Acquisitions Boost Oracle's Middleware License Market Share

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The majority of Oracle's ( ORCL ) revenue is generated by its software business. Oracle makes money by selling crucial database, application, and middleware software primarily to medium and large businesses worldwide. These three types of software help in various stages of collection, processing and storage of data.

Oracle mainly competes with IBM ( IBM ) and Microsoft ( MSFT ) in the middleware software market. Middleware is a portfolio of software products used to build and deploy software applications. It acts as an interface between front-end, web-based applications and back-end applications like the database. Oracle's popular middleware tools include Oracle Weblogic Server, Oracle Tuxedo, and Java Software (acquired through the Sun Microsystems acquisition).

We maintain a $38.16 price estimate for Oracle's stock , roughly 20% ahead of market price.

Key Acquisitions (BEA, Sun) Have Lifted Oracle's Middleware Share

Until 2007, Oracle's share of the global middleware software license market was around 8%. But after it acquired BEA Systems in 2008, its share doubled up, reaching 16% in 2009.  Through this acquisition, Oracle got BEA's popular product Weblogic Application Server, a tool used for deploying Java-based enterprise applications.

Another strategic acquisition by Oracle was of Sun Microsystems in January 2010. This deal gave Oracle control of Sun's Java programming, which acts as a base for most of Oracle's middleware product suite. Oracle could re-engineer Java to enhance or further develop its middleware portfolio, which would help boost its market share in the long run.

While IBM competes with Oracle in the middleware market based on industry standards, its middleware components are not as integrated into a suite as are Oracle's. And Microsoft doesn't necessarily adhere to the industry standard due to its usage of .net architecture and C Sharp programming language. In this way, Oracle holds an edge over its competitors in middleware offerings.

Given Oracle's improving share in the middleware software market, we pose the following question:

What Percent of Oracle's Stock Value Comes from Middleware Software Licenses?

A) 10%

B) 25%

C) 50%

D) 75%

Click a response above to see the answer

See our full analysis and $38.16 price estimate for Oracle



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: IBM , MSFT , ORCL

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