3 Tech Companies Growing With Cloud Technology

Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Cloud computing delivers software and IT infrastructure services via a shared network. The global cloud market will grow at a compound annual growth rate of 26.2%, increasing from $37.8 billion in 2010 to $121.1 billion by 2015. Looking at the growth opportunities in cloud technology, software companies are combining cloud technology with existing applications as well as new ones. With the prevailing growth opportunities in this industry, here is analysis of three companies that are looking to grow further and enhance their market share by signing agreements and acquiring other cloud-computing companies. Let's discuss how these companies will gain investor confidence with their cloud businesses.

Acquisition enhancing digital marketing revenue

To enhance its digital marketing segment capabilities, Adobe Systems (NASDAQ: ADBE) recently acquired Neolane, a leader in cross-channel campaign management technology, for $600 million. Neolane has software that helps in tracking and integrating an enterprise’s online and offline marketing efforts across all channels. This acquisition will generate strong marketing automation capabilities for Adobe's cloud marketing suite and will increase the company's cross-channel campaign management capabilities.

Neolane, with 400 international clients, generated revenue of $58 million in 2012 and expects revenue of $100 million this year. Adobe reported 17% growth year-over-year in its digital marketing cloud revenue, earning $229.6 million in the second quarter of 2013. It expects digital marketing cloud revenue of $1.19 billion this fiscal year and $1.32 billion next year, up from $1.09 billion last year.

Adobe's creative software products such as Photoshop had a global market share of around 43% in 2012. To enhance its market share, the company is launching new software every 18 months. On the other side, the increased competition from open source alternatives and the new Internet-based subscription model priced lower than the traditional model, forced it to reduce its software subscription price to $792 this year from $870 in 2012.

To grow its market share and revenue, the company launched its next-generation Creative Cloud service with a subscription fee of $49.99 a month. Creative Cloud received an overwhelming response and ended the second quarter with 700,000 paid subscriptions. In order to grow further, Adobe is keeping it up-to-date with the latest features and capabilities by adding new tools in its applications. This will help Adobe retain existing customers and to reach its goal of 1.25 million paid subscriptions by the end of this fiscal year. Total revenue will remain flat this fiscal year and grow to $4.51 billion next fiscal year due to the software's reduced price, up from $4.4 billion last fiscal year.

Agreements driving future growth

Oracle (NYSE: ORCL) signed a nine-year alliance agreement with Salesforce.com (NYSE: CRM), one of the fast-growing cloud computing companies. This agreement was designed to boost Oracle's cloud-computing efforts and hardware business.

In the agreement, Salesforce will help Oracle by supplying hardware including Exadata servers and Java middleware applications. Salesforce will also support Oracle’s Fusion Human Capital Management and Financial Cloud in its internal operations and further integration is likely due to customer demands for more integrated products. Moreover, Salesforce will refer customers to Oracle for its cloud applications, giving Oracle an advantage over its competitors. This deal will also strengthen Oracle's position in cloud-computing, resulting in market share gains and increasing gross profit to $33 billion in fiscal year 2014 from $30 billion in the last fiscal year.

Salesforce will use Oracle's database management system as a result of the agreement. This data sharing will make the products of both companies more attractive to buyers as it will add more features to their software offerings. The companies deliver around one million complex cloud-based transactions every day. Salesforce will report year-over-year revenue growth of around 26% to reach $3.86 billion with earnings per share of $0.48 in fiscal year 2014.

Oracle also signed a similar deal with Microsoft to allow Java developers to develop applications using Oracle tools on Microsoft’s servers such as Hyper-V and Microsoft Azure. Microsoft’s cloud services will help Oracle customers move their workloads to Azure. Both companies will now run Java as well as Oracle database tools and Linux on Microsoft Windows servers. In this agreement, Microsoft will provide and support Java, and Oracle will do the same for Linux. This deal is one the largest deals in the software world, benefiting customers and helping both companies stabilize their position in the fast-growing cloud business.

With these agreements, Oracle expects to generate total revenue of $38.87 billion in the 2014 fiscal year, up from $37.18 billion in 2013.

Conclusion

Cloud technology helps software companies to grow a technology presence and enables them to serve their customers with more integrated software options. Adobe's Creative Cloud and its acquisition of Neolane will help in driving its revenue further. Oracle’s new agreements will increase its future revenue and its cloud service capabilities. Salesforce expects wide opportunities for future growth due to its agreement.

I recommend a buy for all three of these stocks for long-term growth.

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Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends Adobe Systems and Salesforce.com. The Motley Fool owns shares of Oracle.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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