GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Oracle Can Enrich Your Portfolio

March 29, 2014 | About:



The cloud enabled software solutions has been reaching new heights ever since its inception in the market. Small and big players into IT enabled services are joining the Cloud band wagon to reap the maximum benefits. Oracle (ORCL) that has always been a global leader in database market and system application software, also ventured into cloud enabled software solutions to influence its top and bottom line.

To establish its footprint in the cloud market, it increased its product portfolio by providing SAAS solutions. The company also made strategic acquisition of smaller companies to include cloud in its portfolio and broaden its market share. The company’s latest release of Oracle Enterprise Manager 12c, claims to be most popular database developed for cloud computing technology. Oracle 12c provides optimum utilization of resources for various IT solutions that can be deployed on cloud.

Oracle recently released its third quarter 2014 results. Despite the global economic recession, the overall global performance was considerably fair on revenue generated from various segments

Financial Performance

Oracle’s Q3-2014 results record growth in all segments of its business. It recorded revenue of $9.302 billion, a growth of 4% year over year. However the revenue missed the consensus estimate of $9.36 billion. Major percentage of total revenue (75%) for Oracle came from software solutions that recorded $6.979 billion. Most important was the hardware revenues which was always declining in the previous quarterly results, finally showed an upward trend. The company recorded revenue of $1.323 billion from its hardware business, growth of 6.6% year over year.

The company also recorded growth in the bottom line by recording a net income of $2.565 billion as against $2.504 billion year ago quarter, this again is a good sign. EPS also was up by 8% to $0.56 as against $0.52 year ago quarter.

Oracle’s persistence with engineered systems and clouds is now gaining acceptance among customers. This is exemplified by the fact that cloud enabled services witnessed a growth of 24%, while engineered system witnessed 30% growth year ago quarter. Another important growth was hardware system which again is a good sign.

The deployment of application on cloud has been embraced by business houses globally with more and more business moving on cloud. This had a direct impact on Oracle' cloud market globally.

Synergies That Helped the Cloud Business

Oracle had joined forces with NetSuite (N) to compete with SAP, with a major focus on increasing its customer base for small and medium sized companies by providing HR software on the cloud. Oracle-NetSuite synergy was like a win-win situate for both oracle and NetSuite to acquire a bigger market share. This synergy created prospects of new customer base for Oracle’s HCM (Human Capital Management) application software as NetSuite has over 16,000 global customers. Oracle had always believed that HCM is most under penetrated market and a huge potential which is un-explored. Oracle-NetSuite synergy is beneficial to explore this under tapped market.

NetSuite was established in 1998 for providing ERP business solutions, but with time it migrated to SAAS hosted on cloud servers. NetSuite is one of the fastest growing companies in the space and recorded an organic growth of 49% in 2012. It is listed in the top 15 companies for FMS (Financial Management System) vendors. Its global customer base has increased appreciably and stands at more than 16,000.


SAP (SAP) a market leader for providing ERP solutions to various business houses. SAP is a head on competitor of Oracle in the ERP market and ERP as SAAS solutions. SAP has been constantly increasing its expenditure on cloud based services just to expand it customer base.

To expand its presence in the cloud computing business SAP has been extravagant on its acquisition policy. Past few years, SAP has acquired various companies pertaining to providing solution on cloud. SAP acquired SuccessFactor for $3.4 billion in December 2011, a pioneer in providing HCM solutions on cloud. Ten months down the line, in October 2012, it acquired another company, Ariba, well known for its cloud-based commerce. Ariba was bought for $4.51 billion.

Investors Can Consider Following

Regularly dividend paying company, this can always keep the investors interested those who are looking to invest in a dividend paying companies.

Share repurchase programs always safeguards the interest of an investor. Oracle’s plans of $12 billion share repurchase programs does safeguards an investor. Finally, EPS is certainly influenced with every repurchase plan executed.

Company has been recording revenue growth and most important was the hardware segment of the company. This also has started showing a growth in revenue which always is a good sign of the company and investor.


Not just SAP, but even Oracle’s acquisition policy and synergistic tie ups a adopted by Oracle have benefited the company in terms of wider customer base. This will also benefit the company in the longer run. I think you won’t regret having the company in your.

Rating: 2.5/5 (2 votes)



Dr. Paul Price
Dr. Paul Price premium member - 5 months ago

What is ORCL worth? You never say.

Please leave your comment:

Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial