Oracle (NYSE:ORCL) is the second largest software seller in the world behind Microsoft (NASDAQ:MSFT) and ahead of International Business Machines (NYSE:IBM), which stands at the third place. The majority of the company's revenue comes from its database management applications, where the company has a substantial market share. Although, Oracle already has a good position in this segment; the company is taking steps to adjust as the market for unstructured data grows.
Rise of the NoSQL Data
SQL (structured query logic) data is the kind of data which can be structured into rows and columns and can be easily used to extract meaning. However, over the course of a few years, we have seen piles of unstructured data being archived through Facebook (NASDAQ:FB), Google (NASDAQ:GOOG) and Twitter (NYSE:TWTR). This data is extremely important for online marketing and can even be used by government. All the preferences, hobbies, and natures of different societies are present on these platforms. This has resulted in demand for NoSQL based software which is likely to increase in the coming years.
NoSQL data came as a threat to Oracle initially as the company was not the pioneer. Now the company has created an open platform for small companies to participate with it in order to develop better applications for this market. Oracle has come up with a few applications but it has not been able to gain considerable market share. At the moment, the two most popular NoSQL open-source databases are Project Cassandra and MongoDB.
Oracle is taking steps to increase its presence in this market, which shows the company's ability to adapt to the changes in the market. However, the company will have to develop a product or acquire a company with an already established product to capture this market - at the moment, the opportunity is being missed. Oracle has a strong position in the database software market and the company will be able to leverage its expertise and wide network in order to achieve a larger market share with the right product. Furthermore, the stronger financial position of the company as well as the ability to integrate acquisitions will play a vital role for Oracle.
Threat to Java Cloud
Adam Gowdiak, a security researcher, has published attack codes for 16 flaws in the oracle's Java cloud while he has further published technical details on a total of 30 flaws. Oracle has claimed that it has fixed 24 of the flaws but the updates are still not available. There is no doubt that Oracle will eradicate these flaws; however, the issue has brought some bad image to the company. The researcher has further raised questions on the reliability of oracle's product as he proved how an attacker can access the applications of a user and violate the privacy. Oracle will have to make amends soon and prove the reliability of its product soon. The threat is not related to Java Cloud, it can be fixed easily. The company's goodwill is at stake in this situation and it should be resolved soon.
The Performance Relative to Peers is Good
Other than the issues mentioned above, the company is performing well in the regular segments of its business. It has recently gained its position as the second largest software seller up from the third largest by beating IBM. The competition in the cloud industry is still fierce but the company has a strong position in the market. IBM has other things to worry about, such as restructuring, selling-off low profit businesses and hitting its target EPS. Another player, SalesForce (NYSE:CRM) is coming strong in the cloud market with about $4 billion in revenues, showing an increase of 33% since the last year. Oracle has about $37 billion in total revenues.
It is a good sign that the company is taking steps to position itself for the emerging market of NoSQL database. It looks like the opportunity will be substantial from this segment of the market. Overall, Oracle has a good position in the market as compared to IBM and Microsoft. Microsoft is still taking the lead, but as far as the growth is concerned, Oracle is at the top. Moreover, the recent acquisitions made by the company are yet to gain momentum - we expect these acquisitions to have a considerable impact on the revenue and earnings mix of the company. Also, the restructuring cost related to acquisitions will even out in the coming quarter leading to better profitability in the coming years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. IAEResearch is not a registered investment advisor or broker/dealer. This article was written by an analyst at IAEResearch and represents his/her personal opinion about the companies mentioned in the article. The article is for informational purposes only and it should not be taken as an investment advice. Investors are encouraged to conduct their own due diligence before making an investment decision. I am not receiving any compensation (other than from Seeking Alpha) for this article, and have no relationship with the companies mentioned in the article.