It could be a great time to invest in Oracle (ORCL) after CEO Larry Ellison announced that the company would debut its much anticipated cloud computing software next week. The stock is currently trading at around $26, staying in the same $10 range or so for the last decade. Based on the new cloud software rolled out by the charismatic Ellison, as well as favorable buzz over the safety of the always-consistent stock, I think Oracle could be poised for a solid rise.
The debut of its cloud software - which, according to Ellison, would give Oracle a significant leg up over competitor SAP (SAP) - represents a significant step up in technology for the tech giant. The concept of cloud computing, which has had a meteoric rise over the last few years, is having data access from pretty much anywhere, as opposed to locating data on a physical server. One example of cloud computing most are familiar with is Google's (GOOG) Google Docs, which allow users to work on documents in the "cloud," wherever they are. Users are then able to come back to their documents in other places at other times. Cloud software even allows users to work collaboratively in real-time on the same document, since it is in "the cloud" and not based in a physical server room based in any one location. PCMag explains cloud computing as "having every piece of data you need for every aspect of your life at your fingertips and ready for use."
So, how does Oracle play into this exciting new technology? As opposed to cloud technology like Google Docs, which is free and open-sourced, Oracle is monetizing its cloud technology into software for businesses. Specifically, Oracle will offer businesses "Enterprise Resource Planning" and "Customer Relationship Management."
Rollout of the new software will be lead by the always-charismatic Ellison. Ellison was quite enthusiastic over the launch, but even more interesting were his comments about competitors SAP and Salesforce.com (CRM), as well as Hewlett-Packard (HPQ), whom Oracle shares a long history with. He also dismissed talks of competitor Workday potentially going public with an IPO. He focused much of his criticism on SAP:
"It took us six or seven years to rewrite everything for the cloud," Ellison said. "Our competitor SAP didn't do it. ... They have nothing new in the cloud for at least eight years, and I 'd argue nothing for 10 to 12 years."
However, not everyone is buying the excitement Ellison is selling. Some analysts feel that much of Ellison's comments were baseless, arguing the media focused too much on Ellison's personality as opposed to the actual nuts and bolts of the software. This is probably true, as it's far easier for journalists to write about personalities than technical computing software.
There certainly seems to be a big future in cloud computing, however, so I think Oracle is wise to have been spending years working on developing the technology. It should be interesting to see what the quality of the software is and, most importantly, how much businesses like it.
But another good reason to be optimistic about Oracle is the relative safe nature of the stock. As I said before, it's been around the same $10 range for the last decade or so. While one could argue this represents stagnation of the brand, at the very least you're probably not going to lose very much money, if any at all. One writer argues that Oracle is an especially attractive tech stock with a lot of value. Lupin admits it may seem counterintuitive to buy tech stocks right now:
" ... One could argue that the best strategy at this point is anything but technology," Lupin states. "But another world view would be to buy technology blue chips that can ride the summer swoon when their valuations are reasonable, and valuations of growth oriented technology stocks are getting to be reasonable as investors seek safety."
And the best company to go with if you fall into the latter worldview, according to Lupin, is Oracle. Indeed, it looks like Oracle is a very stable company. They just haven't gone away, riding a bad economy and continuing to innovate.
One could be reluctant to get involved with Oracle since it gets only 17 percent of its revenue from Asia. The reason this could be problematic right now is admittedly compelling. Since many OECD countries are stagnating right now, "developing" countries are actually the ones where growth is occurring. Nowhere is this more true than in China and India, where the growth rates are significantly higher than in Europe and the U.S (Note: Japan is the exception to the rule as far as Asian countries go, as its economy has continued to stagnate). Since Oracle relies heavily on the European and American markets, this could be troubling. However, if/when things turn around for the global economy, Oracle will be glad it is where it is, especially if Asia does not continue its enormous growth.
While the fact that Oracle relies so heavily on European and American markets in a time of economic crisis certainly gives me pause, I am optimistic about the company's future in cloud computing, which I think is on the cutting-edge. Thus, based on the new cloud software rolling out next week, as well as how consistently safe the stock has been, I feel comfortable being optimistic about the future financial prospects of the tech giant.
If European and American markets make a turnaround, Oracle could be poised to reap huge profits in the future business tech sector. As Ellison said at the announcement, "For a long time I have understood you either move forward or die. If you don't keep technology current and monitor what is possible today because of technology innovations, someone is going to get ahead of you." That type of attitude seems to be the perfect one for the rapidly-changing times we live in today.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.