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.
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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