This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Oracle Flexes Its Muscle

NEW YORK (TheStreet) -- Anyone who believes that size is an insurmountable obstacle to growth has not paid enough attention to what Oracle (ORCL - Get Report) has done in the last six months of 2013.

After being left for dead following what many believed was a disastrous September quarter, not only did the database giant respond recently with stronger bookings and re-accelerated growth, but Oracle's management just stunned the Street with a $1.5 billion all-cash deal for B2C (business to customer) cloud-marketing specialist Responsys (MKTG).

With the recent rise of nimbler rivals like Salesforce.com (CRM - Get Report) and Workday (WDAY - Get Report), Oracle has taken more than its share of criticism for its cloud position. Some might say "its lack of cloud position." Nevertheless, immediately after this deal some analysts have complained that Oracle has "reached" or overspent on the deal.

While it's true that the 38% premium from Responsys last closing seems a bit steep. However, with well over $30 billion in cash on the balance sheet this deal is not going to break Oracle. In fact, this deal is not even close to the 53% premium Salesforce.com paid for ExactTarget in its $2.5 billion all-cash deal. No one questioned whether Salesforce would get the value for which it believed it was paying. The assumption was that it would.

To that end, I believe Oracle deserves similar consideration. For the past six months, Oracle has been the Street's punching bag because it was seen as immobile. This is even though management had taken -- what I believe -- were prudent and necessary strides to grow into areas like SaaS (software-as-a-service) and Big Data too. Some of which served to fight off SAP (SAP - Get Report) and IBM (IBM - Get Report). It was never considered enough.

But even then, Oracle has been hard at work transforming what it calls Oracle Marketing Cloud. This was what spurred the acquisition for Eloqua, a B2B (business to business) web marketing specialist that it picked off last year. Management understands that digital marketing is the next battleground within the cloud. This is precisely what Salesforce.com understood when it dropped a king's ransom for ExacTarget, which specializes in B2C.

Plus, with research firms like Forrester predicting that the market for digital marketing will grow to over $43 billion in the next two years, it's foolish to question why Oracle would not invest in that direction. Now, with Responsys' muscle in areas like email and cross-channel marketing solutions, Oracle is now in a much better position to fight back and to become a threat of its own.

I don't believe anyone has ever mistaken Oracle for a growth company -- at least not in the last decade. But while the needs of the enterprise continues to evolve (with concepts like Big Data, cloud and now digital cloud) Oracle has never been shy about building its capabilities -- whether through internal research and development or through acquisitions.

I won't deny that Salesforce.com has landed several jabs sending Oracle back a few steps. But with the strengths of both Responsys and Eloqua under its belt, Oracle has to now be taken seriously. Not only has Oracle become a stronger player in customer relationship management (CRM) software, but management has now positioned Oracle to become the go-to vendor for cloud-based marketing CRM as well.

It goes without saying, however, that as much as I like this deal, it will only matter to the extent that Oracle can execute. For now, I have to believe that Oracle shareholders can look forward to meaningful gains in 2014. With the stock trading around $38 per share, I believe fair market value can reach $45 at some point this year, given the better-than-expected bookings and strong cash flow growth.

At the time of publication, the author held no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CRM $73.26 -0.06%
IBM $159.73 -1.40%
ORCL $39.73 -0.53%
SAP $71.86 0.27%
WDAY $83.53 -0.95%

Markets

Chart of I:DJI
DOW 17,611.22 -78.64 -0.44%
S&P 500 2,099.99 -3.85 -0.18%
NASDAQ 5,121.9560 -6.3250 -0.12%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs