Oracle Corporation (ORCL): Does Its Recent Entry in Cloud Computing Makes this Tech Giant a Good Buy?

International Business Machines Corp. (NYSE:IBM) is another competitor of Oracle. The company posted weak first quarter results with revenue down by 5.1% year-over-year. This is because the sales of both software and hardware were disappointing and due to the divestment of its low margin business.

But the company showed tremendous growth in the cloud, Analytics and Smart Planet platform. The company is expected to continue to benefit from the investments and acquisitions in these areas. The company has also been divesting its low margin business, which will help it to focus on the high margin business.

The company is also re-balancing its resources which will help cut its operating expense. We believe this strategy will negatively impact its revenue in a few of the coming quarters, but in the long term it will help increase its revenue and margin by focusing and investing in high margin businesses.

Conclusion

Oracle has been regarded as a laggard in developing its cloud competency. This has adversely impacted the company’s revenue. Of late, the company has taken steps to enter into the cloud business and has been on an acquiring spree. We expect the alliance with salesforce.com, inc. (NYSE:CRM) and Microsoft will help the company improve its software and cloud subscription revenue in the coming quarters. With the economy also showing signs of revival, the sales of its software and hardware should also increase in the upcoming quarters. At this price the stock is worth buying.

The article Does Its Recent Entry in Cloud Computing Makes this Tech Giant a Good Buy? originally appeared on Fool.com and is written by Lalit Kumar.

Lalit Kumar has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines (NYSE:IBM). and Oracle. Lalit is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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