Should Oracle’s Recent Buyouts Be a Cause for Concern?
Oracle’s recent acquisitions: Opower and Textura
Previously in this series, we discussed Oracle’s (ORCL) recent acquisitions of Opower (OPWR) and Textura (TXTR). While Opower will boost Oracle’s position in the utility space, Textura will give the company an edge in the construction industry.
With its recent acquisitions, Oracle is making a strategic effort to build a portfolio of cloud offerings that are focused on applications and platforms. Despite the prevailing uncertainty and the shrinkage in corporate technology budgets, cloud adoption is on the rise, as businesses and organizations continue to shift their computing and software to the cloud. Oracle’s recent acquisitions are opportune as organizations are showing more interest in moving applications to the cloud.
Interested in CSCO? Don't miss the next report.
Receive e-mail alerts for new research on CSCO
Unlike peers IBM (IBM) and Microsoft (MSFT), which are keen on cloud infrastructure services, Oracle’s primary focus would be on SaaS (software-as-a-service) and PaaS (platform-as-a-service) offerings. This would be to gain a competitive differentiation, according to co-CEO Mark Hurd.
According to the Cisco (CSCO) Global Cloud Index, and as the graphic above shows, SaaS is expected to be the fastest-growing cloud service through 2018. SaaS is expected to grow at a CAGR (compound annual growth rate) of 33% while the cloud market as a whole is expected to grow at a CAGR of 24%.
In fiscal 2015, Textura reported revenues of $87 million with a net loss of approximately $17 million. The company has approximately $79 million in cash. Opower reported revenue of $148.7 million in fiscal 2015. Despite a 16% growth in its fiscal 2015 revenues, Opower reported a loss. Its non-GAAP (generally accepted accounting principle) loss stood at $44.9 million in fiscal 2015.
Considering Opower and Textura’s losses, it appears that Oracle would have to wait for some time before it can hope to get returns on its investment. 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.