Having spent the better part of the last 10 years rewriting its code for the cloud, the price of Oracle Corporation’s (ORCL, Financial) stock has grown by less than 100 per cent in the last 5 years. Not a bad looking graph by itself, when compared to cloud competitor Amazon.com Inc. (AMZN, Financial) or the industry trailblazer salesforce.com inc (CRM, Financial), both of which have grown by over 200 per cent in the same period, it looks rather unimpressive. Oracle’s growth and guidance has been inconsistent for the last many quarters, but now that the painful task of customising most of its core code to seamlessly integrate with the cloud is over, it may be time for things to turn around for the company and its stock. And that makes the stock well worth purchasing in both the short and the long terms.
Big numbers from the cloud
In the Q3 results announced last week, the contribution from cloud services speaks for itself. As the company makes a transition from software licensing to subscription based services and software, it shows numbers to match. The three cloud segments, software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS), taken together have grown by almost 30% in the last quarter. In dollar terms, that amounts to $520 million in the last quarter alone, and combined with a similar growth in the second fiscal quarter, that comes to more than $2 billion in one year. Oracle is guiding to sell over $1 billion in new SaaS and PaaS in the year 2015, which is the same as salesforce.com. At least half that amount from new sales is measured in recurring sales and not a one-time sale. This gives Oracle founder Larry Ellison enough confidence to tell analysts during the earnings call that the company will catch up to salesforce.com in 2015 itself, ahead of his earlier prediction of it happening in 2016.
Ease of transition for users
The last 10 years Oracle spent rewriting code is proving to be worth every man-hour spent. According to Ellison, “you can take any workload, any database that you currently have running in your data centre and move your database with the push of a button and move your application with the push of a button and run it in the Oracle Cloud. Nobody else can do that. We’re the only ones that allow you to move data and workload back and forth between the cloud and on premises.” That claim seems to be well justified, seeing the number of new sales and the orders that stand unfulfilled.
Preferred employer
According to February's data from hiring app Poachable, Oracle has moved up five spots--from 23 to 18-- in the monthly list it produces of companies that people most want to work for. According to executives at Poachable, this is largely in part due to Oracle’s booming cloud business. While competitors like salesforce.com, Amazon.com, Microsoft Corporation (MSFT, Financial) and Google Inc. (GOOG, Financial) are all higher on the list, this still shows the increasing appeal of Oracle.
Oracle announced a 25% increase in quarterly dividend, which is not only good for shareholders but is also indicative of the management’s confidence for future growth. The company is making all the right moves to capture market share in an evolving industry, while also maintaining its traditional business. There is every reason to be bullish on the stock in both the short term and the long term.
