Will Oracle Win With The Enterprise Manager?

| About: Oracle Corporation (ORCL)
This article is now exclusive for PRO subscribers.

A few days after Oracle (NYSE:ORCL) and Salesforce.com (NYSE:CRM) announced a close alliance on the cloud-based service, Oracle made sure that its growth will not be affected by the arrangement. It introduced its third generation Oracle Enterprise Manager 12c. Oracle CEO Mr. Larry Ellison wanted Salesforce.com CEO Marc Benioff to know that despite the alliance, Oracle had to forge ahead in the cloud sector. The new product could lead to a 2% improvement in Oracle's price multiples.

Oracle has been active in the building of the alliances that can strengthen its cloud-based service solutions. Recently, Oracle and NetSuite announced a strategic alliance focused on the delivery of an integrated cloud service for its mid-size customers. Oracle wanted the NetSuite's solutions to integrate with its software for the human resource division. The resulting solution can be enhanced and integrated as Oracle pushes further into the services delivered over the Internet. I think it is a good move because the alliance will strengthen the Oracle Cloud and Software-as-a-Service platform. These are the areas Oracle has targeted for future growth.

Mr. Ellison believes that an alliance will enhance the merging of the products of the two companies. He especially likes to align with the companies that have a cloud-based technology and an innovative concept. It is not a wonder that Oracle decided to form an alliance with Deloitte to develop the software that enables the customer to adopt SaaS technology in a faster speed.

Initiatives in the Cloud Field

Oracle, SAP AG (NYSE:SAP), Salesforce.com, and Microsoft (NASDAQ:MSFT) have been engaged in a fierce rivalry about gaining a greater market share in the cloud-based service sector. Oracle and Microsoft have more free cash than the others, but this will not give them the desired monopoly. Microsoft recently launched a wave of its new products to showcase its Cloud OS vision. The solutions will enable the customer to unlock an insight into any data. Since Microsoft has more free cash, this kind of activity should be expected as the company uncovers its vision to transform the data center. Still, with an EPS of 2.26, compared with 1.94 for Microsoft, and a price to sales of 3.91, compared with 3.77 for Microsoft, Oracle is no pushover.

SAP AG may have lesser free cash than Microsoft and Oracle, but this has not prevented a frenzied activity in the cloud sector. It announced that it would simplify its structure to accelerate the innovations powered by its SAP HANA Enterprise Cloud service. The new structure will oversee the innovations across the company. With a price to sales of 4.02 and an EPS of 3.15, SAP AG is not on a superior level to Oracle.

As for Salesforce.com, the alliance with Oracle is not the only cloud-based policy it has made this year. The company has been successful in the area of research and development of SaaS. It recently developed a file-sharing product that is integrated with some of the company's cloud offerings. With an EPS of -0.56 and a price-to-sales ratio of 7.03, Salesforce.com is not doing better than Oracle.

Mr. Ellison is of the opinion that Oracle will enjoy a faster progress if it accelerates the development of its cloud-based division. So when Mr. Ellison and Mr. Marc Benioff made the announcement about their alliance, I knew Oracle will use the opportunity to drive the revenue of Oracle's cloud-based sector. I believe the arrangement will enable the products of Oracle and Salesforce.com to easily share its data. This will enable the solutions to become even more attractive to customers.


I feel that an investor should buy Oracle. The company has sustained its desire to accelerate its growth through the cloud-based service. I think an investor should buy now. Oracle's share price is 15% below its 52-week high. It fell after the latest earnings report when the analysts felt the company was not responding to the new changes in the software market. However, I feel Oracle's price multiples will become more solid in the next few months. Mr. Ellison will have led the onslaught against Oracle's rivals and emerged with a triumph.

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.