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Larry Ellison Wants to Make Oracle King of the Cloud

Stocks in this article: ORCLMCRSCRMWDAYMKTGIBMMSFTRHTCTXS

NEW YORK (TheStreet) -- With rumors surfacing Tuesday Larry Ellison was moving in on a possible $5 billion bid for point-of-sale technology company Micro Systems (MCRS), Oracle's (ORCL) CEO is showing he means business and won't be left behind in the race to the cloud.

The enterprise software giant will report financial results for its fiscal fourth-quarter on Thursday. Its shares closed Tuesday at $42.32, up nearly 11% for the year to date.

Some think Oracle has fallen behind cloud giants Salesforce.com (CRM) and Workday (WDAY) but Ellison is trying to end these debates. I don't think Ellison's done yet,  even if he lands Micro Systems.

After having traded in a tight range since the beginning of the year, Oracle shares have broken out. But it's about where Oracle is heading that matters, and that's where value in the shares can still be found.

With recent acquisitions like cloud-marketing specialist Responsys (MKTG) and cloud marketing technology specialist BlueKai, Ellison is flexing his financial muscle while affirming how seriously he's taking the cloud.

If you combine Oracle's aggressiveness with recent data from Forrester Research, which suggests the market for digital marketing will grow to over $43 billion in the next two years, you get shares that should command a price tag of $50 in the next 12 months. This assumes Oracle is able to integrate these buys into the company's strategy. I see no signs suggesting otherwise.

Ellison has been clear about the direction he wants to take Oracle. The company is transitioning the business to stronger growth areas. In the most recent quarter Oracle's cloud software revenue was up 25% year over year.

Equally impressive, Oracle's Engineered Systems segment is growing at a faster rate than management expected. This is important to note because the engineered systems, which is the hardware, can be integrated to support Oracle's cloud applications. This means customers are looking to Oracle to provide a complete workable solution from the standpoint of both hardware and software.

On Thursday, the Street will be looking for 95 cents in earnings per share on revenue of $11.48 billion, which represents year-over-year earnings and revenue growth of 9% and 5%, respectively. For a company of Oracle's size, these would be solid results.

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