Cloud-enabled software solutions have been reaching new heights ever since their introduction in the market. Small and big players into IT-enabled services are joining the Cloud bandwagon to reap the maximum benefits. Oracle (ORCL, Financial), which 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 the 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.
Financial performance
Oracle recently released its Q1 FY 2015 results; the overall global performance was considerably good on revenue that was generated from various segments. It recorded consolidated revenue of $8.6 billion, a growth of 3% year over year. Major share of total revenue (over 76%) for Oracle was generated from software solutions, up by 6% year over year, to a record $6.6 billion. The leased services SaaS (Software as application Service) and PaaS (Platform as application Service) of the company witnessed hefty growth of 32%, while IaaS (Infrastructure as a Service) also recorded growth of 26% year over year.
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's Cloud market globally. Oracle’s persistence with engineered systems and clouds is now gaining acceptance among its global customers. This is exemplified by the fact that Cloud-enabled services and engineered systems both are recording constant year-over-year growth.
Synergies that helped Cloud business
Oracle had joined forces with NetSuite (N, Financial) 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 situation 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 the 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.
Competitor
SAP (SAP, Financial), a market leader for providing ERP solutions to various business houses, is a head on competitor with Oracle in the ERP market and ERP as SAAS solutions. SAP has been constantly increasing its expenditure on Cloud-based services just to expand its customer base.
To expand its presence in the Cloud computing business, SAP has been extravagant in its acquisition policy. In the past few years, SAP has acquired various companies pertaining to providing solutions on Cloud. SAP acquired SuccessFactor, a pioneer in providing HCM solutions on Cloud, for $3.4 billion in December 2011. 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
A regularly dividend-paying company, this can always keep investors interested.
Share repurchase programs always safeguard the interests of an investor. Oracle’s plans of $12 billion share repurchase programs safeguard an investor. Finally, EPS is certainly influenced with every repurchase plan executed.
The 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.
Conclusion
Not just SAP, but even Oracle’s acquisition policy and synergistic tie ups adopted by Oracle have benefited the company in terms of a wider customer base. This will also benefit the company in the longer run. I think you won’t regret having the company in your portfolio.
