Weekly Software Notes: Oracle

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Shares of global software giant Oracle Corp. (NYSE: ORCL) fell by 4% during the week ended March 27th. The decline was in line with the Dow Jones U.S. Software Index, which fell by 3% Monday through Friday. The broader S&P 500 lost 2% during the same period.

During the week, Oracle released a new hardware product, entered into a partnership with Samsung and announced plans to expand its sales force in the Asia-Pacific region. In this report, we take a look at each of these developments.

We have a price estimate of $47 for Oracle Corp., which is about 10% higher than its current market price.

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MICROS Product Line Receives New Addition

On March 25th, Oracle announced the release of the Oracle MICROS Workstation 6 Point-of-Service Terminal for the hospitality industry and select retail venues. [1] The MICROS Workstation 6 comes with a revamped interface and is designed to work in concert with mobile devices, cloud and social media.

The new terminal is the latest addition to the MICROS engagement products, which include Oracle’s MICROS R-Series and E-Series Tablets. Sales of Oracle’s hardware products, primarily servers, have lagged behind competitors in recent years. This has caused a loss of server market share along with slump in revenues therefrom. Oracle has pinned its hopes on its engineered systems product line to revive its flailing hardware business, but it seems the company has not yet given up on leveraging benefits from its MICROS acquisition.

Oracle Eyes Expansion in Asia-Pacific Region

On March 26th, Oracle announced that it will add 1,000 people to its sales team in the Asia-Pacific region, 300 of which will be hired in India. [2] The company plans to capitalize on the nascent cloud computing market in the region, which is set to take off with economic expansion and proliferation of broadband and mobile infrastructure.

Oracle currently derives only 15% of its revenues from the Asia-Pacific region, compared to the Americas with 55% revenue share and Europe, Middle East and Africa (EMEA) with 30% revenue share. [3] Revenues from the Asia-Pacific region grew by just 2% on constant currency basis during the nine months ended February 28th, which was the least growth among the three regions. With the planned expansion of the sales team in the region, revenues from the Asia-Pacific region are likely to pick up in the future.

Oracle Enters China’s IT Logistics Market

On March 24th, Oracle announced that it has entered into a partnership with Samsung for providing database, middleware and system know-how for the Chinese IT logistics market. [4] Under the agreement, Oracle’s solutions will be applied to Samsung’s data centers for increasing the cloud offering for analysis models and high-performance big data platforms.

The deal gets Oracle a foot in the door in the lucrative and largely untapped Chinese IT logistics market. Gartner estimates China’s IT logistics market to grow by 16.2% through 2018, while the worldwide IT logistics market is expected to expand at a CAGR of 9.5% to reach $14.6 billion by 2018.

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Notes:
  1. Oracle Introduces Oracle’s MICROS Workstation 6 Point-of-Service Terminal, Oracle Press Release, March 25, 2015 []
  2. Oracle to hire 1,000 people in Asia Pacific region, The Hindu, March 26, 2015 []
  3. Oracle FY 2015 Third Quarter SEC Filing []
  4. Samsung and Oracle team up to tap into China’s logistics market, March 24, 2015 []