Is Oracle’s Buyout of Opower a Sign of Acquisitions to Come?
Oracle: The largest provider of cloud services to utilities
Previously, we discussed Oracle’s recent buyout, Opower. Opower (OPWR) will not only expand Oracle’s (ORCL) cloud portfolio, but also its position in the utility industry. Rodger Smith, the general manager of Oracle Tax and Utilities Global Business Unit, stated that Opower’s acquisition will enable Oracle to become the “largest provider of mission-critical cloud services to utilities.”
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Acquisitions expected to increase
Stifel analyst Brad Reback feels that Oracle’s acquisition of Textura indicates that the SaaS (software-as-a-service) space will see more. SaaS players such as Paycom, Paylocity, and Splunk could be future acquisition targets.
Cloud is most preferred growth avenue for Oracle
Of late, Cloud is at the forefront of Oracle’s business. Currently, Oracle Cloud has approximately 63 million users. In fiscal 3Q16, Oracle’s total cloud revenue grew by 40% to $735 million, a growth of 44% on a constant currency basis. Oracle’s SaaS and PaaS (platform-as-a-service) revenue grew 57% to $583 million in 3Q16. In constant currency terms, this a 61% growth.
Commenting on Oracle’s performance in the cloud space, Edward Jones analyst Bill Kreher stated that “the world is shifting faster to the cloud, and Oracle is adapting appropriately.” Oracle claims that it is growing faster than Salesforce (CRM) in the SaaS space and has ten times more customers than Workday (WDAY). Amazon (AMZN) leads the overall cloud space.
You could consider investing in the SPDR S&P 500 ETF (SPY) to gain exposure to Oracle, which makes up 0.7% of SPY. Investors who would like application software exposure could also consider SPY. Application software makes up ~7% of SPY.