Oracle (NASDAQ: ORCL) president Mark Hurd said that Oracle's cloud offering of HCM, CRM and ERP applications - plus its Oracle database and Java platform services - are the "strongest in the industry". Oracle's cloud business is approaching a $1 billion run rate with further growth expectations over time. Oracle's long-term investment is still promising. The company made a strategic move and used its $7.4 billion buyout for a now near three-year-old acquisition of Sun Microsystems to expand in big data. Oracle President Mark Hurd stated, "The cash flow has far exceeded the value of what Oracle paid for Sun. We've been very particular and deliberate to focus on our value-add strategy." A recent acquisition was also made for Tekelec, a maker of mobile software to further its cloud transitions. Telecom investments are expected to improve significantly this year. Tekelec will benefit from carriers spending more on mobile broadband services. Oracle agreed this year to acquire Acme Packet for $1.9 billion. Acme Packet Chief Executive Andy Ory stated, "We are excited to join forces with Oracle because we believe that together we can rapidly accelerate the transformation to all-IP communications networks across the globe." Cisco Systems Inc. recently announced that it has agreed to buy cloud services management business SolveDirect. Cisco added 0.5 percent to $20.85; and Oracle dropped 2.3 percent to close at $31.25 last Monday. For Oracle investors, the price target has been $40. The company 50-day moving average is currently $34.98. Oracle's market cap is $167.9 billion and P/E ratio of $17.00. Oracle shares were down 8 percent last Thursday. This is its greatest single-day loss since December 2011. Analysts expect this to be only a temporary set back. Investors should still anticipate a strong fourth quarter. The stock is still trading now about 12 times corporate earnings. Twenty-three analysts to date rate Oracle as a buy; no analysts rate it a sell; and 13 rate it a hold. Aside from being a dominant company positioned for sustained growth, Oracle consistently continues to show us, it is able to grow where rivals can't. CEO Larry Ellison: "Our $7.4 billion purchase of Sun is turning out to be the most profitable investment ever made."
AllThingsD reported, "IBM's (IBM) support of OpenStack, an open source cloud infrastructure originally designed at NASA, was not unexpected." The company has been a generous sponsor of the OpenStack Foundation for almost a year. Companies in cloud such as Oracle will now adapt to OpenStack and interoperate with open source. Interoperability will allow organizations to build their own private clouds across the estimated multi-trillion dollar industry.
Dividend Yield: N/A
P/E Ratio: $17, trailing 12 months
Market Cap: $167.88 billion
Shares Outstanding: $4.73 billion
Public Float: $3.62 billion
At the end of the fourth quarter 2012, Oracle reported net income of $2.6 billion, or 53 cents per share at an 18% increase YOY. Excluding charges related to acquisitions and other costs, earning estimates moved to 64 cents per share. Oracle had a 3% increase in revenue reaching $9.1 billion. The company forecasts new software license sales as an indicator of future revenues from 1 percent to 11 percent this quarter. Software licenses and subscriptions performed at 17% YOY.
According to Oracle, "The promise of better financial and performance outcomes thanks to successful big data strategies helps explain why even during times of constrained budgets, governments around the world are eyeing investments in big data." The Obama Administration announced a Big Data Initiative on March 29, 2012 with over $200 million in new spending this year to improve the tools needed to process and visualize large volumes of digital data. Research by the McKinsey Global Institute shows that big data solutions could potentially reduce administrative costs in Europe's public sector by up to 20 percent, creating the equivalent of $446 billion in new value. The savings would come from both efficiency gains and more effective collection activities for tax revenues.
Oracle's cloud acquisitions began with the $1.5 billion purchase of RightNow, a maker of call-center automation software followed by a series of company buyouts. It was the purchase of Eloqua to be the deal that now poises Oracle as one of the top cloud companies alongside Salesforce and SAP.
"Big data will drive $232 million in IT spending through 2016." Source: Gartner.
Oracle will continue to remain strong in the big data market.
Challenges can arise from the newer technology companies, which have abilities to outpace traditional enterprise models. Big data now has an outstanding opportunity to identify new emerging data for all industry organizations. Forrester's 2013 expectations predict a strong rebound in the worldwide technology market with enterprise organizations.
Oracle's stock history has been quite consistent in revenues over the past years. With a trading average of around $35.48, Oracle is favored as a buy as a result of its high margins, strategic acquisitions, and stock performance. Its growth and expansion of cloud computing, software, and services' business lines remain impressive. Oracle has been able to adapt successfully in fluctuating market changes, resulting in shareholder stocks at a 33% jump in value.
Big Data Trends
"By 2015, the market for big data technology and services globally will reach $16.9 billion up from $3.2 billion in 2010", according to IDC. Big data will continue to be the future and grow rapidly in the IT industry. Oracle is set as an enterprise to be a leader in adapting to big data by understanding customer data within its market. The emerging big data usage trend is to employ Hadoop as a component of a larger data.
Oracle will evolve by adapting to standards and regulatory technological change in the market. The company will continue its path to build new products. Salesforce and Microsoft have been the largest competitors to Oracle. Both Oracle and Cisco have been aggressive in its acquisitions. Last year, Cisco purchased Cloupia, Meraki, Cider, Cariden and BroadHop to expand its expertise in programming, software and add to its cloud management tools. The company also purchased NDS Group last year. Cisco's CEO John Chambers recently stated he is beefing up Cisco's software holdings through acquisitions in order to make sure Cisco's products can run the hardware it sells to enterprise customers.
All organizations today are faced with the challenge of understanding, deriving value and analytics leveraging unstructured big data. The biggest challenge in big data is to understand the problem. There is massive low-identify information, which previously was never included in the day-to-day transaction business applications. To get value out of the big data, companies analyze the data and integrate that into the business intelligence applications and intelligence dashboards. Organizations look at all this information collectively to see how it can better impact the business.
Oracle is a "Win"
Bullish, long term and buy for Oracle; certainly encouraging for investors. Oracle's revenue comes from a quarter of its new licenses and subscriptions. Oracle is a strong player in the cloud market for big data and analytics. The valued stock is at $32 per share with its price target at $40 FY 2013. Oracle's strategies, past histories, leadership, margins, revenues, and growth rates are successful. Oracle survived the financial crisis of 2008/2009 better than other technology companies. With an attractive valuation for fiscal 2013, Q2 financial earnings up 24% to $0.53 a share and total revenue up 3% to over $9 billion and with a focus on aggressive acquisitions, performance in cloud and licensing, Oracle is a win.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.