Oracle (NASDAQ:ORCL) has been growing rapidly this year as evidenced by its stock price which started at $25-$26 levels at the beginning of the year and is now trading around the $30-$31 level. The company has been on the lookout for growth opportunities and has snapped up smaller companies in social media, virtualization and project management areas. Its latest acquisitions include Instantis and a minority stake in Platform-as-a-Service (PaaS) vendor Engine Yard.
In its most recent filings, Oracle reported revenues of $8.2 billion, up 3% y-o-y. Software and cloud subscription was up 11% y-o-y with revenues of $1.6 billion and cloud revenues were $222 million for the quarter. The operating cash flow for this quarter was at an all-time high of $5.7 billion, up from $5.4 billion last year. And free cash flow grew to a record $13.4 billion over the last 4 quarters. The company also guided for EPS between $0.59 and $0.63 for the next quarter, up from $0.54 last year.
Oracle, which is the biggest player in database software, has set its sights on high growth markets such as social media analytics, virtualization and cloud based CRM and ERP businesses. It has acquired companies such as Selectminds, Xsigo Systems, Skire, Collective Intellect and Vitrue, among others, recently. This is a clear push to make its presence felt in social media, virtualization, cloud and project management markets. The company is going all out to take market share in the high-growth cloud CRM space, and we expect this to be the growth engine for the CRM & ERP markets.
Instantis and Engine Yard operate in Oracle’s areas of interest. Instantis will fortify Oracle’s project management software division, Oracle Primavera, which was established after Oracle acquired Primavera in 2008. Engine Yard competes with Salesforce.com’s Heroku service, which is a cloud application platform. The Engine Yard PaaS automates configuration, deployment and maintenance of cloud environments and will enable application developers to rapidly build, deploy and manage cloud based applications. The financial details of both the deals were not disclosed.
We currently have a $41.24 Trefis price estimate for Oracle, which stands nearly 20% above its current market price. Database, middleware and application software accounts for nearly 80% of its value while enterprise server and storage hardware accounts for more than 10%.