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NEW YORK ( TheStreet) -- There's no question that technology companies will continue to lead the market. As profits grow, the major indexes soar.
The cloud is the new growth area. As the concept is fully embraced, software companies will be the primary drivers of that transition -- except they are not all the same. Some are better positioned than others to generate high-margin businesses that produce the type of growth Wall Street craves.
Here are two names to consider in 2013.
Oracle(ORCL - Get Report) -- Price target $40
The first name that comes to mind is database giant Oracle. There is no shortage of critics when it comes to assessing the company's business and competitive threats. But the company continues to see increased demand for its products and services -- particularly in the areas of the cloud, which produced $222 million in revenue.
In its most recent quarter, Oracle posted $8.2 billion in revenue. Net income arrived at $2 billion, or 41 cents per share - representing a year-over-year profit increase of 11%. On a non-GAAP basis, the company produced $3.6 billion in operating income, which was 6% higher year over year. This was helped by the company's 2% improvement in operating margin, which arrived at 44%.
Likewise, software licenses as well as cloud subscription revenue grew 11% to $1.6 billion. As a sign of how well the company's model is working, Oracle continues to generate tons of cash, while consistently managing its expenses.
Although competition from the likes of
SAP(SAP) certainly exists, Oracle has been able grow its cloud products such as Exadata, Exalogic and Exalytics by 100% during the quarter. These will be the major drivers of the company's growth for many years to come.
Salesforce.com(CRM - Get Report) - Price target $200
The popular bear argument against Salesforce.com continues to be its valuation. Admittedly, I have raised this same concern.
However, after the company's most recent quarter I was forced to become a believer. Although its lack of profitability continues to be a sore spot, for now its strong growth is too much to ignore.