A Winning Cloud Growth Pick for 2013 And Beyond
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Oracle (NASDAQ: ORCL) announced that it purchased Eloqua for $810 million. Eloqua is a manufacturer of marketing automation software. The move highlights Oracle’s efforts to establish itself in the arena of cloud computing services. With the acquisition, Oracle will expand its cloud computing and offer solutions for brand management. The company will also focus on increasing revenue by driving qualified leads to sales teams. In this article, I will explain how the purchase will help Oracle to enter cloud computing and increase its profitability in the long-run.
Oracle Eyes Cloud Computing
The premise behind the purchase is that Oracle will now make the cloud of Eloqua marketing automation service as its centerpiece bid for marketing cloud, and complements the Customer Experience line. The product line includes Oracle Sales Cloud, Oracle Commerce Cloud, Service Cloud Oracle, Oracle Content Cloud and Oracle Social Cloud. This view is shared by Thomas Kurian, executive VP of Development. Oracle has also reinforced its sales strategy, starting to invest in technical and pre-sales teams specifically trained to care for niches.
Eloqua’s software allows companies to predict and increase revenue by monitoring and measuring sales and marketing initiatives. The company has more than a thousand clients including Cisco (CSCO), Dell (NASDAQ: DELL) and the NBA Miami Heat and Sacramento Kings basketball teams. The offer of $23.66 per share represents a premium of 31 percent over the value of Eloqua. Eloqua's board was unanimous in approving the deal, which is expected to close in the first half of 2013. Oracle said that the growth of software sales remain strong next year, despite fears that there might be a large tax increase and budget cuts that could lead to a drop in consumer spending.
Oracle's quarterly profits beat Wall Street's expectations after strong growth in software sales, suggesting that the fear psychosis created by the "fiscal cliff" did not bring down corporate spending on technology. The company announced that its sales of software and cloud software subscriptions advanced 17% from a year earlier to $2.4 billion in its fiscal second quarter. Oracle, the third-largest software developer in the world, increased its stock value by 2.6% thanks to this news. Oracle had projected that sales of new software would grow between 5% and 15% against previous year. With a market cap of $162 billion and an enterprise value of $150 billion, the company is doing really well recently. Oracle’s profit margin is high, of 28.38% with revenue of $37 billion. By purchasing Eloqua, Oracle is sending the right signal to its investors that it will continue to acquire companies that will help it to establish itself as a major cloud computing provider.
Oracle's competitors are no strangers to cloud computing either. IBM (NYSE: IBM) has an end to end cloud computing app development program, which is available for free for 90 days. The company offers cloud security strategies to enterprise clients and handles more than 13 billion both public and private clouds. Hewlett-Packard (NYSE: HPQ) on the other hand offers cloud computing solutions to business and IT enterprises. The PC maker offers storage solutions which include taking backups, archiving, collaborating and synchronization. It also offers platform solutions for big data and helps enterprises to migrate to cloud. HP is keenly looking at cloud computing after its PC sales began to decline throughout 2012.
Dell, the other PC maker offers cloud optimization and design-to-order services which have been particularly popular with enterprises. Dell's ability to create cloud solutions that are customized to each enterprise has helped the company to create a niche for itself. Moreover, Dell has dedicated project management teams that oversee cloud products and their sales across the world. Microsoft (NASDAQ: MSFT) is no stranger to cloud computing and has offerings for both private and public clouds. Windows Azure is a public cloud offering that offers 'pay-as-you-go' business model. Applications with .NET, PHP or Java can be easily run on Windows Azure, saving enterprises from a lot of unnecessary hardware.
Oracle did the right thing by purchasing Eloqua, as it will help the company to increase its profitability in the long-term. Oracle’s profits will increase because corporate spending did not decrease in spite of a fear of fiscal cliff and cloud computing is fast becoming the industry standard. With a huge demand for cloud services and a long list of previous clients that worked with Eloque, Oracle has made a number of deals along with Eloqua. This will help the company increase profitability in the long-term.
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