software SQL Server has some sort of feature where you can use Azure as a hot backup, or take peak demand loads, which is pretty interesting.  Given Microsoft’s current presence in most companies, maybe they can turn the tide and overtake Amazon, but so far I haven’t seen it.

One other important point from this article – most dollars added by Microsoft to Azure is likely a dollar (or more) subtracted from current licensing revenues.   For Amazon, this is all new revenue.  Also, Microsoft has to compete on price with Amazon, and Amazon has pretty deep pockets.

If the current revenue trajectory doesn’t change in the next few quarters – I worry it might be too late for Microsoft Azure to be the Enterprise platform of choice.  The old saying ‘Nobody ever got fired for buying IBM’ may soon apply to Amazon, as AWS becomes the safe and defacto standard for Enterprise IT Infrastructure.