Oracle: The Latest Company to Join the Tech Space Buyout Spree
Oracle is rapidly acquiring companies in the cloud space
Previously in this series, we discussed Oracle’s (ORCL) recent acquisitions, Opower (OPWR) and Textura (TXTR). Within a span of one week, Oracle spent $1.2 billion on these acquisitions, showing that the company is back on track to developing domain expertise and attaining growth.
Barring 2015, when Oracle made only three acquisitions, the company has mostly been acquisitive over the years. In 2014, Oracle acquired eight companies, including MICROS Systems. Prior to the Opower acquisition, Oracle had made several others in 2016:
- Crosswise, to strengthen its DaaS (data-as-a-service) offering
- AddThis, to enhance the company’s position in the marketing cloud
- Ravello Systems, to strengthen its position in the cloud space
To learn more, you can read Why Tech Companies Like Oracle Are on Acquisition Sprees in 2016.
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The cloud space: A hotbed for growth and acquisitions
Although Oracle’s cloud revenues grew by the double digits in fiscal 3Q16, the company has yet to make a mark in the cloud space. The cloud space is extremely concentrated and competitive.
As we highlighted earlier in this series, the cloud space is dominated by Amazon (AMZN), Microsoft (MSFT), IBM (IBM), and Google (GOOG) (GOOGL). They collectively account for about half of the global cloud space. According to John Dinsdale, chief analyst and research director at Synergy Research Group, “The big four cloud operators are continuing to run away with the market.” Cloud computing, mobile, IoT (Internet of Things), and cognitive computing are expected to be the technologies that will shape the near future. An International Data Corporation report, released in 2016, stated that global spending on public cloud services is expected to rise at a compound annual growth rate of 19%, which is approximately six times the rate of overall information technology spending growth.
You can read What Is Driving Growth in the Cloud Space? to learn more. Investors who wish to gain exposure to Oracle could consider investing in the Technology Select Sector SPDR ETF (XLK). While XLK invests ~3% of its holdings in Oracle, it also has an exposure of 31% to application software.