Oracle Corp.
(
ORCL
) recently launched its much anticipated public cloud computing
service. The public cloud system known as Oracle Cloud offers a
portfolio of software-as-a-service (SaaS), platform as a service
and social applications.
The cloud service bundle comprises more than 100 applications
that will be delivered to customers from remote data centers over
the Internet. Oracle applications delivered over the cloud will not
only allow customers to start using them instantly, but will also
be updated automatically. Customers will pay a subscription for
these services, which will be more cost effective, as they will no
longer need to maintain an onsite data center for software
installation or update.
Oracle's public cloud offerings include database, java,
developer, web, mobile, documents, sites and analytics services.
SaaS offerings include Enterprise Resource Planning (ERP)
applications, Human Capital Management (HCM) solutions, Talent
Management services, Sales & Marketing services and Customer
Experience services. Social software offerings consist of Oracle
Social Network, Social data services, Social Marketing and
engagement services and Social Intelligence services.
Other than public cloud services the company is also offering a
private cloud and managed cloud service. Oracle announced that its
cloud platform will allow enterprises to shift data and
applications between the public cloud and their private clouds, a
service yet to be available from other cloud computing providers
including
Salesforce.com
(
CRM
).
According to Bloomberg, Oracle also announced its intentions to
release software for accounting and supply chain management as part
of the Oracle Cloud going forward. We believe that Oracle will
continue to expand its cloud-based offerings not only in order to
maintain its existing customer base but also to increase its
penetration in the cloud computing market, which is dominated by
Salesforce,
Amazon Inc.
(
AMZN
),
SAP AG
(
SAP
),
International Business Machines
(
IBM
),
Hewlett-Packard
(
HPQ
),
Microsoft
(
MSFT
) and Workday.
In fact, Oracle, although a late entrant into this highly
competitive market, expects its public cloud to provide a
significant competitive edge over its peers going forward. To gain
an upper hand on them, Oracle has been on an acquisition spree in
recent times.
Although its peers such as Salesforce (which recently announced
the acquisition of Buddy Media) and SAP (acquired Ariba in late
May) continue to gather companies from varied sectors, Oracle has
been the most aggressive of the bunch in recent times.
Over the last 18 months, Oracle acquired a number of companies
including small start-ups as well as big-shots from different
fields (clinical trial to Data analytics) such as Taleo (human
resource), RightNow (CRM), Endeca (unstructured data management,
web commerce and business intelligence) to name a few.
The latest acquisitions of Vitrue (a cloud based
social-marketing software developer) and Collective Intellect (a
social media monitoring firm) are expected to help Oracle to
solidify its position in the social marketing arena.
Our Take
According to Forrester research, the global market for cloud
computing will grow from $40.7 billion in 2011 to more than $241
billion in 2020. The total size of the public cloud market will
grow from $25.5 billion in 2011 to $159.3 billion in 2020. We
believe that the public cloud offering from Oracle will help it to
tap this significant growth opportunity.
Currently, Oracle generates approximately $1.0 billion in annual
revenue from cloud computing. We believe that the new public cloud
offering will diversify its revenue base thereby boosting top-line
growth going forward.
However, we think that Oracle could see integration issues due
to the rapid pace of acquisitions within a short span of time.
Moreover, stiff competition in most of the markets is expected to
hurt its profitability going forward.
We remain Neutral on a long term basis (6-12 months). Currently,
Oracle has a Zacks #3 Rank, which implies a Hold rating on a
short-term basis.
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