Must-know: Is Oracle stock worth your time and investment?

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Sep. 26 2014, Published 8:44 a.m. ET

Oracle’s is going through a transition

Oracle (ORCL), like other leading technology players, is making great efforts to transition from a hardware supplier and developer to a complete cloud solutions provider. Through strategic investments and launching new offerings, Oracle is trying to shift its revenue stream toward higher-margin, higher-growth cloud and software revenues.

applications and middleware
The above chart shows the market share held by various players in the global application infrastructure and middleware software market. IBM (IBM) leads the market with a share of 30%. It’s followed by Oracle that has a 15% market share. Microsoft (MSFT), Software AG, and Tibco made it to the top five rankings.

Global growth and strategic investments

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Oracle has continued to invest heavily in strategic acquisitions to achieve revenue growth, expand its offerings and capabilities, and gain an edge in the competitive cloud space. Its acquisitions seems to have started paying result’ as its cloud offerings have posted good revenue growth. It’s still behind most of its peers, though its position seems to be improving.

Change in management

Oracle has only one CEO, Larry Ellison, in its history. Oracle has garnered a lot of criticism lately on account of its slow revenue growth and adoption of big data and cloud. But it still commands a leadership position in the database market. We have yet to see how the company fares under the guidance and leadership of its new co-CEOs.

Concerns

An industry shift towards subscription or cloud offerings from licensing products and services is expected to increase price competition. It may jeopardize Oracle’s licensing business. The rising popularity of Salesforce.com (CRM) and Workday Inc. (WDAY) validates this trend.

Oracle’s transition to a cloud infrastructure player, its declining hardware sales, its shifting customer base in preference for the cloud, stiff competition from new companies like Datastax, and the emergence of open-source databases are some of the key concerns Oracle has to deal with in order to emerge as a successful player.

2Q15 expectations

For 2Q 2015, Oracle expects revenue and non-GAAP earnings to be $9,727 billion and earnings per share of 74 cents per share, respectively. GAAP EPS is expected to be in the range of 53 to 57 cents per share.

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