The secret to Oracle (NYSE:ORCL) is that they find where a customer's vulnerabilities are, and take full advantage.
In the last century this was the database. In the last decade this was the database applications. Then the cloud came along and, for a long time, Oracle was pounded, thanks in part to its stupid decision to buy a hardware maker, Sun Microsystems, just as the cloud was making proprietary hardware a thing of the past.
But even in the cloud there are customer vulnerabilities. When a company moves data to a private or hybrid cloud, the applications running on that infrastructure become its vulnerability. So Oracle is buying that, focusing first on programs with lots of data, where decisions on changes have to take years because the cost is so high.
Textura serves construction management, companies that build skyscrapers and office parks. The oPower niche is utilities, regulated entities controlling lots of infrastructure. These companies have moved to cloud infrastructure because it was cheaper, and seemed to get them out of the problem of vendor lock-in. But they still needed application software, and this made them vulnerable to Oracle.
Not to put too fine a point on it, but Oracle is acting a little like Allergan (NYSE:AGN) here, the only difference being that it has yet to move itself to Europe. If the triumvirate of Ellison, Catz and Hurd decide at some point in the future that the company can save money by moving to some tax haven, of course, don't put it past them, but for now there are no tech companies big enough for it to merge into.
The question becomes whether this is a game you want your money to be involved with. Right now, the stock's price/earnings multiple is 19.5 - a bit higher than that of the market as a whole. The dividend yields 1.5%, nothing to get excited about. The acquisitions (and there may be more to come) should get the top line growing again, from its base of about $9 billion/quarter. But it won't be a big jump - between them oPower and Textura should do $260 million in revenue this year, and even if Oracle management can boost that to $400 million, it's not an enormous jump.
Oracle is what I would call an "old line" tech stock. Don't give it a premium for being tech. Only buy it if it looks like a bargain, relative to other stocks in other industries. Right now that's not the case, but that could change. As we have seen twice in the last year, downdrafts happen, even in a growing economy. Next time one does, keep this on your list.
Disclosure: I/we 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.