Weekly Software Review: Oracle, Salesforce and Symantec
It was an eventful week for software majors Oracle Corp. (NYSE: ORCL), Salesforce.com (NYSE: CRM) and Symantec (NYSE: SYMC) and all of them ended the week in positive territory. Oracle was the biggest gainer with a 15% expansion on the back of strong second quarter numbers released during the week. Salesforce was not far behind and gained 9% over the week, while Symantec was up by 2%. Outsized gains by heavyweights Oracle and Salesforce helped the Dow Jones US Software Index rise by 5%, outperforming the 3% growth of the broader S&P 500.
In this report, we take a look at the key events in the US software industry during the week ended 21 December.
Oracle
Oracle reported its fiscal 2015 second quarter earnings on 17 December and beat its own guidance as well as consensus estimates (Read: Oracle Q2’15 Earnings Review: Cloud’s Success Helps Beat All Expectations). Across the board double digit growth in its cloud business helped drive the company’s 7% revenue growth, while the EPS stood at $0.69. Oracle’s hardware business also defied expectations of a deceleration and achieved a commendable 4% revenue growth, further bolstering the top line.
The market reacted positively to the strong performance and the company’s shares gained 10% on the very next day after earnings released. Pre-earnings anticipation pushed up its shares by 3% Monday through Wednesday, resulting in an overall weekly gain of 15%. The shares hit a 52-week high of $46.15 in intra-day trading on Friday amidst post-earnings positivity.
We believe that new bookings in the cloud business will be a key factor in driving Oracle’s short-term revenue growth. In its hardware division, the high-value, high-margin ‘engineered systems’ are the product category to watch out for and may help rescue the floundering growth in hardware revenues (Read: Oracle Loses 4th Spot in Global Server Market to Cisco).
We are currently updating our Oracle model to reflect recent events.
Salesforce.com
It was an eventful week for Salesforce, characterized by insider selling amidst substantial market gains and announcements of new product and partnerships. The company gained 9% during the week following positive analyst ratings [1] and increase in expectations from strong performance of its key competitor, Oracle.
However, it may not be a positive indication that insiders Chairman and CEO Marc Benioff and Martinez Maria (President, Sales and Customer Success) cumulatively sold more than a hundred thousand shares of the company worth over $6.1 million during the week. Disclosure of these insider sales stemmed the rising share price to 1% growth on Friday, compared to 6% and 4% gains on Wednesday and Thursday respectively.
On 17 December, Salesforce announced its new Salesforce Files Connect, a centralized file sharing solution which allows users to browse, search and share files located in repository from a single user interface [2]. Salesforce Files Connect will first natively integrate with Microsoft’s OneDrive and SharePoint, and will subsequently support Google Drive also. This is a first of its kind solution which will allow users to access external files within the flow of Salesforce business processes.
On the other hand, on 18 December, Outbox Systems launched the first commercial cloud service app on Salesforce’s AppExchange marketplace [3]. This app provides ready-made integration of two of the most popular Enterprise Work Management platforms, namely, Salesforce and AtTask. The release of this app underscores AppExchange’s growing popularity and provides a boost to potential adoption of Salesforce’s new AppExchange App Builder (Read: Salesforce Releases Product That Lets Businesses Create Custom Enterprise App Stores).
Lastly, Salesforce added another feather to its cap by partnering with Verizon for the latter’s Secure Cloud Interconnect service [4]. This puts Salesforce in the company of industry heavyweights like Microsoft, Amazon, Google and HP as Verizon’s cloud infrastructure and hosting partners.
We currently have a price estimate of about $55 for Salesforce, which is 8% lower than the current market price.
Symantec
Symantec shares gained 2% on 18 December and maintained the level to close the week with a 2% weekly gain. The shares reached a 52-week high of $26.58 in early December and continue to trade at that level, touching an intra-day high of $26.30 on Friday. The company’s shares have gained 10% since 9 October, when it announced the plan to split the company into two independent, publicly traded companies.
Symantec plans to separate its storage software business from its security offerings to further accelerate top line growth and expand margins. We believe that such a split will reiterate focus on its core business line, security software; and unlock greater value by emphasizing its organic business segments like consumer and enterprise security solutions (Read: Will Symantec Benefit By Separating Its Storage Software Business?).
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research
- salesforce.com, inc. Earns Overweight Rating from Analysts at Piper Jaffray, Dakota Financial News, 16 December 2014 [↩]
- Salesforce Announces Salesforce Files Connect, Delivers Universal File Sharing for the Enterprise, Salesforce Press Release, 17 December 2014 [↩]
- Outbox Systems Unveils First Product on Salesforce AppExchange with Salesforce.com Integration to AtTask, MarketWatch, 18 December 2014 [↩]
- Verizon adds HP, Salesforce to its cloud interconnect roster, ZDNet, 16 December 2014 [↩]