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Oracle's Transition Can Make It a Better Performer in the Future

August 22, 2014 | About:

Oracle (NYSE:ORCL) disappointed the Street as its final quarter earnings and revenue neglected to meet consensus estimates. Its feeble results have resulted in a pullback. Indeed, Oracle shares dropped the most in a year after the results. Likewise, Oracle's direction also neglected to match expectations, demonstrating that the organization's business has slowed down. Notwithstanding, is Oracle worth purchasing on the pullback? How about we figure it out?

In transition mode

Oracle is presently experiencing an intense time as it is transitioning to the cloud. As indicated by Oracle CEO Larry Ellison, "We are going to perceive the revenue all the more slowly, and that will somewhat influence the top line amid the transition." But once the transition is finished, Oracle will improve.

Truth be told, Oracle is as of now making positive moves in the cloud. In the previous quarter, the organization saw strength in cloud SaaS (software-as-a-service), PaaS (stage as-a-service), and cloud IaaS (infrastructure as a service). What's more, it conveyed an enhanced performance in different areas such as software license replenishment, built systems and NAS storage.

Administration is positive about Oracle's execution. As indicated by CFO Safra Catz, "We've successfully developed the organization's revenues and earnings through every transition whether it was numerous machine database to a complete suite of products, customer server to Internet, product equipment to designer systems and now on-premise to cloud. We're well on our route into our most late transition."

Development ahead

Oracle plans to become the foremost player in distributed computing because of three reasons. First, it has the most finish and advanced arrangement of Saas products. Next, each of those SaaS applications run on an effective stage, the Oracle in-memory, multi-occupant database, and are based on the prominent programming dialect JAVA. Lastly, Oracle has significantly increased its sales power, which is presently specialized and is lined up to sell SaaS and PaaS.

An important acquisition to consider

Indeed, Oracle as of now has an edge over Workday in cloud ERP, as it packed away 120 new cloud ERP customers in the final quarter alone. Salesforce is an alternate rival in cloud solutions, yet as indicated by administration, Oracle is the pioneer across more cloud solutions than Salesforce. Likewise, Oracle's arrangement to purchase Micros Systems for $5.3 billion is another move to enhance its position in cloud solutions, permitting it to secure more business from competitors.

Henceforth, Oracle seems to have made a smart move by purchasing Micros.


In spite of the fact that Oracle's viewpoint was not up to the imprint, administration is positive. Since its performance was not in line with consensus estimates, the stock has declined. Anyway, Oracle has some good fundamentals to show for, and is implementing good strategies to improve its prospects in the future.

It has a low trailing P/E as well, while the forward P/E also indicates development in the bottom line. Likewise, Oracle has a profit margin of 28.6% and an operating margin of 39%, showing strong profitability. Also, the organization's cash of $39 billion is more than its obligation of $24 billion, which means that Oracle has the influence to keep gaining more companies furthermore investing in advancement.

Thus, investors should consider taking advantage of the stock's late drop and add more shares to their portfolio.

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